Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Apr. 17, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | Global Future City Holding Inc. | ||
Entity Central Index Key | 1,164,964 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 40,431,680 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 | ||
Entity public float | $ 33,710,357 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 85,650 | $ 655,405 |
Accounts receivable, net of allowance | 4,355 | 0 |
Inventories on hand | 572,310 | 0 |
Inventory deposits | 0 | 879,504 |
Deferred financing costs | 0 | 14,489 |
Prepaid expenses | 18,427 | 21,411 |
Total current assets | 680,742 | 1,570,809 |
Property and equipment, net | 549,019 | 249,325 |
Investment in Powerdyne | 0 | 250,000 |
Service Contract - related party, net | 0 | 350,000 |
Other assets | 19,954 | 19,359 |
Total assets | 1,249,715 | 2,439,493 |
Current liabilities: | ||
Accounts payable | 526,417 | 326,700 |
Accrued expenses | 270,714 | 138,677 |
Accrued compensation | 315,277 | 211,905 |
Membership deposits and accrued benefits | 550,808 | 10,020 |
Deferred revenue | 1,375 | 600 |
Notes payable | 1,006,453 | 1,050,000 |
Advances from related parties | 89,966 | 89,359 |
Total current liabilities | 2,761,010 | 1,827,261 |
Total liabilities | 2,761,010 | 1,827,261 |
Commitments and contingent liabilities (Note 12) | ||
Shareholders' equity (deficit) | ||
Preferred stock, $0.001 par value: 20,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value: 150,000,000 shares authorized, 48,781,586 and 47,533,029 shares issued and outstanding at December 31, 2016 and 2015, respectively. | 48,782 | 47,533 |
Additional paid-in capital | 9,492,762 | 6,007,601 |
Accumulated deficit | (11,052,839) | (5,442,902) |
Total shareholders' equity (deficit) | (1,511,295) | 612,232 |
Total liabilities and shareholders' equity (deficit) | $ 1,249,715 | $ 2,439,493 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 20,000,000 | 20,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 150,000,000 | 150,000,000 |
Common stock shares issued | 48,781,586 | 47,533,029 |
Common stock shares outstanding | 48,781,586 | 47,533,029 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Revenue - related party commissions | $ 3,468,582 | $ 0 |
Revenue - direct selling | 38,931 | 0 |
Total revenue, net | 3,507,513 | 0 |
Cost of net revenues (includes inventory impairment charge of $1,122,520 and $0 in 2016 and 2015, respectively) | 1,128,504 | 0 |
Gross profit | 2,379,009 | 0 |
Operating expenses: | ||
Selling and marketing (includes stock-based expense of $179,570 and $65,000 in 2016 and 2015, respectively) | 1,402,964 | 102,915 |
General and administrative (includes stock-based expense of $237,078 and $0 in 2016 and 2015, respectively) | 4,363,683 | 1,036,108 |
Impairment of investment in Powerdyne | 250,000 | 0 |
Impairment of service contract - related party | 280,000 | 0 |
Reserve on due from related parties | 1,518,300 | 0 |
Total operating expenses | 7,814,947 | 1,139,023 |
Operating loss | (5,435,938) | (1,139,023) |
Other income (expense): | ||
Interest expense | (163,751) | (104,799) |
Interest income | 179 | 13 |
Gain on extinguishment of debt | (9,627) | 333,823 |
Total other income (expense) | (173,199) | 229,037 |
Loss before income taxes | (5,609,137) | (909,986) |
Provision for income taxes | 800 | 800 |
Net loss | $ (5,609,937) | $ (910,786) |
Basic net loss per common share | $ (0.12) | $ (0.02) |
Diluted net loss per common share | $ (0.12) | $ (0.02) |
Weighted average number of common shares used in basic per share calculations | 48,194,399 | 45,004,313 |
Weighted average number of common shares used in diluted per share calculations | 48,194,399 | 45,004,313 |
CONSOLIDATED STATEMENTS OF OPE5
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Inventory impairment charge | $ 1,122,520 | $ 0 |
Selling and Marketing Expense [Member] | ||
Stock-based compensation expense | 179,570 | 65,000 |
General and Administrative Expense [Member] | ||
Stock-based compensation expense | $ 237,078 | $ 0 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) | Preferred Stock | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning balance, shares at Dec. 31, 2014 | 0 | 37,763,410 | |||
Beginning balance, amount at Dec. 31, 2014 | $ 37,763 | $ 435,040 | $ (4,532,116) | $ (4,059,313) | |
Sale of common stock, shares | 6,000,000 | ||||
Sale of common stock, amount | $ 6,000 | 2,994,000 | 3,000,000 | ||
Stock issued to non-employees for services, shares | 250,000 | ||||
Stock issued to non-employees for services, amount | $ 250 | 64,750 | 65,000 | ||
Stock issued for extinguishment of debt, shares | 25,000 | ||||
Stock issued for extinguishment of debt, amount | $ 25 | 47,075 | 47,100 | ||
Stock issued for conversion of debt, shares | 123,268 | ||||
Stock issued for conversion of debt, amount | $ 123 | 58,156 | 58,279 | ||
Stock issued in connection with Stock Purchase Agreement, shares | 3,371,351 | ||||
Stock issued in connection with Stock Purchase Agreement, amount | $ 3,372 | 396,628 | 400,000 | ||
Forgiveness of debt by officer and employee | 1,673,774 | 1,673,774 | |||
Other capital contributions | 355,425 | 355,425 | |||
Net liabilities assumed in acquisition | (17,247) | (17,247) | |||
Net loss | 0 | (910,786) | (910,786) | ||
Ending balance, shares at Dec. 31, 2015 | 0 | 47,533,029 | |||
Ending balance, amount at Dec. 31, 2015 | $ 0 | $ 47,533 | 6,007,601 | (5,442,902) | 612,232 |
Sale of common stock, shares | 784,453 | ||||
Sale of common stock, amount | $ 785 | 2,682,301 | 2,683,086 | ||
Stock issued to non-employees for services, shares | 203,000 | ||||
Stock issued to non-employees for services, amount | $ 203 | 179,367 | 179,570 | ||
Stock issued to employees for services, shares | 97,000 | ||||
Stock issued to employees for services, amount | $ 97 | 236,981 | 237,078 | ||
Stock issued in settlement of debt, shares | 14,104 | ||||
Stock issued in settlement of debt, amount | $ 14 | 49,350 | 49,364 | ||
Stock issued with debt, shares | 150,000 | ||||
Stock issued with debt, amount | $ 150 | 87,162 | 87,312 | ||
Other capital contributions | 250,000 | 250,000 | |||
Net loss | (5,609,937) | (5,609,937) | |||
Ending balance, shares at Dec. 31, 2016 | 0 | 48,781,586 | |||
Ending balance, amount at Dec. 31, 2016 | $ 0 | $ 48,782 | $ 9,492,762 | $ (11,052,839) | $ (1,511,295) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (5,609,937) | $ (910,786) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Loss on extinguishment of debt | 9,627 | (333,823) |
Inventory impairment | 1,122,520 | 0 |
Impairment of investment in Powerdyne | 250,000 | 0 |
Impairment of service contract - related party | 280,000 | 0 |
Reserve on due from related parties | 1,518,300 | 0 |
Common stock issued for services and compensation | 416,647 | 65,000 |
Depreciation and amortization | 179,247 | 6,367 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (4,355) | 51,256 |
Inventories and inventory deposit | (815,326) | (876,078) |
Deferred financing costs | 14,489 | 0 |
Prepaid expenses | 2,984 | (11,133) |
Service contract - related parties | 0 | (350,000) |
Other assets | (595) | (19,359) |
Accounts payable | 199,717 | 77,298 |
Accrued expenses | 164,844 | 26,441 |
Accrued compensation | 103,372 | (56,880) |
Membership deposits and accrued benefits | 540,788 | 10,020 |
Deferred revenue | 775 | 600 |
Net cash used in operating activities | (1,626,903) | (2,321,077) |
Cash flows from investing activities: | ||
Capital expenditures | (416,420) | (249,634) |
Acquisition of Powerdyne EB-5 license | 0 | (200,000) |
Net cash used in investing activities | (416,420) | (449,634) |
Cash flows from financing activities: | ||
Sale of common stock | 2,683,086 | 3,000,000 |
Proceeds from capital contribution for acquisition of Powerdyne | 0 | 150,000 |
Proceeds from capital contributions | 250,000 | 188,178 |
Cash paid for deferred financing costs | 0 | (14,489) |
Borrowings from (repayments to) a related party | 49,971 | (52,844) |
Advances to related parties | (1,497,055) | 0 |
Proceeds from issuance of notes payable | 300,000 | 0 |
Repayment of notes payable and accrued interest | (312,434) | 0 |
Net cash provided by financing activities | 1,473,568 | 3,270,845 |
Net increase (decrease) in cash and cash equivalents | (569,755) | 500,134 |
Cash and cash equivalents at beginning of year | 655,405 | 155,271 |
Cash and cash equivalents at end of year | 85,650 | 655,405 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 437 | 437 |
Cash paid for income taxes | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Repayment of accounts payable and advances with common stock | 0 | 47,075 |
Conversion of notes payable and accrued interest | 0 | 58,279 |
Forgiven accrued compensation | 0 | 1,673,774 |
Assets acquired from Powerdyne for note payable | 0 | 250,000 |
Net liabilities assumed in GX-Life acquisition | $ 0 | $ 17,247 |
1. Business and Nature of Opera
1. Business and Nature of Operations | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Nature of Operations | Corporate History Our Company was incorporated in the State of Nevada on October 12, 2000 under the name Cogen Systems, Inc. We changed our name to Snocone Systems, Inc. on December 6, 2001. On April 1, 2005, Snocone Systems, Inc. and its wholly-owned subsidiary, WYD Acquisition Corp., a California corporation (the “Merger Sub”), merged with Who’s Your Daddy, Inc. (“WYD”), an unrelated, privately held California corporation, whereby the Merger Sub merged with and into WYD. After the merger, WYD continued its corporate existence as a direct, wholly-owned subsidiary of Snocone Systems, Inc. under the laws of the State of California. On April 13, 2005, we changed our name to Who’s Your Daddy, Inc. and, effective June 1, 2010, we changed our name to FITT Highway Products, Inc. Effective October 29, 2013, we merged with F.I.T.T. Energy Products, Inc. (“FITT”) whereby FITT merged into our Company, with our Company being the surviving entity. Effective October 29, 2014 the name of our Company was changed to Global Future City Holding Inc. (the “Company” or “we”) and our trading symbol changed from “FHWY” to “FTCY.” Detention of our Former Chief Executive Officer On August 30, 2016, we reported on Form 8-K that our former Chief Executive Officer, President, and Chairman of the Board of Directors, Ning Liu, was detained in the People’s Republic of China (“PRC”) and we had begun investigating the facts and circumstances surrounding his detainment. On September 9, 2016, we filed Form 8-K reporting that Mr. Liu was taking a 30 day leave of absence from all positions he held with our Company. Finally, on October 21, 2016, because of his ongoing legal challenges in the PRC, Mr. Liu resigned from all his positions in our Company. Also on October 21, 2016, our Board of Directors appointed Michael R. Dunn to the positions of Chief Executive Officer (“CEO”), President and Chairman of the Board. Mr. Liu continues to be detained in the PRC. We have been informed by Mr. Liu’s attorney in the PRC that, on March 2, 2017, he was convicted in Hunan province for violations of the PRC’s multi-level marketing regulations and sentenced to 10 years in prison. We have likewise been informed by Mr. Liu’s attorney that he has an appeal hearing scheduled in Hunan Province in the near future and, if he is unsuccessful in that hearing, he can appeal to a national court in Beijing China. This process could take months and it is very difficult to get reliable information on the particulars of Mr. Liu’s case to make any intelligent assessment as to the final outcome. While many of the facts of his detention and conviction are unclear, we have been informed that Mr. Liu allegedly raised capital through the sale of a digital coin, named Wan Fu Bi, all while representing himself as the CEO of our Company and an unaffiliated private company, Great Coin Inc. (“Great Coin”). As further described below, Great Coin, which was co-owned by Mr. Liu and Michael Dunn, is a technology company that developed the GX Coin, a digital currency, and a trading platform for the GX Coin. Through a February 2016 agreement with Great Coin, our Company’s direct-selling program members were able to convert a portion of their membership accounts into GX Coins. It is unclear whether investors in Wan Fu Bi believed it was the same as the GX Coin. Even though Mr. Liu was allegedly representing himself as the CEO of our Company and also of Great Coin, his activities were never authorized by either company, Wan Fu Bi has no affiliation with either company or Michael Dunn, and no funds resulting from the alleged activities were ever received by our Company, Great Coin or Michael Dunn. While no actions have been filed against our Company as a result of Mr. Liu’s actions, his detention and legal challenges have had, and continue to have, a material adverse impact on us. We believe that potential investors in our Company and potential business partners have refused and or avoided doing business with us due to Mr. Liu’s actions. Our efforts to implement our direct selling program became significantly more difficult due to questions surrounding Mr. Liu’s detention. In addition, our investment in Global Future City Regional LLC, an EB-5 Regional Center, was significantly impaired due to Mr. Liu’s actions, and potential project partners decided to investigate their opportunities elsewhere. While Mr. Liu is no longer involved with our Company, many potential investors and strategic partners, particularly those in the PRC, became distrustful of us, resulting in significant harm to our credibility, our brand and our ability to raise capital. As a result of Mr. Liu’s alleged actions, we were forced to suspend our direct selling program (the “GX-Life Direct Selling Program”) in the fourth quarter of 2016 and to abandon and write-off our investment in our EB-5 Regional Center line of business. We believe Mr. Liu’s alleged actions were the primary factor in our stock price falling from a high of $3.64 per share in the first quarter of 2016 to a low of $0.51 per share in the fourth quarter of 2016, causing us to experience significant lost opportunities to raise capital. In addition, after focusing a significant portion of our resources for several months attempting to redirect our marketing strategy to an online sales program with little success, we were forced to lay off a majority of our employees in January 2017 to reduce costs to a minimal level. In response to Mr. Liu’s alleged actions and their significant harm to our Company, on March 20, 2017 we entered into a Stock Issuance Cancellation Agreement with Mr. Liu and certain of his affiliates (the “Stockholders”) under which the Stockholders agreed to return 8,349,906 common shares owned by them to our Company for cancellation. We retain the right in the future to bring actions against Mr. Liu for any and all further damages his alleged actions may have caused. In a separate agreement, Mr. Liu also relinquished his 50% ownership in Great Coin to Mr. Dunn and Mr. Dunn retains the right to bring future actions against Mr. Liu for any damages his alleged actions may have caused. Description of Business We are a holding company focused in the area of consumer product sales. We entered this market space through our October 2015 acquisition of GX-Life Global, Inc. (“GX-Life”). See Note 3. Through GX-Life, we sell high quality consumer products such as personal care, wellness, and quality-of-life products under the brand, “GX-Life”. Our sales, although limited, were previously made via a direct-selling membership program and through e-commerce channels. Our direct-selling program includes a reward program featuring a digital currency (the “GX Coin”) we access through an agreement with Great Coin, Inc. (“Great Coin”). See Note 6. During the fourth quarter of 2016, we suspended the direct-selling program for reasons associated with the detention of our CEO described above. We currently are pursuing relationships with a number of sales organizations who can purchase our existing inventory for resale purposes in an attempt to establish a wholesale relationship with these organizations. This would allow us to take advantage of established sales networks and, if successful, create a sustainable stream of revenue. We believe this approach gives us the best opportunity for future success at the least cost. There is no assurance that we will be successful in this endeavor. For a more detailed description of our business, please see the section titled, “Business Summary” under Part I, Item 1. Business. As a result of recurring losses, negative cash flows from operations and working capital deficiency, there is a substantial doubt about the Company’s ability to continue as a going concern. We intend to fund our operations with additional equity and/or debt financing. Management is also making efforts to increase revenue generating activities though the pursuit of wholesale relationships with interested sales organizations. If we cannot raise additional short term capital, we may consume all of our cash reserved for operations. There are no assurances that management will be able to raise capital on terms acceptable to the Company or at all. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that would be necessary if we are unable to continue as a going concern. |
2. Basis of Presentation and Si
2. Basis of Presentation and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts in the financial statements and disclosures of contingent assets and liabilities. On an on-going basis, we evaluate all of these estimates and assumptions. The most important of these estimates and assumptions relate to revenue recognition including reserves for right of return, inventory valuation, collectability of receivables, impairment assessments on long-lived assets, and the valuation of stock compensation and awards. Although these and other estimates and assumptions are based on the best available information, actual results could be different from these estimates. The policies discussed below include those that management has determined to be the most appropriate in preparing our consolidated financial statements. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Global Future City Holding Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions h ave been eliminated in consolidation . Management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes. Actual results could d i ffer from those estimates. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Our significant estimates relate to revenue recognition including reserves for right of return, inventory valuation, collectability of receivables, impairment assessments on long-lived assets, and the valuation of stock compensation and awards. Concentrations of Credit Risks We will invest any cash balances we may have through high-credit quality financial institutions. From time to time, we may maintain bank account levels in excess of FDIC insurance limits. If the financial institution in which we have our accounts has financial difficulties, any cash balances in excess of the FDIC limits could be at risk. Cash and Cash Equivalents We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents. Allowances for Doubtful Accounts We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining if collection of required payments is reasonably assured: customer credit-worthiness, past transaction history with the customer, and current economic industry trends. As of December 31, 2016 and 2015, there were no allowances for doubtful accounts. Inventories Inventories are valued at the lower of first-in, first-out, cost or market value (net realizable value). We regularly review our inventory quantities on hand and record a provision for excess and slow moving inventory based primarily on our estimated forecast of product demand and related product expiration dates. Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of five years. Significant renewals and betterments are capitalized while maintenance and repairs are charged to expense as incurred. Leasehold improvements are amortized on the straight-line basis over the lesser of their estimated useful lives or the term of the related lease. Internal Use Software We incur software development costs to develop software programs to be used solely to meet our internal needs and cloud-based applications used to deliver our services. In accordance with ASC 350-40, Internal-Use Software, we capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Impairment of Long-Lived Assets We review our long-lived assets in accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets. Under that directive, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Such group is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. Fair Value of Financial Instruments We follow the guidance of ASC 820 – Fair Value Measurement and Disclosure. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of our Company. Unobservable inputs are inputs that reflect our Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value: Level 1. Observable inputs such as quoted prices in active markets; Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Our financial instruments consisted primarily of (level 1) accounts payable, accrued expenses and deposits, and notes payable. The carrying amounts of our financial instruments generally approximate their fair values due to the short term nature of these instruments. As of December 31, 2016 and 2015, we did not have any level 2 or 3 assets or liabilities. Deferred Rent Our Company accounts for lease rentals that have escalating rents on a straight-line basis over the life of each lease. This accounting generally results in a deferred liability (for the lease expense) recorded on the balance sheet. Debt Issued with Common Stock Debt issued with common stock is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt With Conversion or Other Options. We record the relative fair value of common stock related to the issuance of convertible debt as a debt discount or premium. The discount or premium is subsequently amortized to interest expense over the expected term of the convertible debt. Convertible Debt We account for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities, as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. We determine the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. We record all of these liabilities at their fair value at issuance and adjust the liabilities quarterly to reflect changes in their fair value. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Due to historical net losses, a valuation allowance has been established to offset the deferred tax assets. Revenue Recognition Revenue from product sales are recorded when the products are shipped and title passes to independent members. Net revenues are determined after deducting promotional and other allowances in accordance with ASC 605-50. Product sales to members are made pursuant to a member agreement that provides for transfer of both title and risk of loss upon our delivery to the carrier that completes delivery to the members. This is commonly referred to as “F.O.B. Shipping Point.” Amounts received for unshipped product are recorded as deferred revenue. Our sales arrangements do not contain right of inspection or customer acceptance provisions other than general rights of return. We estimate and accrue a reserve for product returns based on our return policies and historical experience, with the expense recorded as a reduction to revenue. Cash receipts for enrollment packages include nonrefundable enrollment fees for all new members and an additional deposit for upgrading to a VIP status if a member so chooses under the terms of the compensation plan that was in effect during the second quarter of 2016 (the “Q2 Plan”). The nonrefundable enrollment fee is deferred and recognized over the term of the arrangement, generally twelve months. For members under the Q2 Plan, a VIP status upgrade is a deposit which is repayable to a member either in cash, product, or convertible into GX Coin. There is no revenue associated with a VIP status upgrade deposit initially; however, related party revenue is recognized on the commission earned when VIP members under the Q2 Plan convert their membership or rewards points into GX-Coin. A VIP status upgrade earns reward status points that are also subject to repayment in cash or convertible into GX Coin. Pursuant to ASC 605-50, a cost and liability for amounts owed in cash or cash equivalents benefits under nondiscretionary loyalty programs should be accrued with a related contra-revenue, as by transferring the right to cash or cash equivalent benefits, the entity effectively reduces the revenue from conversions of VIP status and related accrued benefits to GX Coin. Each VIP member entering the Q2 Plan through the second quarter of 2016 have elected to convert their respective deposit to GX-Coin by such time or during the third quarter of 2016. The Company recognizes revenue on the conversion upon the completion of our performance obligation as part of the conversion process, at which point all necessary revenue recognition criteria have been met. Based on industry developments and best practices of direct selling programs, GX-Life implemented a revised compensation plan on July 15, 2016, and finalized and released such plan on August 1, 2016 (the “GX-Life Global Compensation Plan”). The GX-Life Global Compensation Plan removed the VIP status upgrade deposits and accordingly, the revenues from the conversion of VIP status upgrade deposits is expected to cease during the 2016 year after all deferrals are recognized. From time to time, GX-Life may make modifications and enhancements to the GX-Life Global Compensation Plan to help motivate GX-Life Members. GX-Life may also enter into agreements for business or market development, which may result in additional compensation to specific GX-Life Members. GX-Life intends to continue to examine and adjust the GX-Life Global Compensation Plan to reflect marketplace competition, demand, and U.S. regulations and foreign jurisdictions. Because of this, GX-Life recognizes that the compensation and rewards available under the GX-Life Global Compensation Plan may be different across different jurisdictions. Shipping and Handling Shipping and handling costs are recorded as a cost of net revenue and are expensed as incurred. Net Income (Loss) per Share We present basic income (loss) per share (“EPS”) and diluted EPS on the face of the consolidated statement of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. At December 31, 2016 and 2015, we had no outstanding options or warrants to purchase any of our common shares, respectively. As of December 31, 2016 and 2015, we had convertible debt; however, the effects of the convertible debt would have been anti-dilutive due to loss in the period. Stock-Based Compensation We account for our stock-based compensation in accordance with ASC 718 – Stock Compensation. We account for all stock-based compensation using a fair-value method on the grant date and recognize the fair value of each award as an expense over the requisite vesting period. Accounting for Equity Instruments Issued to Non-Employees We account for our equity-based payments to non-employees under ASC 505 – Equity. The fair value of the equity instrument issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of our common stock on the date the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to the statement of operations and credited to common stock and/or additional paid-in capital as appropriate. Fees Paid in a Cloud Computing Arrangement In April 2015, the FASB issued ASU No. 2015-05 “Intangibles-Goodwill and Other-Internal-Use Software.” The standard amended the existing accounting standards for intangible assets and provides explicit guidance to customers in determining the accounting for fees paid in a cloud computing arrangement, wherein the arrangements that do not convey a software license to the customer are accounted for as service contracts. The pronouncement is effective for reporting periods beginning after December 15, 2015. We early adopted ASU 2015-05 and applied service contract treatment to the Software License and Service Agreement (Note 6) as we do not have the right to take possession of the software, and thus the contract is deemed a service contract. Recent Accounting Pronouncements From time to time, the FASB issues ASUs to amend the authoritative literature in ASC. Management believes that those issued to date that are not described below either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements. Revenue Recognition. In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” . Financial Instruments. Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases, that requires organizations that lease assets, referred to as “lessees”, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. ASU 2016-02 will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will include qualitative and quantitative requirements. The new standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those annual years, and early application is permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements. Share-Based Payments to Employees. Cash Flow Classifications. |
3. Acquisitions
3. Acquisitions | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Acquisitions | Sky Rover Stock Purchase Agreement On April 17, 2015, our Company and Sky Rover Holdings, Ltd., a corporation formed under the laws of the Republic of Seychelles (“Sky Rover”) completed the closing of a Stock Purchase Agreement (the “SPA”) whereby certain unaffiliated parties that contributed cash, E-Gold coin (“EGD”) crypto-assets, and other consideration to complete the SPA (including the shares issued to Mr. Lei Pei as described below) (collectively, the “Acquiring Shareholders”) cumulatively acquired 30,400,000 of the outstanding shares of stock of our Company (approximately 87.3%) in exchange for our receipt of $400,000 in cash and the contribution of 4,000,000 EGD to our wholly-owned subsidiary, Global Modern Enterprise Limited, a Hong Kong entity (the “EGD Subsidiary”). To complete the transaction, 29,868,649 of the common shares acquired were conveyed by certain affiliated and unaffiliated existing shareholders and 3,371,351 were newly issued. Prior to the closing, Sky Rover advanced $539,885, consisting of the $400,000 purchase price and $139,885 towards reimbursement of certain corporate costs. Additionally, Sky Rover’s officer, Mr. Lei Pei, provided the initial down payment for the purchase of Powerdyne. In connection with the closing of the SPA, Mr. Lei Pei purchased 6,000,000 newly-issued shares of our common stock for $3,000,000 in cash in a separate transaction that closed on March 30, 2015, which was meant to provide working capital for our anticipated expansion programs. On August 17, 2015, Mr. Pei, resigned from our Company as its Chief Executive Officer, Chief Financial Officer and Chairman. Also in connection with the share purchase by Sky Rover, we intended to market and deploy the EGD through a reward program (“Rewarded EGD”). In order to ensure compliance with existing securities regulations, on February 10, 2015 we filed a Request for No-Action Relief (the “No-Action Letter”) with the Securities and Exchange Commission (“SEC”) to obtain clarification that the SEC will not recommend enforcement action against our Company and its related subsidiaries regarding our use of the EGD. Despite several inquiries made by our Company, we did not receive a substantive response from the SEC on the No-Action Letter. This led management to elect to rescind the previous contribution of EGD and to focus on the acquisition of GX-Life as described below. As a result, on October 9, 2015, we withdrew the No-Action Letter from consideration by the SEC. The acquisition of the EGD is considered an asset purchase for accounting purposes based on the guidance of ASC 805 - Business Combinations, as the EGD does not have features of a business nor does it have any operations. Due to management’s election to effectively rescind the contribution of EGD and to focus on the acquisition of GX-Life Global, we recorded the value of the EGD as of the date of acquisition at $0. GX-Life Acquisition On October 2, 2015, we completed a Share Exchange Agreement with GX-Life, whereby we spun-off 100% of our ownership interest in the EGD Subsidiary (including 4,000,000 EGD) in exchange for 100% of the outstanding common stock of GX-Life. GX-Life is a consumer products business, which was primarily owned by our former CEO, Ning Liu, and our current CEO, Michael Dunn. As part of their marketing strategy, GX-Life had developed a robust, scalable network marketing platform that utilizes iMatrix’s software to support direct selling opportunities throughout the world. In a related transaction, on October 2, 2015, the former shareholders of GX-Life sold all of their interests in the EGD Subsidiary to the Acquiring Shareholders in the Sky Rover SPA in exchange for 21,280,000 shares of our Company’s common stock previously acquired in the Sky Rover SPA. Collectively these two transactions are referred to as the “GX-Life Transactions”. As a result of the GX-Life Transactions, much of the Sky Rover SPA has been effectively unwound and the 4,000,000 EGD crypto-assets are no longer owned or controlled by our Company or any of our subsidiaries. The GX-Life Transactions effectuated a change in control of our Company, as the former shareholders of GX-Life acquired 21,280,000 shares of our common stock representing an aggregate voting power of 45.9%. Individually, (i) Michael Dunn acquired an additional 24.1% voting power of our common stock, (ii) Ning Liu acquired 2.6% voting power of our common stock, and (iii) Tomoe Masuya acquired an additional 26.65% voting power of our common stock. The former shareholders of GX-Life Global are all unaffiliated from one another, and none of them have a beneficial interest or hold any ownership interest in each other's entity and disclaim status as a "group" as defined by SEC Rules. In accordance with ASC 805, we have included the financial results of GX-Life in our consolidated financial statements as of the date of acquisition. The assets and liabilitie were recorded at fair value, which approximated the carrying value, and are included in the consolidated financial information post-merger . Following is a summary of the assets and liabilities assumed as of the acquisition date: Assets: Cash $ 100 Deposits for inventory 491,988 Other deposits 5,700 Total assets 497,788 Liabilities: Accounts payable 19,298 Due to related parties 495,737 Total liabilities 515,035 Net liabilities in excess of assets $ 17,247 Following is pro-forma revenue and earnings information for the year ended December 31, 2015 assuming both our Company and GX-Life had been combined as of September 1, 2015, the date of formation of GX-Life. Amounts are unaudited: Net revenue $ 0 (Loss) before income taxes $ (927,233 ) Our direct-selling program includes a reward program featuring a digital currency (the “GX Coin”) we access through an agreement with Great Coin, Inc. (“Great Coin”). See Note 6. Powerdyne Acquisition On March 26, 2015, we entered into a Membership Interest Purchase and Sale Agreement with Powerdyne, Inc., an entity which owned 100% of the membership interests in Global Future City Regional Center, LLC, formerly Powerdyne LLC (“Powerdyne” or “Regional Center”). Powerdyne is an EB-5 Regional Center (USCIS ID Number 1215250671) that was approved by the USCIS on March 28, 2013. The purchase price was $250,000, of which $150,000 was contributed by our former CEO Lei Pei. The acquisition closed on March 27, 2015. As an EB-5 Regional Center, we intended to attract and pool investments from qualified foreign investors for the purpose of job creation within a defined geographic region. The purchase of Powerdyne is considered an asset purchase for accounting purposes based on the guidance of ASC 805 - Business Combinations, as Powerdyne does not have features of a business nor does it have any operations. Through the Powerdyne acquisition, we acquired the right to issue licenses to projects such that the projects will benefit from its regional center approved status. We have been unable to find an EB-5 investment project that meets our internal criteria and, given the difficulties caused by Mr. Liu’s alleged actions discussed in Note 1, we believe our investment in the Regional Center became significantly impaired. Consequently, during the fourth quarter of 2016 we commenced evaluating alternative strategies to utilize or sell the Regional Center. Because of the inactivity of the Regional Center, the USCIS has deemed it frozen and the value the license would have to a third party may be minimal. We may not be able to utilize or find a buyer for the EB-5 Regional Center and cannot determine at this point whether it has any value at all. Accordingly, a full impairment was deemed necessary. We have included the capitalized amount as a separate line item in the accompanying consolidated balance sheet as of December 31, 2016 and 2015 and a separate line for the impairment in the accompanying consolidated statements of operations. |
4. Inventories
4. Inventories | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories on hand at December 31, 2016 consist of finished goods. Because of the difficulties associated with Mr. Liu’s legal challenges in the PRC, we have suspended our direct-selling program and reduced the value of our inventory to its net realizable value resulting in an impairment charge of $1,122,520 during 2016. The impairment estimate was based on the movement of products to date, negotiations with third party to purchase certain inventory, and expiration dates of perishable goods that our Company may have difficulty selling in a timely manner. In addition, we had made deposits of $242,777 for future deliveries of inventory to companies that went out of business or declared bankruptcy. During the fourth quarter of 2016 we wrote-off these deposits as bad debts as the ability to receive inventory or recoup deposits is in doubt. Deposits for inventories at December 31, 2015 are down payments for products of our new direct-selling business which were shipped to us in the first quarter of 2016. |
5. Property and Equipment, net
5. Property and Equipment, net | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | Property and equipment, net consist of the following at December 31: 2016 2015 Furniture $ 374,299 $ 103,515 Computers 107,790 10,001 Software 101,330 62,610 Leasehold improvements 89,765 80,638 673,184 256,764 Less accumulated depreciation (124,165 ) (7,439 ) $ 549,019 $ 249,325 Depreciation expense was $95,482 and $6,367 for the years ended December 31, 2016 and 2015, respectively. |
6. Service Contract - Related P
6. Service Contract - Related Party | 12 Months Ended |
Dec. 31, 2016 | |
Service Contract - Related Party | |
Service Contract - Related Party | As described in Note 3 under the caption Sky Rover Stock Purchase Agreement Under the Services Contract, which has a term of 10 years, members of our direct selling program may elect to convert certain membership account balances into GX Coins at agreed-to conversion rates. When a member converts status or reward points, we will record revenues, excluding the conversion fee payable to Great Coin, equal to 80% of the conversion amount, up to $4,000,000 in total conversion amounts, and 50% of the conversion amount thereafter. We had classified the $350,000 as a separate line item in our consolidated balance sheet and began amortizing it on a straight-line basis over the expected period of benefit. However, given the difficulties we’ve experienced as a result of Mr. Liu’s detention in the PRC as described in Note 1, our efforts to implement our direct selling program became significantly more difficult and we decided to suspend our direct selling program. Accordingly, although the agreement remains in place and the platform run by the Great Coin remains operational, the usage of the Service Contract has been suspended, as it is no longer being integrated with our suspended direct selling program and therefore provides no future economic benefit to the Company based on current circumstances. As a result, during the fourth quarter of 2016, we have impaired the remaining unamortized balance of the Service Contract of $280,000. |
7. Accrued Expenses
7. Accrued Expenses | 12 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued expenses consist of the following at December 31: 2016 2015 Accrued interest $ 242,211 $ 126,512 Accrued royalties and commissions 11,346 11,366 Deferred rent 16,358 – Other 799 799 $ 270,714 $ 138,677 |
8. Accrued Compensation
8. Accrued Compensation | 12 Months Ended |
Dec. 31, 2016 | |
Compensation Related Costs [Abstract] | |
Accrued Compensation | Accrued compensation consists of the following at December 31: 2016 2015 Accrued officer’s compensation - CEO $ 55,231 $ – Accrued other compensation 70,786 – Accrued payroll taxes – delinquent 181,905 211,905 Accrued payroll taxes on accrued payroll (not yet due) 7,355 – $ 315,277 $ 211,905 As further discussed in Note 13, in 2016, we issued common stock to certain of our employees as part of the condition of their employment. During the fourth quarter of 2016, the employees earned common stock valued at $34,079 which is included in the table above under Accrued other compensation. We have delinquent Federal and State payroll taxes incurred mainly under previous management during the years 2006 through 2008. In 2015 we made payments of $52,597 against the Federal obligation. Additionally, based on an accounting received from the Internal Revenue Service (“IRS”), we determined that our accrual for past-due Federal payroll taxes was overstated due to collections made, which were unknown to us, from other responsible parties along with lower than estimated interest and penalties. As a result, at December 31, 2015, we reduced our liability by $60,000, with $6,000 reducing interest expense accrued during 2015 and $54,000 recorded as a gain on extinguishment of debt. In January 2016, we received approval from the IRS for a 4-year payment plan to repay this obligation with the first payment scheduled for April 2016. Due to the reduced availability of capital, we are delinquent with respect to this payment plan and are in contact with the IRS about adjusting the plan. In 2014, in order to facilitate the investment by Sky Rover discussed in Note 1, we entered into settlement agreements with our former CEO and Controller under which they agreed to forgive all accrued but unpaid salary once all closing conditions of the Sky Rover SPA had been met. During the three months ended March 31, 2015, when all closing conditions of the Sky Rover SPA became effective, our former Chief Executive Officer and former Controller forgave all accrued compensation owed to them in accordance with settlement agreements which, along with the related accrued payroll taxes, totaled $1,673,774. This amount has been recorded as contributed capital in the accompanying consolidated financial statements due to the related party nature of the transaction. |
9. Membership Deposits and Accr
9. Membership Deposits and Accrued Benefits | 12 Months Ended |
Dec. 31, 2016 | |
Membership Deposits And Accrued Benefits | |
Membership Deposits and Accrued Benefits | Membership deposits and accrued benefits activity for the years ended December 31, 2016 and 2015 consists of the following: 2016 2015 Beginning balance $ 10,020 $ – Member deposits 5,399,812 10,000 Less: deposits repaid (240,400 ) – Accrued member benefits 94,920 20 Less: member conversions to GX Coins (4,713,544 ) – Ending balance $ 550,808 $ 10,020 During 2016, our former CEO repaid certain member deposits totaling $250,000 ($240,400 in member deposits and $8,600 in enrollment fees and prepaid product purchases). We have accounted for this repayment as contributed capital. Member conversions to GX Coins were made in conformity with the provisions of the Service Contract discussed in Note 6. The balance at December 31, 2016 consists of the following: 2016 Repayments requested by members $ 115,580 Conversion paperwork signed – verifying appropriate state of residency 165,219 Conversion paperwork signed – no GX Coin account established 270,009 Ending balance $ 550,808 |
10. Notes Payable
10. Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | Notes payable consists of the following at December 31: 2016 2015 Acquisition note - Powerdyne $ – $ 50,000 Promissory notes - principal 300,000 – Promissory notes – unamortized debt discount (73,547 ) – Settled and restructured notes payable: Convertible promissory notes – debt acquisition 95,000 100,000 Notes payable – original bridge 120,000 120,000 Notes payable – bridge loan #1 230,000 355,000 Notes payable – bridge loan #2 85,000 175,000 Notes payable – bridge loan #3 250,000 250,000 Subtotal 1,006,453 1,050,000 Less current portion (1,006,453 ) (1,050,000 ) Long-term portion $ – $ – Acquisition Note – Powerdyne This obligation arose in connection with our acquisition of Powerdyne (see Note 3). Remaining payments on this note were made in 2016. Promissory Notes In the fourth quarter of 2016, we issued promissory notes to three individuals with face values totaling $300,000. The notes are to be repaid from proceeds from the sale of our inventory, with 50% of the proceeds payable on a pari passu In lieu of a stated interest rate, each note contains the following bonus payment provisions: 1. For each $25,000 invested, the note holder receives 12,500 shares of restricted common stock of our Company. 2. For each $25,000 invested, the note holder receives a cash bonus of: a. $5,000 if note is repaid between zero and 30 days b. $10,000 if note is repaid between 31 and 60 days c. $15,000 if note is repaid between 61 and 90 days All principal and accrued but unpaid bonus payments are due 90 days from the date of each note. As of the date of this filing, no inventory has been sold and no payments have been made under the notes. As a result, the notes are in default. The note holders were issued 150,000 shares of our common stock under these notes. We have valued the shares at $87,312, their relative fair market value on the issue date of each note (the date the share obligation arose) and recorded a debt discount for that amount. We are amortizing the debt discount over the 90-day length of the note and we recognized an interest expense of $13,765 in 2016 in connection therewith. The remaining discount of $73,547 will be amortized in the first quarter of 2017. Settled and Restructured Notes Payable During the fourth quarter of 2014 and the first quarter of 2015, we reached settlements (“Settlement Agreements”) with virtually all of our noteholders holding debt acquisition promissory notes and bridge notes (original through bridge #3). In the restructuring of the notes payable, our noteholders agreed to a) forgo payment of nearly all of the interest which had been accrued but unpaid as of the dates of each settlement agreement, b) a new interest rate of 10% per annum, c) a new maturity date of August 1, 2015, and d) a Company option to convert into free-trading shares of our common stock at any time the common stock has a closing bid price per share of $1.00 or more for 20 consecutive trading days after the closing of the Sky Rover SPA. Certain noteholders also agreed to relinquish to Sky Rover shares of their common stock they received with their original notes, contingent upon the Sky Rover SPA closing which occurred on April 17, 2015. In addition, holders of the restructured convertible promissory notes also agreed to forgo any additional principal (over and above the original principal) payable under their notes. These notes are no longer convertible at the option of the holder. As a result of these settlements, we recorded gains on extinguishment of debt totaling $35,403 in 2015. Convertible Promissory Notes – Debt Acquisition These notes originated during the first quarter of 2013 with original face values totaling $150,000. In the fourth quarter of 2014, we entered into Settlement Agreements with the holders of these notes, with the same terms as described under the above caption Settled and Restructured Notes Payable Note Payable – Original Bridge These notes which originated in 2009 and 2010 had an original face value totaling $245,000. In the fourth quarter of 2014, we entered into Settlement Agreements with the holders of these notes, with the same terms as described under the above caption Settled and Restructured Notes Payable Note Payable – Bridge Loan #1 These notes which originated in 2010 and 2011 had an original face value totaling $580,000. In the fourth quarter of 2014, we entered into Settlement Agreements with the holders of $345,000 face value of these notes, with the same terms as described under the above caption Settled and Restructured Notes Payable Note Payable – Bridge Loan #2 These notes originated in 2012 and had an original face value totaling $175,000. We entered into Settlement Agreements in the fourth quarter of 2014 with holders of $150,000 face value of these notes, and in the first quarter of 2015 with holders of $25,000 face value of these notes, all with the same terms as described under the above caption Settled and Restructured Notes Payable Note Payable – Bridge Loan #3 These notes originated in 2013. In the fourth quarter of 2014, we entered into Settlement Agreements with the holder of these notes, with the same terms as described under the above caption Settled and Restructured Notes Payable |
11. Related Parties
11. Related Parties | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Parties | During 2016, we made net advances to Great Coin in the amount of $1,494,002, mainly for the purpose of their development of the GX Coin trading platform which could be used by our direct-selling members as part of our reward program. In addition, our former CEO, Mr. Ning Liu, became responsible for credit card charges totaling $24,298 which were unrelated to our business and unauthorized. Because of the legal difficulties encountered by Mr. Liu in the PRC discussed in Note 1, it has become extremely difficult for Great Coin to raise capital needed to repay these advances. In addition, the reduced activity on the trading platform, related to the suspension of our direct selling program in the fourth quarter, reduces the ability for Great Coin to generate revenue from transactional activity. As a result, while we will continue to pursue collection from the applicable parties, during the fourth quarter of 2016, we reserved $1,518,300 representing the total of these advances as it is unclear whether any of these advances will be collectable. Advances from related party consist of net advances made by our CEO, Michael Dunn. |
12. Commitments and Contingenci
12. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | On October 16, 2015, we entered into a lease agreement for 5,824 square feet of office space in Irvine, California. The lease has a minimum term of 60 months and requires the following minimum annual payments, excluding property taxes and other common area costs: months 1 through 12 - $176,112; months 13 through 24 - $183,804; months 25 through 36 - $192,192; months 37 through 48 - $200,580; and months 49 through 60 - $209,664. Tenant improvements made by the landlord were completed at the end of January 2016, at which time we moved into the space and our lease commenced. Accordingly, the annual payments as just described also substantially reflect the five-year payout schedule through 2020. Annual rent expense for the years ended December 31, 2016 and 2015 was $150,907 and $33,335, respectively. Due to the escalating rent we have recorded a deferred rent liability of $16,358 as of December 31, 2016 which equates to the accumulated difference between the amount paid each month and the expense on a straight-line basis over the lease term. |
13. Capital Stock
13. Capital Stock | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Capital Stock | S-1 Registration Statement On May 8, 2015, we filed a Form S-1 Registration Statement with the SEC for the initial registration of 10 million shares of our common stock at $3.50 per share, as amended on June 8, 2016, and amended further on June 19, 2016 (collectively the “S-1”). The S-1 was declared effective by the SEC on July 6, 2015. The Company has filed and continues to file Post-Effective Amendments to keep the S-1 current and effective. However, as of the date of this filing, the S-1 is currently ineffective and under review by the SEC. The summary below details the Post-Effective Amendments we have filed with the SEC as of the date of this filing: · On October 8, 2015, we submitted Post-Effective Amendment No. 1 to the S-1 incorporating new information resulting from certain transactions in connection with GX-Life, and the resignation of our former CEO, Lei Pei. The Post-Effective Amendment No. 1 was declared effective by the SEC on October 19, 2015. · On December 2, 2015, we submitted Post-Effective Amendment No. 2 to the S-1 incorporating certain information contained in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, that was filed with the SEC on November 17, 2015. The Post-Effective Amendment No. 2 was declared effective by the SEC on December 22, 2015. · On May 4, 2016, we submitted Post-Effective Amendment No. 3 to the S-1 incorporating certain information contained in our Annual Report on Form 10-K for the year ended December 31, 2015, that was filed with the SEC on April 13, 2016, information contained in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, that was filed with the SEC on May 16, 2016, and certain changes in circumstances involving the development and utilization of GX Coin in GX-Life’s Direct Selling Program. We disclosed in this Post-Effective Amendment that we had sold 1,013,500 shares of our common stock under this prospectus. This was due to the fact that subsequent to March 31, 2016, and while the S-1 was still effective, we had received written and verbal commitments to purchase 1,000,000 shares under the S-1 for a total of US$3,500,000. However, certain investors either did not (i) transmit their respective funds to purchase their shares, or (ii) provide the appropriate written documentation to the Company prior to the S-1 becoming ineffective. As a result, we were only able to appropriately document the sale of 759,453 shares under the S-1 for a total of US$2,658,086, and sold an additional 48,104 shares to certain individuals in exchange for noncash consideration. · On July 22, 2016, we submitted Amendment No. 1 to Post-Effective Amendment No. 3 with the SEC to maintain the registration of 9,192,443 shares of our Common Stock. The S-1 is currently under review and we will not sell any shares under the S-1 until it is deemed effective by the SEC. Reference to the S-1 is not an offer to sell the securities described therein, and we are not soliciting an offer to buy the securities in any state where the offer or sale is not permitted. S-8 Registration Statements On July 29, 2016, we filed a Form S-8 Registration Statement (“S-8”) with the SEC to register 32,500 shares of our common stock at $1.69 per share. On October 5, 2016, we filed an S-8 with the SEC to register 33,500 shares of our common stock at $1.01 per share. The S-8’s were deemed effective as of the filing date pursuant to Rule 462 of the Securities Act. Preferred Stock We have authorized the issuance of a total of 20,000,000 shares of our preferred stock, each share having a par value of $0.001. Common Stock We have authorized the issuance of 150,000,000 shares of our common stock, each share having a par value of $0.001. As discussed under the above caption S-1 Registration Statement Effective April 17, 2015 in connection with the closing of the Sky Rover SPA, Sky Rover's designees received 33,240,000 shares of our common stock of which 3,371,351 were newly issued and 29,868,649 were conveyed by certain affiliated and unaffiliated existing shareholders to complete the transaction. All shares were considered to be part of the $400,000 acquisition price to acquire the stock per the terms described in Note 3. Prior to the closing of the Sky Rover SPA, Mr. Lei Pei purchased 6,000,000 newly-issued shares of our common stock for $3,000,000 in cash in a separate transaction that closed on March 30, 2015. Common Stock Issued for Services Employee Services During 2016, we issued 97,000 shares of our common stock to certain of our employees for services relating to conditions of their employment. 66,000 of these shares were issued under Form S-8 as described above and 31,000 of these shares were issued under our S-1 Registration Statement. The shares were valued at $237,077 based on our Company’s stock price and we recorded general and administrative expense of that amount in connection with the share issuance. No shares were issued for employee services in 2015. Non-Employee Services During 2016, we issued 203,000 shares of our common stock for consulting services rendered. 3,000 of these shares were issued under our S-1 Registration Statement and 200,000 of these shares were restricted. We recorded general and administrative expense of $179,570 in connection with the share issuances based on the fair market value (quoted market price) of our common stock on the dates of issuance. During 2015, we issued 250,000 shares of our common stock for consulting services related to marketing. The shares were valued at $65,000 based on the fair market value (quoted market price) of our common stock on the dates of issuance. We recorded selling and marketing expense of $65,000 in connection with the share issuances. Common Stock Issued to Extinguish Debt During 2016, we entered into a settlement agreement with a vendor under which we issued 14,104 shares of our common stock to settle $49,364 of outstanding amounts due. The shares were issued under our S-1 Registration Statement. No gain or loss was recorded with respect to this settlement. During 2015, we entered into settlement agreements with two vendors under which we issued 25,000 shares of our common stock to settle $49,189 of outstanding amounts due. We recorded a gain of on extinguishment of debt of $2,089 on these settlements based on the fair market value (quoted market price) of our common stock on the date of issuance. Contributed Capital As discussed in Note 9, during 2016 our former CEO repaid certain member deposits totaling $250,000 which we have we have accounted for as contributed capital. During 2015, our former Chief Executive Officer, Michael Dunn and our former Controller forgave accrued compensation due to each of them. In connection with these transactions, we recorded contributed capital of $1,673,774. Also in 2015, we recorded the following transactions as contributed capital: Payments made by a former CEO, Lei Pei, for Powerdyne acquisition $ 175,000 Advances in connection with Sky Rover SPA for expenses incurred due to late closing of the Sky Rover SPA 139,885 Net receipts in connection with all outstanding issues with Mr. Lei Pei 40,540 $ 355,425 Warrants and Stock Options During the years ended December 31, 2016 and 2015, there were no warrants or stock options outstanding and there was no expense related to warrants or stock options. On December 30, 2015, we elected to withdraw and terminate our Option Plan for employees, officers, and consultants of our Company. At the time of cancellation, there were no options outstanding and 13,889 shares were remaining for future issuance. We will re-evaluate the implementation of an option plan in the future at the Board of Director’s discretion. |
14. Income Taxes
14. Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Reconciliations of the U.S. federal statutory rate to the actual tax rate are as follows for the years ended December 31: 2016 2015 Federal tax at statutory rate 34.0% 34.0% Permanent differences: State income taxes, net of federal benefit 5.8% 5.8% Stock issued for services -3.0% – Gain/loss on extinguishment of debt -0.1% 4.6% Amortization of debt discount and accretion of debt -0.1% – Non-deductible entertainment – -0.1% Temporary differences: Accrued liabilities and other – -0.1% Change in valuation allowance -36.6% -44.3% Total provision -0.0% -0.1% The major components of the deferred taxes are as follows at December 31: Asset (Liability) 2016 2015 Current: Reserves and accruals $ 501,907 $ 51,290 Noncurrent: Net operating losses 2,770,239 1,166,436 Valuation allowance (3,272,146 ) (1,217,726 ) Net deferred tax asset $ – $ – Based on federal tax returns filed or to be filed through December 31, 2016, we had available approximately $8,322,000 in U.S. tax net operating loss carryforwards, pursuant to the Tax Reform Act of 1986, which assesses the utilization of a Company’s net operating loss carryforwards resulting from retaining continuity of its business operations and changes within its ownership structure. Net operating loss carryforwards expire in 20 years for federal income tax reporting purposes. For Federal income tax purposes, the net operating losses begin to expire in 2026. State net operating loss carryforwards through December 31, 2016 are approximately $8,197,000 and begin to expire in 2030. We have relied on the issuance of common stock to fund certain operating expenses. With the finalization of our merger with FITT, we experienced a change in ownership as defined in Section 382 of the Internal Revenue Code. As a result, our net operating loss carryforwards for federal income tax reporting became significantly limited based on the fair value of our Company on the date of change in ownership. Such change is expected to provide benefit to us only upon the attainment of profitability. Due to the Sky Rover and GX-Life transactions (Note 1) there has been a significant change in ownership. A change in ownership requires management to compute the annual limitation under Section 382 of the Internal Revenue Code. The amount of benefits we may receive from the operating loss carry forwards for income tax purposes is further dependent, in part, upon the tax laws in effect, our future earnings, and other future events, the effects of which cannot be determined. During the years ended December 31, 2016 and 2015, our valuation allowance increased by $2,054,420 and $403,358, respectively. The United States Federal return years 2013 through 2016 are still subject to tax examination by the United States Internal Revenue Service, however, we do not currently have any ongoing tax examinations. We are subject to examination by the California Franchise Tax Board for the years 2013 through 2016 and currently do not have any ongoing tax examinations. |
15. Agreements
15. Agreements | 12 Months Ended |
Dec. 31, 2016 | |
Agreements | |
Agreements | Mo Feng Yi Consulting Agreement On November 24, 2015 we entered into a Consulting Agreement with Mo Feng Yi (“Consultant”), an individual with extensive contacts and business relationships in Asia. Under the agreement, which has a term of 6 months, Consultant agreed to provide various business and market development services for our direct-selling business. The agreement required us to pay Consultant $200,000 in 2015 in two equal installments for services provided. On February 23, 2016, we amended the agreement to provide for an additional payment of $100,000 in February 2016 for continued service. Alicia Xie Geiser Consulting Agreements On December 1, 2015, we entered into a Consulting Agreement with Alicia Xie Geiser (“Consultant”), an individual with extensive contacts and business relationships in Asia. Under the agreement, which has a term of 6 months, Consultant agreed to provide various business and market development services for our direct-selling business. The agreement requires us to pay Consultant $10,000 per month. During 2016 and 2015, we recorded general and administrative expenses of $40,000 and $10,000, respectively, in connection with this agreement. On September 21, 2016, we entered into another Consulting Agreement with Consultant under which Consultant agreed to provide advice and assistance with respect to our capital market positioning. Consultant also agreed to help us broaden the market support for our securities and introduce us to prospective investors. Under the agreement, which had a one-month term, we agreed to issue Consultant 25,000 shares of our restricted common stock which we valued at $29,750, the fair market value at the date of issuance. In 2016, we recorded a general and administrative expense of the same amount in connection with this agreement. Private Consulting Group Consulting Agreement On February 26, 2016, we entered into a Consulting Agreement with Private Consulting Group (“Consultant”) under which Consultant agreed to provide business and financial consulting services including advice and assistance with our capital market positioning and identifying prospective institutional purchasers for our equity securities. The agreement has a term of 7 months and requires that we pay Consultant $10,000 per month and issue Consultant 50,000 restricted shares of our common stock. Because of Consultant’s inability to completely perform the services, we paid only $30,000 and issued only 25,000 shares. The shares were valued at $65,250, their fair market value on the date of issuance. In connection with this agreement, we recorded a general and administrative expense in 2016 totaling $95,250. iMatrix Software, Inc. Consulting Agreement On February 17, 2016, we entered into a Consulting Agreement with iMatrix Software, Inc. (“Consultant”) under which Consultant agreed to provide services to assist in developing and expanding our direct-selling business. The agreement has a minimum term of 3 months and requires that we pay Consultant $18,000 per month and issue Consultant 3,000 registered and free-trading shares of our common stock. The shares were valued at $8,070, their fair market value on the date of issuance. In connection with this agreement, we recorded a general and administrative expense in 2016 totaling $116,070. Mitchell Morrison Consulting Agreement On April 1, 2016, we entered into a Consulting Agreement with Mitchell Morrison (“Consultant”) under which Consultant agreed to provide business and financial consulting services including advice and assistance with our capital market positioning and identifying prospective institutional purchasers for our equity securities. The agreement has no stated term, is cancellable by either party on 30 days’ notice, and requires that we pay Consultant $15,000 on execution of the agreement and $10,000 per month. During 2016, we recorded a general and administrative expense totaling $15,000 in connection with this agreement as it was cancelled shortly after its inception. Juan Lopez Consulting Agreement On December 8, 2016, we entered into a Consulting Agreement with Juan Lopez (“Consultant”) under which Consultant agreed to assist us in developing a marketing plan for the promotion and sale of our products outside the direct-selling area. The agreement has a term of 4 months and requires that we issue Consultant 150,000 restricted shares, all of which were vested as of the date of the agreement. We have valued the shares based on their fair market value on the date of issue and recorded a selling and marketing expense in the amount of $76,500. |
16. Subsequent Events
16. Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Promissory Note On January 27, 2016, we issued a promissory note to an individual with a face value of $50,000. The note has the same terms as the notes described in Note 10 under the caption Promissory Notes Stock Issuance Cancellation Agreement Due to Mr. Liu’s legal challenges in the PRC, as described in Note 1, the following actions were taken. On March 20, 2017, we entered into a Stock Issuance Cancellation Agreement with, Master Power Holdings Group and Big Name Group Co. Ltd., a British Virgin Islands corporation controlled by Mr. Ning (Sam) Liu (“Mr. Liu”), the Company’s former Chief Executive Officer, (collectively the “Shareholders”). Pursuant to the Agreement, the Shareholders agreed to cancel and return to treasury an aggregate 8,349,906 shares of common stock (representing 17.12% of the current issued and outstanding common stock) as consideration for the significant hardship suffered by the Company as a result of Mr. Liu’s legal challenges. Upon the closing of the Agreement, which took place on March 20 2017 (the “Closing”), the Shareholders surrendered their stock certificates representing an aggregate 8,349,906 shares of common stock with all necessary documentation to the Company’s transfer agent for cancellation. Additionally, Mr. Liu entered into an agreement to cancel his share ownership in Great Coin, a company that provides the platform and cryptocurrency (GX-COIN) used by our wholly-owned subsidiary, GX-Life Global, Inc. (“GX-Life”). Prior to the cancellation, Mr. Liu owned 50.0% of Great Coin and Michael Dunn, our Chief Executive Officer and member of our Board of Directors, owned the other 50.0% of Great Coin. After the cancellation, Mr. Dunn owns 100% of Great Coin. |
2. Basis of Presentation and 24
2. Basis of Presentation and Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Global Future City Holding Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions h ave been eliminated in consolidation . Management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes. Actual results could d i ffer from those estimates. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Our significant estimates relate to revenue recognition including reserves for right of return, inventory valuation, collectability of receivables, impairment assessments on long-lived assets, and the valuation of stock compensation and awards. |
Concentrations of Credit Risks | Concentrations of Credit Risks We will invest any cash balances we may have through high-credit quality financial institutions. From time to time, we may maintain bank account levels in excess of FDIC insurance limits. If the financial institution in which we have our accounts has financial difficulties, any cash balances in excess of the FDIC limits could be at risk. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents. |
Allowances for Doubtful Accounts | Allowances for Doubtful Accounts We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining if collection of required payments is reasonably assured: customer credit-worthiness, past transaction history with the customer, and current economic industry trends. As of December 31, 2016 and 2015, there were no allowances for doubtful accounts. |
Inventories | Inventories Inventories are valued at the lower of first-in, first-out, cost or market value (net realizable value). We regularly review our inventory quantities on hand and record a provision for excess and slow moving inventory based primarily on our estimated forecast of product demand and related product expiration dates. |
Property and Equipment, net | Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of five years. Significant renewals and betterments are capitalized while maintenance and repairs are charged to expense as incurred. Leasehold improvements are amortized on the straight-line basis over the lesser of their estimated useful lives or the term of the related lease. |
Internal Use Software | Internal Use Software We incur software development costs to develop software programs to be used solely to meet our internal needs and cloud-based applications used to deliver our services. In accordance with ASC 350-40, Internal-Use Software, we capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets We review our long-lived assets in accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets. Under that directive, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Such group is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments We follow the guidance of ASC 820 – Fair Value Measurement and Disclosure. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of our Company. Unobservable inputs are inputs that reflect our Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value: Level 1. Observable inputs such as quoted prices in active markets; Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Our financial instruments consisted primarily of (level 1) accounts payable, accrued expenses and deposits, and notes payable. The carrying amounts of our financial instruments generally approximate their fair values due to the short term nature of these instruments. As of December 31, 2016 and 2015, we did not have any level 2 or 3 assets or liabilities. |
Deferred Rent | Deferred Rent Our Company accounts for lease rentals that have escalating rents on a straight-line basis over the life of each lease. This accounting generally results in a deferred liability (for the lease expense) recorded on the balance sheet. |
Debt Issued with Common Stock | Debt Issued with Common Stock Debt issued with common stock is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt With Conversion or Other Options. We record the relative fair value of common stock related to the issuance of convertible debt as a debt discount or premium. The discount or premium is subsequently amortized to interest expense over the expected term of the convertible debt. |
Convertible Debt | Convertible Debt We account for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities, as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. We determine the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. We record all of these liabilities at their fair value at issuance and adjust the liabilities quarterly to reflect changes in their fair value. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Due to historical net losses, a valuation allowance has been established to offset the deferred tax assets. |
Revenue Recognition | Revenue Recognition Revenue from product sales are recorded when the products are shipped and title passes to independent members. Net revenues are determined after deducting promotional and other allowances in accordance with ASC 605-50. Product sales to members are made pursuant to a member agreement that provides for transfer of both title and risk of loss upon our delivery to the carrier that completes delivery to the members. This is commonly referred to as “F.O.B. Shipping Point.” Amounts received for unshipped product are recorded as deferred revenue. Our sales arrangements do not contain right of inspection or customer acceptance provisions other than general rights of return. We estimate and accrue a reserve for product returns based on our return policies and historical experience, with the expense recorded as a reduction to revenue. Cash receipts for enrollment packages include nonrefundable enrollment fees for all new members and an additional deposit for upgrading to a VIP status if a member so chooses under the terms of the compensation plan that was in effect during the second quarter of 2016 (the “Q2 Plan”). The nonrefundable enrollment fee is deferred and recognized over the term of the arrangement, generally twelve months. For members under the Q2 Plan, a VIP status upgrade is a deposit which is repayable to a member either in cash, product, or convertible into GX Coin. There is no revenue associated with a VIP status upgrade deposit initially; however, related party revenue is recognized on the commission earned when VIP members under the Q2 Plan convert their membership or rewards points into GX-Coin. A VIP status upgrade earns reward status points that are also subject to repayment in cash or convertible into GX Coin. Pursuant to ASC 605-50, a cost and liability for amounts owed in cash or cash equivalents benefits under nondiscretionary loyalty programs should be accrued with a related contra-revenue, as by transferring the right to cash or cash equivalent benefits, the entity effectively reduces the revenue from conversions of VIP status and related accrued benefits to GX Coin. Each VIP member entering the Q2 Plan through the second quarter of 2016 have elected to convert their respective deposit to GX-Coin by such time or during the third quarter of 2016. The Company recognizes revenue on the conversion upon the completion of our performance obligation as part of the conversion process, at which point all necessary revenue recognition criteria have been met. Based on industry developments and best practices of direct selling programs, GX-Life implemented a revised compensation plan on July 15, 2016, and finalized and released such plan on August 1, 2016 (the “GX-Life Global Compensation Plan”). The GX-Life Global Compensation Plan removed the VIP status upgrade deposits and accordingly, the revenues from the conversion of VIP status upgrade deposits is expected to cease during the 2016 year after all deferrals are recognized. From time to time, GX-Life may make modifications and enhancements to the GX-Life Global Compensation Plan to help motivate GX-Life Members. GX-Life may also enter into agreements for business or market development, which may result in additional compensation to specific GX-Life Members. GX-Life intends to continue to examine and adjust the GX-Life Global Compensation Plan to reflect marketplace competition, demand, and U.S. regulations and foreign jurisdictions. Because of this, GX-Life recognizes that the compensation and rewards available under the GX-Life Global Compensation Plan may be different across different jurisdictions. |
Shipping and Handling | Shipping and Handling Shipping and handling costs are recorded as a cost of net revenue and are expensed as incurred. |
Net Income (Loss) per Share | Net Income (Loss) per Share We present basic income (loss) per share (“EPS”) and diluted EPS on the face of the consolidated statement of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. At December 31, 2016 and 2015, we had no outstanding options or warrants to purchase any of our common shares, respectively. As of December 31, 2016 and 2015, we had convertible debt; however, the effects of the convertible debt would have been anti-dilutive due to loss in the period. |
Stock-Based Compensation | Stock-Based Compensation We account for our stock-based compensation in accordance with ASC 718 – Stock Compensation. We account for all stock-based compensation using a fair-value method on the grant date and recognize the fair value of each award as an expense over the requisite vesting period. |
Accounting for Equity Instruments Issued to Non-Employees | Accounting for Equity Instruments Issued to Non-Employees We account for our equity-based payments to non-employees under ASC 505 – Equity. The fair value of the equity instrument issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of our common stock on the date the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to the statement of operations and credited to common stock and/or additional paid-in capital as appropriate. |
Fees Paid in a Cloud Computing Arrangement | Fees Paid in a Cloud Computing Arrangement In April 2015, the FASB issued ASU No. 2015-05 “Intangibles-Goodwill and Other-Internal-Use Software.” The standard amended the existing accounting standards for intangible assets and provides explicit guidance to customers in determining the accounting for fees paid in a cloud computing arrangement, wherein the arrangements that do not convey a software license to the customer are accounted for as service contracts. The pronouncement is effective for reporting periods beginning after December 15, 2015. We early adopted ASU 2015-05 and applied service contract treatment to the Software License and Service Agreement (Note 6) as we do not have the right to take possession of the software, and thus the contract is deemed a service contract. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements From time to time, the FASB issues ASUs to amend the authoritative literature in ASC. Management believes that those issued to date that are not described below either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements. Revenue Recognition. In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” . Financial Instruments. Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases, that requires organizations that lease assets, referred to as “lessees”, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. ASU 2016-02 will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will include qualitative and quantitative requirements. The new standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those annual years, and early application is permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements. Share-Based Payments to Employees. Cash Flow Classifications. |
3. Acquisitions (Tables)
3. Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Acquisition Assets and Liabilities | Assets: Cash $ 100 Deposits for inventory 491,988 Other deposits 5,700 Total assets 497,788 Liabilities: Accounts payable 19,298 Due to related parties 495,737 Total liabilities 515,035 Net liabilities in excess of assets $ 17,247 |
Pro-forma revenue and earnings information | Net revenue $ 0 (Loss) before income taxes $ (927,233 ) |
5. Property and Equipment, net
5. Property and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | 2016 2015 Furniture $ 374,299 $ 103,515 Computers 107,790 10,001 Software 101,330 62,610 Leasehold improvements 89,765 80,638 673,184 256,764 Less accumulated depreciation (124,165 ) (7,439 ) $ 549,019 $ 249,325 |
7. Accrued Expenses (Tables)
7. Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | 2016 2015 Accrued interest $ 242,211 $ 126,512 Accrued royalties and commissions 11,346 11,366 Deferred rent 16,358 – Other 799 799 $ 270,714 $ 138,677 |
8. Accrued Compensation (Tables
8. Accrued Compensation (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accrued Compensation Abstract | |
Accrued Compensation | 2016 2015 Accrued officer’s compensation - CEO $ 55,231 $ – Accrued other compensation 70,786 – Accrued payroll taxes – delinquent 181,905 211,905 Accrued payroll taxes on accrued payroll (not yet due) 7,355 – $ 315,277 $ 211,905 |
9. Membership Deposits (Tables)
9. Membership Deposits (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Membership Deposits | |
Membership Deposits | 2016 2015 Beginning balance $ 10,020 $ – Member deposits 5,399,812 10,000 Less: deposits repaid (240,400 ) – Accrued member benefits 94,920 20 Less: member conversions to GX Coins (4,713,544 ) – Ending balance $ 550,808 $ 10,020 |
Member conversions | 2016 Repayments requested by members $ 115,580 Conversion paperwork signed – verifying appropriate state of residency 165,219 Conversion paperwork signed – no GX Coin account established 270,009 Ending balance $ 550,808 |
10. Notes Payable (Tables)
10. Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | 2016 2015 Acquisition note - Powerdyne $ – $ 50,000 Promissory notes - principal 300,000 – Promissory notes – unamortized debt discount (73,547 ) – Settled and restructured notes payable: Convertible promissory notes – debt acquisition 95,000 100,000 Notes payable – original bridge 120,000 120,000 Notes payable – bridge loan #1 230,000 355,000 Notes payable – bridge loan #2 85,000 175,000 Notes payable – bridge loan #3 250,000 250,000 Subtotal 1,006,453 1,050,000 Less current portion (1,006,453 ) (1,050,000 ) Long-term portion $ – $ – |
13. Capital Stock (Tables)
13. Capital Stock (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Contributed capital | Payments made by a former CEO, Lei Pei, for Powerdyne acquisition $ 175,000 Advances in connection with Sky Rover SPA for expenses incurred due to late closing of the Sky Rover SPA 139,885 Net receipts in connection with all outstanding issues with Mr. Lei Pei 40,540 $ 355,425 |
14. Income Taxes (Tables)
14. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of tax rate | 2016 2015 Federal tax at statutory rate 34.0% 34.0% Permanent differences: State income taxes, net of federal benefit 5.8% 5.8% Stock issued for services -3.0% – Gain/loss on extinguishment of debt -0.1% 4.6% Amortization of debt discount and accretion of debt -0.1% – Non-deductible entertainment – -0.1% Temporary differences: Accrued liabilities and other – -0.1% Change in valuation allowance -36.6% -44.3% Total provision -0.0% -0.1% |
Deferred taxes | Asset (Liability) 2016 2015 Current: Reserves and accruals $ 501,907 $ 51,290 Noncurrent: Net operating losses 2,770,239 1,166,436 Valuation allowance (3,272,146 ) (1,217,726 ) Net deferred tax asset $ – $ – |
2. Basis of Presentation and 33
2. Basis of Presentation and Significant Accounting Policies (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts | $ 0 | $ 0 |
3. Acquisitions (Details - Acqu
3. Acquisitions (Details - Acquisition allocation) - GX-Life [Member] | Oct. 02, 2015USD ($) |
Assets: | |
Cash | $ 100 |
Deposits for inventory | 491,988 |
Other deposits | 5,700 |
Total assets | 497,788 |
Liabilities: | |
Accounts payable | 19,298 |
Due to related parties | 495,737 |
Total liabilities | 515,035 |
Net liabilities in excess of assets | $ 17,247 |
3. Acquisitions (Details - Prof
3. Acquisitions (Details - Proforma) - GX-Life [Member] | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Net revenue | $ 0 |
Loss) before income taxes | $ (927,233) |
4. Inventories (Details Narrati
4. Inventories (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | ||
Impairment of inventories | $ 1,122,520 | $ 0 |
Deposits written off | $ 242,777 |
5. Propery and Equipment, net (
5. Propery and Equipment, net (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 673,184 | $ 256,764 |
Less accumulated depreciation | (124,165) | (7,439) |
Property and equipment, net | 549,019 | 249,325 |
Furniture [Member] | ||
Property and equipment, gross | 374,299 | 103,515 |
Computers [Member] | ||
Property and equipment, gross | 107,790 | 10,001 |
Software [Member] | ||
Property and equipment, gross | 101,330 | 62,610 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | $ 89,765 | $ 80,638 |
5. Property and Equipment, ne38
5. Property and Equipment, net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 95,482 | $ 6,367 |
6. Service Contract - Related39
6. Service Contract - Related Party (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Impairment of service contract | $ 280,000 | $ 0 |
Great Coin [Member] | ||
Payment for software license | $ 350,000 |
7. Accrued Expenses (Details)
7. Accrued Expenses (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Payables and Accruals [Abstract] | ||
Accrued interest | $ 242,211 | $ 126,512 |
Accrued royalties and commissions | 11,346 | 11,366 |
Deferred rent | 16,358 | 0 |
Other | 799 | 799 |
Accrued expenses | $ 270,714 | $ 138,677 |
8. Accrued Compensation (Detail
8. Accrued Compensation (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Total accrued compensation | $ 315,277 | $ 211,905 |
Accrued officers compensation - CEO [Member] | ||
Total accrued compensation | 55,231 | 0 |
Accrued officers compensation [Member] | ||
Total accrued compensation | 70,786 | 0 |
Accrued payroll taxes - delinquent [Member] | ||
Total accrued compensation | 181,905 | 211,905 |
Accrued payroll taxes on accrued payroll (not yet due) [Member] | ||
Total accrued compensation | $ 7,355 | $ 0 |
8. Accrued Compensation (Deta42
8. Accrued Compensation (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Employees [Member] | |
Stock issued for compensation, value | $ 34,079 |
Payroll taxes [Member] | |
Payments for federal payroll taxes | 52,597 |
Decrease in federal tax liability | (60,000) |
Gain on extinguishment of debt | 54,000 |
Decrease in interest expense | $ (6,000) |
9. Membership Deposits and Ac43
9. Membership Deposits and Accrued Benefits (Details - Deposit) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Membership Deposits | ||
Membership deposits, beginning balance | $ 10,020 | $ 0 |
VIP membership deposits | 5,399,812 | 10,000 |
Less: deposits repaid | (240,400) | 0 |
Accrued member benefits | 94,920 | 20 |
Less: member conversions to GX-Coin | (4,713,544) | 0 |
Membership deposits, ending balance | $ 550,808 | $ 10,020 |
9. Membership Deposits and Ac44
9. Membership Deposits and Accrued Benefits (Details - Conversions) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Membership Deposits And Accrued Benefits | |||
Repayments requested by members | $ 115,580 | ||
Conversion paperwork signed - verifying appropriate state of residency | 165,219 | ||
Conversion paperwork signed - no GX Coin account established | 270,009 | ||
Membership deposits and accrued benefits | $ 550,808 | $ 10,020 | $ 0 |
10. Notes Payable (Details)
10. Notes Payable (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Note payable balance | $ 1,006,453 | $ 1,050,000 |
Less current portion | (1,006,453) | (1,050,000) |
Long-term portion | 0 | 0 |
Acquisition note [Member] | ||
Note payable balance | 0 | 50,000 |
Promissory notes - principal [Member] | ||
Note payable balance | 300,000 | 0 |
Promissory notes - unamortized debt discount [Member] | ||
Note payable balance | (73,547) | 0 |
Convertible promissory notes - debt acquisition [Member] | ||
Note payable balance | 95,000 | 100,000 |
Original Bridge Loan [Member] | ||
Note payable balance | 120,000 | 120,000 |
Bridge Loan 1 [Member] | ||
Note payable balance | 230,000 | 355,000 |
Bridge Loan 2 [Member] | ||
Note payable balance | 85,000 | 175,000 |
Bridge Loan 3 [Member] | ||
Note payable balance | $ 250,000 | $ 250,000 |
10. Notes Payable (Details Narr
10. Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Gain (loss) on extinguishment of debt | $ (9,627) | $ 333,823 |
Repayment of notes | 312,434 | 0 |
Promissory Notes [Member] | ||
Interest expense | 13,765 | |
Settled and Restructured Notes Payable [Member] | ||
Gain (loss) on extinguishment of debt | 35,403 | |
Convertible Promissory Notes - Debt Acquisition [Member] | ||
Repayment of notes | 5,000 | 0 |
Bridge Loan #1 [Member] | ||
Repayment of notes | 125,000 | 0 |
Bridge Loan #2 [Member] | ||
Repayment of notes | $ 90,000 | $ 0 |
11. Related Parties (Details Na
11. Related Parties (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Reserve on due from related parties | $ 1,518,300 | $ 0 |
Great Coin [Member] | ||
Advances to affiliates | 1,494,002 | |
Other amounts due from related parties | 24,298 | |
Reserve on due from related parties | $ 1,518,300 |
12. Commitments and Contingen48
12. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 150,907 | $ 33,335 |
Minimum annual payments through 1 - 12 months | 176,112 | |
Minimum annual payments through 13 - 24 months | 183,804 | |
Minimum annual payments through 25 - 36 months | 192,192 | |
Minimum annual payments through 37 - 48 months | 200,580 | |
Minimum annual payments through 49 - 50 months | 209,664 | |
Deferred rent liability | $ 16,358 |
13. Capital Stock (Details - Co
13. Capital Stock (Details - Contributed capital) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Contributed capital | $ 250,000 | $ 188,178 |
Powerdyne Acquisition [Member] | ||
Contributed capital | 175,000 | |
Sky Rover expenses [Member] | ||
Contributed capital | 139,885 | |
Mr. Lei Pei [Member] | ||
Contributed capital | $ 40,540 |
13. Capital Stock (Details Narr
13. Capital Stock (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Proceeds from issuance of stock | $ 2,683,086 | $ 3,000,000 |
Common stock issued for services, value | 179,570 | $ 65,000 |
Stock issued in settlement of debt, amount | $ 49,364 | |
Warrants outstanding | 0 | 0 |
Options outstanding | 0 | 0 |
Investor [Member] | ||
Stock issued new, shares | 25,000 | |
Proceeds from issuance of stock | $ 25,000 | |
Certain Employees [Member] | ||
Common stock issued for services, shares | 97,000 | |
Share-based compensation expense | $ 237,077 | |
Non-Employee Services [Member] | ||
Common stock issued for services, shares | 203,000 | |
Share-based compensation expense | $ 179,570 | |
Vendor [Member] | ||
Stock issued in settlement of debt, shares | 14,104 | |
Stock issued in settlement of debt, amount | $ 49,364 | |
Two Vendors [Member] | ||
Gain on extinguishment of debt | $ 2,089 | |
Stock issued in settlement of debt, shares | 25,000 | |
Stock issued in settlement of debt, amount | $ 49,189 | |
S-1 Registration Statement [Member] | ||
Stock issued new, shares | 759,453 | |
Proceeds from issuance of stock | $ 2,658,086 | |
Marketing Services [Member] | ||
Share-based compensation expense | $ 65,000 | |
Stock issued for compensation, shares | 250,000 |
14. Income Taxes (Details-Recon
14. Income Taxes (Details-Reconcilation of tax rate) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Effective income tax reconciliation | ||
Federal tax at statutory rate | 34.00% | 34.00% |
Permanent differences: | ||
State income taxes, net of federal benefit | 5.80% | 5.80% |
Stock issued for services | (3.00%) | 0.00% |
Gain/loss on extinguishment of debt | (0.10%) | 4.60% |
Amortization of debt discount and accretion of debt | (0.10%) | 0.00% |
Non-deductible entertainment | 0.00% | (0.10%) |
Temporary differences: | ||
Accrued liabilities and other | 0.00% | (0.10%) |
Change in valuation allowance | (36.60%) | (44.30%) |
Total provision | 0.00% | (0.10%) |
14. Income Taxes (Details-Defer
14. Income Taxes (Details-Deferred income taxes) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current: | ||
Reserves and accruals | $ 501,907 | $ 51,290 |
Noncurrent: | ||
Net operating losses | 2,770,239 | 1,166,436 |
Valuation allowance | (3,272,146) | (1,217,726) |
Deferred tax assets | $ 0 | $ 0 |
14. Income Taxes (Details Narra
14. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Increase in valuation allowance | $ 2,054,420 | $ 403,358 |
Federal [Member] | ||
Net operating loss carryforward | $ 8,322,000 | |
Operating loss carryforward expiration date | Dec. 31, 2026 | |
State [Member] | ||
Net operating loss carryforward | $ 8,197,000 | |
Operating loss carryforward expiration date | Dec. 31, 2030 |
15. Agreements (Details Narrati
15. Agreements (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock issued for services, value | $ 179,570 | $ 65,000 |
Mo Feng Yi [Member] | ||
Consulting fees | 100,000 | 200,000 |
Alicia Xie Geiser [Member] | ||
Consulting fees | 40,000 | $ 10,000 |
Stock issued for services, shares issued | 25,000 | |
Stock issued for services, value | $ 29,750 | |
Private Consulting Group [Member] | ||
Consulting fees | $ 30,000 | |
Stock issued for services, shares issued | 25,000 | |
Stock issued for services, value | $ 65,250 | |
iMatrix Software [Member] | ||
Consulting fees | $ 116,070 | |
Stock issued for services, shares issued | 3,000 | |
Stock issued for services, value | $ 8,070 | |
Mitchell Morrison [Member] | ||
Consulting fees | $ 15,000 | |
Juan Lopez [Member] | ||
Stock issued for services, shares issued | 150,000 | |
Stock issued for services, value | $ 76,500 |