Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Apr. 14, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | PeerLogix, Inc. | ||
Entity Central Index Key | 1,603,494 | ||
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 Public Float | $ 1,445,852 | ||
Entity Common Stock, Shares Outstanding | 32,808,909 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash | $ 56,022 | $ 1,298 |
Prepaid expenses and other current assets | 46,869 | 19,973 |
Total Current Assets | 102,891 | 21,271 |
Total Assets | 102,891 | 21,271 |
Current liabilities | ||
Accounts payable | 309,763 | 224,882 |
Accrued payroll and payroll related expenses | 221,838 | 23,339 |
Accured director's fee | 40,075 | 0 |
Other accrued liabilities | 153,186 | 859 |
Demand loans payable | 15,000 | 15,000 |
Notes payable | 106,000 | 0 |
Convertible notes payable - related party | 70,000 | 0 |
Convertible notes payable, net of debt discount of $512,014 and $0, respectively | 88,486 | 0 |
Loans payable - officers | 34,254 | 33,648 |
Total Current Liabilities | 1,038,602 | 297,728 |
Total Liabilities | 1,038,602 | 297,728 |
Stockholders Deficiency | ||
Preferred stock par value $0.001: 10,000,000 shares authorized; no shares issued or outstanding as of December 31, 2016 and 2015 | 0 | 0 |
Common stock par value $0.001: 100,000,000 shares authorized; 26,860,825 and 23,107,535 shares issued and outstanding as of December 31, 2016 and 2015, respectively | 26,861 | 23,108 |
Additional paid in capital | 2,430,276 | 1,245,416 |
Accumulated deficit | (3,392,848) | (1,544,981) |
Total Stockholders' Deficiency | (935,711) | (276,457) |
Total Liabilities and Stockholders' Deficiency | $ 102,891 | $ 21,271 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Debt discount | $ 512,014 | $ 0 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common Stock, par value per share | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 100,000,000 | 100,000,000 |
Common Stock, shares issued | 26,860,825 | 23,107,535 |
Common Stock, shares outstanding | 26,860,825 | 23,107,535 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Revenues | $ 15,000 | $ 2,520 |
Operating expenses | ||
Compensation | 234,529 | 294,875 |
Director fees | 224,455 | 0 |
Research and development | 0 | 293,516 |
Professional fees | 565,749 | 704,718 |
General and administrative | 231,044 | 205,032 |
Operating Expenses | 1,255,777 | 1,498,141 |
Loss from operations | (1,240,777) | (1,495,621) |
Other income (expense) | ||
Interest expense | (825,861) | (24,962) |
Gain on extinguishment of debt | 240,368 | 0 |
Loss on settlement of vendor liabilities | (21,600) | 0 |
Interest income | 3 | 69 |
Other income (expense) | (607,090) | (24,893) |
Net loss | $ (1,847,867) | $ (1,520,514) |
Net loss per common share - basic and diluted | $ (0.08) | $ (0.08) |
Weighted average common shares outstanding - basic and diluted | 24,447,444 | 19,117,099 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficiency - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Common Stock [Member] | ||
Beginning balance, shares | 23,107,535 | 16,000,002 |
Beginning balance, value | $ 23,108 | $ 16,000 |
Common stock and warrants issued for cash, shares | 2,683,336 | |
Common stock and warrants issued for cash, value | $ 2,683 | |
Common stock and warrants issued for settlement of convertible notes, shares | 174,566 | |
Common stock and warrants issued for settlement of convertible notes, value | $ 175 | |
Common stock issued with promissory notes, shares | 100,000 | |
Common stock issued with promissory notes,value | $ 100 | |
Common stock issued with related party convertible notes, shares | 175,000 | |
Common stock issued with related party convertible notes, value | $ 175 | |
Common stock issued with convertible notes, shares | 6,229,999 | |
Common stock issued with convertible notes, value | $ 6,230 | |
Common stock issued in connection with extinguishment of convertible notes, shares | 3,333,333 | |
Common stock issued in connection with extinguishment of convertible notes, value | $ 3,333 | |
Common stock issued in connection with settlement of liabilities, shares | 240,000 | |
Common stock issued in connection with settlement of liabilities, value | $ 240 | |
Cancellation of common stock, shares | (8,324,084) | |
Cancellation of common stock, value | $ (8,324) | |
Common stock issued for services, shares | 1,942,042 | 250,000 |
Common stock issued for services, value | $ 1,942 | $ 250 |
Common stock issued in reverse recapitalization, shares | 3,999,631 | |
Common stock issued in reverse recapitalization, value | $ 4,000 | |
Stock issued new, shares issued | 57,000 | |
Stock issued new, value | $ 57 | |
Ending balance, shares | 26,860,825 | 23,107,535 |
Ending balance, value | $ 26,861 | $ 23,108 |
Additional Paid-In Capital [Member] | ||
Beginning balance, value | 1,245,416 | (239,727) |
Common stock and warrants issued for cash, value | 1,507,318 | |
Common stock and warrants issued for settlement of convertible notes, value | 90,987 | |
Related party loan forgiven | 2,577 | |
Common stock issued with promissory notes,value | 17,900 | |
Common stock issued with related party convertible notes, value | 13,085 | |
Common stock issued with convertible notes, value | 182,767 | |
Warrants issued with convertible notes | 192,656 | |
Beneficial conversion feature - convertible debt | 261,450 | |
Common stock issued in connection with extinguishment of convertible notes, value | 479,999 | |
Repurchase of beneficial conversion feature - extinguishment of convertible notes | (675,418) | |
Common stock issued in connection with settlement of liabilities, value | 27,360 | |
Cancellation of common stock, value | 8,324 | |
Common stock issued for services, value | 265,840 | 149,750 |
Options issued for services | 166,565 | |
Warrants issued for services | 161,388 | 126,000 |
Stock issuance costs | (387,489) | |
Common stock issued in reverse recapitalization, value | (4,000) | |
Modification of investor warrants | 81,001 | |
Stock issued new, value | 1,943 | |
Ending balance, value | 2,430,276 | 1,245,416 |
Accumulated Deficit [Member] | ||
Beginning balance, value | (1,544,981) | (24,467) |
Net loss | (1,847,867) | (1,520,514) |
Ending balance, value | (3,392,848) | (1,544,981) |
Beginning balance, value | (276,457) | (248,194) |
Common stock and warrants issued for cash, value | 1,510,001 | |
Common stock and warrants issued for settlement of convertible notes, value | 91,162 | |
Related party loan forgiven | 2,577 | |
Common stock issued with promissory notes,value | 18,000 | |
Common stock issued with related party convertible notes, value | 13,260 | |
Common stock issued with convertible notes, value | 188,997 | |
Warrants issued with convertible notes | 192,656 | |
Beneficial conversion feature - convertible debt | 261,450 | |
Common stock issued in connection with extinguishment of convertible notes, value | 483,332 | |
Repurchase of beneficial conversion feature - extinguishment of convertible notes | (675,418) | |
Common stock issued in connection with settlement of liabilities, value | 27,600 | |
Common stock issued for services, value | 267,782 | 150,000 |
Options issued for services | 166,565 | |
Warrants issued for services | 161,388 | 126,000 |
Stock issuance costs | (387,489) | |
Modification of investor warrants | (81,001) | |
Stock issued new, value | 2,000 | 1,510,001 |
Net loss | (1,847,867) | (1,520,514) |
Ending balance, value | $ (935,711) | $ (276,457) |
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 | $ (1,847,867) | $ (1,520,514) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Stock based compensation | 361,956 | 150,000 |
Amortization of debt discount | 211,632 | 8,750 |
Accretion of original issue discount | 43,750 | 0 |
Amortization of debt issuance costs | 421,327 | 0 |
Loss on settlement of vendor liabilities | 21,600 | 0 |
Gain on extinguishment of debt | (240,368) | 0 |
Direct expense paid by officer | 31,521 | 0 |
Modification of investor warrants | 81,001 | 0 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | (14,420) | (19,478) |
Accounts payable | 90,881 | 182,413 |
Accrued payroll and payroll related expenses | 198,499 | 0 |
Accrued director's fees | 40,075 | 0 |
Other accrued liabilities | 89,357 | 0 |
Net Cash Used In Operating Activities | (511,056) | (1,198,829) |
Cash Flows From Financing Activities: | ||
Proceeds from demand loans | 0 | 5,500 |
Repayment of demand loans | 0 | (5,500) |
Proceeds from notes payable | 130,000 | 17,500 |
Repayment of notes payable | (26,250) | (26,250) |
Repayment of notes payable - related party | (17,500) | (53,725) |
Proceeds from officer loans | 4,032 | 4,041 |
Repayment of officer loans | (34,948) | 0 |
Proceeds from convertible notes - related party | 70,000 | 0 |
Proceeds from convertible notes | 575,500 | 0 |
Debt issuance costs | (137,054) | 0 |
Net proceeds from sale of common stock | 2,000 | 1,248,512 |
Net Cash Provided By Financing Activities | 565,780 | 1,190,078 |
Net change in cash | 54,724 | (8,751) |
Cash at beginning of year | 1,298 | 10,049 |
Cash at end of year | 56,022 | 1,298 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 6,328 | 19,360 |
Income tax paid | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Stock issuance costs paid in the form of warrants | 0 | 126,000 |
Original issue discount on notes payable | 26,250 | 8,750 |
Original issue discount on convertible notes payable - related party | 17,500 | 0 |
Debt discount paid in the form of common shares and warrants | 709,580 | 0 |
Beneficial conversion feature - convertible debt | 261,450 | 0 |
Conversion of promissory note to convertible note | 25,000 | 0 |
Increase in note principal as per forebearance agreement | 1,000 | 0 |
Debt issuance cost paid in the form of common stock and warrants | 226,773 | 0 |
Debt issuance cost accrued | 57,500 | 0 |
Common stock and warrants issued for conversion of convertible notes and accrued interest | 0 | 91,162 |
Forgiveness of related party loan | $ 0 | $ 2,577 |
1. Organization and Operations
1. Organization and Operations | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Operations | Peerlogix, Inc. (formerly “Realco International, Inc.”) (“Peerlogix” or the “Company”) was incorporated in Nevada on February 14, 2014. The Company is an advertising technology and data aggregation company. The Company provides a software as a service (SAAS) platform, which enables the tracking and cataloguing of over-the-top viewership and listenership in order to determine consumer trends and preferences based upon media consumption. Its platform collects over-the-top data, including Internet Protocol (IP) addresses of the streaming and downloading parties (location), the name, media type and genre of media watched, listened or downloaded, and utilizes licensed and publicly available demographic and other databases to further filter the collected data to provide insights into consumer preferences to digital advertising firms, product and media companies, entertainment studios and others. Acquisition of Peerlogix Technolgies, Inc. On August 14, 2015, (the “Closing Date”) the Company and Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.), a privately held company, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, Peerlogix Technologies, Inc. exchanged all of their shares of common stock for newly issued common shares of the Company (the “Share Exchange”), with the Company remaining as the surviving corporation (the “Merger”). Following the closing of the Merger, the Company changed its name to Peerlogix, Inc. The stockholders of the Company before the Share Exchange, after giving effect to cancellation of 18,000,000 shares of the Company’s common stock, retained 990,000 shares of the Company’s common stock, which after giving effect to a 4.04 for 1 split of the Company’s common stock (the “Stock Split”), will have become approximately 3,999,600 shares of Realco common stock. Upon closing the transaction, Peerlogix, Inc. had 21,049,602 shares of common stock outstanding. As a result of this transaction, the former owners of Peerlogix Technologies, Inc. own approximately 81.0% of Peerlogix, Inc. common stock as of the closing date. The Share Exchange has been treated as a reverse merger and recapitalization of Peerlogix Technologies, Inc. for financial accounting purposes and the Company will continue the existing business operations of Peerlogix Technologies, Inc. as a wholly-owned subsidiary. The historical financial statements of the Company are those of Peerlogix Technologies, Inc, and of the consolidated entities from the date of merger forward. As a result of this merger, the equity sections of Peerlogix Technologies, Inc. for all prior periods presented reflect the recapitalization described above and are consistent with the December 31, 2016 and 2015 consolidated balance sheets presented for the Company. Prior to the merger, the Company had minimal operations. Peerlogix Technologies, Inc. was incorporated on December 9, 2014 under the laws of the State of Delaware for the sole purpose of acquiring all of the outstanding membership units of IP Squared Technologies Holdings, LLC, an entity organized in 2012. Upon incorporation, the Company issued an aggregate of 16,000,002 common shares of the newly formed corporation’s common stock to the members of the LLC for all of the outstanding membership units of IP Squared Technologies Holdings, LLC (the “Recapitalization”). Simultaneously with the Share Exchange, on the Closing Date all of the issued and outstanding options and warrants to purchase shares of Peerlogix Technologies Inc. common stock were exchanged, respectively, into options (the “New Options”) and warrants (the “New Warrants”) to purchase shares of common stock of the Company. The number of shares of common stock issuable under, and the price per share upon exercise of, the New Options and the New Warrants were the same as those of the original options and warrants of Peerlogix Technologies Inc., as a result of a 1 for 1 exchange ratio of securities pursuant to the Share Exchange, which is described in the Share Exchange Agreement. The New Options are administered under the Company’s 2015 Equity Incentive Plan, which the Company assumed and adopted on the Closing Date in connection with the Share Exchange. (See Note 9). |
2. Going Concern and Management
2. Going Concern and Management Liquidity Plans | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern and Management Liquidity Plans | The Company's primary source of operating funds since inception has been cash proceeds from the sale of Class A units, common stock and common stock warrants, convertible debentures and notes payable. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering. (See Note 10) The Company requires immediate capital to remain viable. The Company can give no assurance that such financing will be available on terms advantageous to the Company, or at all. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all of its operational activities. There can be no assurance that such a plan will be successful. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. |
3. Summary of Significant Accou
3. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Basis of Presentation The accompanying consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP. Principles of Consolidation The Company's wholly-owned consolidated subsidiaries are as follows: Name of consolidated subsidiary or entity State or other jurisdiction of incorporation or organization Date of incorporation or formation (date of acquisition, if applicable) Attributable interest Peerlogix Technologies, Inc. Delaware December 9, 2014 (August 14, 2015) 100% IP Squared Technologies Holdings, LLC Delaware November 20, 2012 (December 9, 2014) 100% On August 14, 2015, the Company and Peerlogix Technologies, Inc. merged. The merger was treated as a reverse merger and recapitalization of Peerlogix Technologies, Inc. for financial accounting purposes. The historical financial statements of the Company are those of PeerLogix Technologies, Inc., and of the consolidated entities from the date of merger forward. All significant inter-company balances and transactions have been eliminated. Reclassifications Certain items in the prior year financial statements have been reclassified to conform to the current year presentation. These reclassifications did not have an impact on previously reported results of operations. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s equity instruments, convertible debt, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets. Concentration of Credit Risk The Company maintains deposits in a financial institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The balance at times may exceed federally insured limits. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2016 and 2015, the Company does not have any cash equivalents. Income Taxes Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of these differences that have been included or excluded in the financial statements or tax returns. The Company follows a recognition threshold and measurement process for consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also prescribes direction on the recognition, classification, interest and penalties in interim periods, disclosure and transition. The Company classifies interest expense and any related penalties, if any, related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized as of December 31, 2016 and 2015. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements for the years ended December 31, 2016 and 2015. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date. Convertible Instruments The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. Accounting for Warrants The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assessed the classification of its common stock purchase warrants as of the date of each equity offering and determined that such instruments met the criteria for equity classification, as the settlement terms indicate that the instruments are indexed to the entity’s underlying stock. Research and Development Research and development (“R&D”) expenses are charged to operations as incurred. Advertising The Company expenses advertising when incurred. During the years ended December 31, 2016 and 2015, the Company incurred advertising expenses of $4,333 and $28,933, respectively. Net Loss Per Share Basic loss per share was computed using the weighted average number of outstanding common shares. Diluted earnings per share, when presented, includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. Common stock equivalents are excluded in the computation of diluted earnings per share since their inclusion would be anti-dilutive. Total shares issuable upon the exercise of warrants, exercise of stock options and conversion of convertible promissory notes for the year ended December 31, 2016 and 2015 were as follows: December 31, 2016 2015 Warrants 8,956,677 2,951,669 Stock options 12,300,000 – Convertible promissory notes 11,408,333 – Total 32,665,010 2,951,669 For the year ended December 31, 2016, 1,000,835 warrants were included in basic and diluted loss per share as their exercise price was determined to be nominal. Share-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and amortized over the respective employment agreements or director service periods. For non-employees, the fair value of the award is measured on the commitment date and generally re-measured on interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations as if such amounts were paid in cash. The Company generally issues new shares of common stock to satisfy option and warrant exercises and note conversions. Fair Value of Financial Instruments The carrying amounts of cash, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Pricing inputs that are generally unobservable inputs and not corroborated by market data. Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the warrant liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Executive Officer determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Executive Officer. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. No such items existed as of December 31, 2016 and 2015. Recently Adopted Accounting Guidance In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-12, Compensation-Stock Compensation In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern. In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03. ASU 2015-03 amends current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. We adopted the provisions of ASU 2015-03 on January 1, 2016. No prior period amounts were required to be reclassified to conform to the current period presentation. The adoption of ASU 2015-03 did not materially impact our consolidated financial position, results of operations or cash flows. Recent Accounting Guidance In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”).The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The adoption of ASU 2015-14 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging” (topic 815). The FASB issued this update to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-06 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-09 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” (topic 606). In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net)” (topic 606). These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity's promise to grant a license provides a customer with either a right to use an entity's intellectual property or a right to access an entity's intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity's adoption of ASU 2014-09, which we intend to adopt for interim and annual reporting periods beginning after December 15, 2017. The adoption of ASU 2016-10 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 addresses specific cash flow classification issues where there is currently diversity in practice including debt prepayment and proceeds from the settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18 “Statement of Cash Flows (Topic 230), Restricted Cash” which provides guidance on the presentation of restricted cash and restricted cash equivalents in the statements of cash flows. The new guidance requires restricted cash and restricted cash equivalents to be included within the cash and cash equivalents balances when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04 “Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment” which eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ASU is effective for reporting periods beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. There were no other new accounting pronouncements that were issued or became effective since the issuance of our 2015 Annual Report on Form 10-K that had, or are expected to have, a material impact on our consolidated financial position, results of operations or cash flows. Subsequent Events The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements, except as disclosed. |
4. Demand Loans Payable
4. Demand Loans Payable | 12 Months Ended |
Dec. 31, 2016 | |
Demand Loans Payable | |
Demand Loans Payable | On January 24, 2013, a family member of an officer of the Company advanced $15,000 to the Company. The proceeds from the non-interest bearing advance were used for general operating expenses. As of December 31, 2016 and 2015, the Company is reflecting a liability of $15,000. The Company did not impute interest on the loan as it was deemed to be de minimus to the consolidated financial statements. On January 30, 2015, an officer of a related party to the Company advanced $5,500 to the Company. The proceeds from the non-interest bearing advance were used for general operating expenses. The Company did not impute interest on the loan as it was deemed to be de minimus to the consolidated financial statements. On March 5, 2015, the loan was repaid. |
5. Notes Payable
5. Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | During June and July of 2015, the Company issued promissory notes in the aggregate principal amount of $17,500 to six lenders. The notes bore aggregate interest at 50%, calculated monthly, and matured August 1, 2015. If the notes are repaid within the first month, the lenders are to be repaid 50% interest on the notes (the “Original Issue Discount”), a minimum payment of $26,250. The Original Issue Discount was accreted to interest expense over the life of the notes. During August and September of 2015, the notes were repaid. Total interest paid on the notes amounted to $17,500. On January 28, 2016, the Company entered into a Securities Purchase Agreement (“SPA”), Promissory Note (the “January Note”) and Registration Rights Agreement (“RRA”) (collectively, the “Transaction Documents”) with Pinewood Trading Fund, L.P. (“Pinewood”). Pursuant to the SPA, the Company issued 100,000 shares (the “Shares”) of its common stock (the “Common Stock”), in exchange for Pinewood lending $105,000 (“Funding Amount”) to the Company pursuant to the January Note with a principal amount of $131,250 (“Principal Amount”). The January Note is secured by all assets of the Company. As part of the transaction, the Company recorded an $18,000 debt discount relating to the relative fair value of the 100,000 shares of common stock issued and $26,250 was recorded as an original issue discount and is being accreted over the life of the note to interest expense. The shares were valued based on the quoted closing trading price on the date of issuance. In addition the Company incurred legal fees of $7,418 which will be amortized over the life of the note to interest expense. As of July 28, 2016, the Company was not compliant with the repayment terms of the January Note and is in default. As of that date, the outstanding principal balance on the January Note was $131,250. On September 28, 2016, the Company and Pinewood The outstanding principal balance on the January Note at December 31, 2016 was $106,000. Under the terms of the RRA with Pinewood, the Company committed to file a registration statement on or prior to March 31, 2016 or any additional registration statements which may be required pursuant to the terms of the RRA on or prior to the earliest practical date (“Filing Date”), covering, among other things, the resale of all or such portion (as permitted by SEC Guidance and Rule 415) of all of the Shares and any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Shares (the “Registrable Securities”) on such Filing Date that are not then registered on an effective registration statement. The Company has agreed to use its commercially reasonable best efforts to cause the registration statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof, and use its commercially reasonable best efforts to keep such registration statement continuously effective under the Securities Act until all Registrable Securities covered by such registration statement have been sold, or may be sold without volume restrictions pursuant to Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the Holder (the “Effectiveness Period”). If the Company fails to file the registration statement on or prior to the Filing Date, or fails to maintain the effectiveness of the registration statement pursuant to the terms of the RRA, the Company may be subject to partial cash liquidated damages, and not as a penalty, equal to $2,500 per month (not to exceed an aggregate of $20,000), pro-rated for periods of less than 30 days. If the Company fails to pay any partial liquidated damages in full within seven (7) days after the date payable, the Company will pay interest, as an addition to the stated original issue discount, thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to Pinewood, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. As of the date of this report the registration statement has not been filed. As of December 31, 2016, the Company has accrued liquidated damages of $20,000 along with accrued interest of $1,359 and has recorded such amounts in interest expense in the consolidated statement of operations. On August 22, 2016, the Company issued an unsecured convertible promissory note in principal amount of $25,000 to an accredited investor through a private placement. The note bears interest at a rate of 12% per annum, with maturity on the earlier of i) September 22, 2016 or ii) an offering of securities of the Company through WestPark. On September 22, 2016, the promissory note was converted into a convertible note per the contractual terms of the WestPark Offering. (See Note 6 and Note 9). As part of the transaction, the Company incurred placement agent fees of $3,250 which were recorded as debt issuance costs. The debt issuance costs were accreted over the life of the notes to interest expense. |
6. Convertible Notes Payable
6. Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Convertible Notes Payable [Abstract] | |
Convertible Notes Payable | a) Senior Unsecured Convertible Notes During December 2014, the Company issued Senior Unsecured Convertible Notes in the aggregate principal amount of $25,000. The notes bore interest at a rate of 5% per annum. Principal and accrued interest on the notes was due and payable on the earlier of (i) September 12, 2015 and (ii) the date upon which the Company receives gross proceeds of any offering of indebtedness, equity securities, or other of no less than $200,000 (the “Qualified Financing”). The notes automatically convert at the effective time of a Qualified Financing under the same terms given to investors in the Qualified Financing. During the first quarter of 2015, the Company entered into a Qualified Financing and the notes became convertible. As per the terms of the Qualified Financing, the noteholders converted an aggregate of $25,000 in principal and were issued 50,000 shares of common stock and 50,000 warrants entitling the holders to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share. b) Senior Unsecured Convertible Notes During 2014 the Company engaged in an offering (the “Offering”) of Series A 10% Senior Convertible Promissory Notes in the aggregate principal amount of up to $300,000 with multiple investors (collectively, the “Convertible Notes”). During 2014, the Company received aggregate proceeds of $58,000 related to the offering. The Convertible Notes bore interest at the rate of 10% per annum, matured on various dates through September 2016, and were convertible at the option of the holder thereof into shares of membership interests in the Company based on a $10 million pre-conversion valuation. At the effective time of a merger, the Convertible Notes shall be automatically converted without any prior action by any holder into securities offered in a qualified financing at 20% discount to the qualified financing. For purposes of Note 6 (c) qualified financing means the sale for cash by the Company or any successor in interest to the Company by means of merger, share exchange, asset acquisition or otherwise, of equity or equity derivative securities (e.g., convertible indebtedness, preferred stock, warrants, etc.), or any combination thereof, generating aggregate gross proceeds of at least $1,500,000 (including the amount of any Notes which convert into securities issued in the qualified financing) as described herein, provided, that the Company shall effect a qualified transaction (e.g., merge, sell all or substantially all of its assets, etc.) substantially simultaneously with the consummation of such qualified financing. During the third quarter of 2015, as a result of the Merger Agreement and a qualified financing (as defined), the Convertible Notes became convertible. As per the terms of the qualified financing, the noteholders converted an aggregate of $58,000 in principal and $8,162 in accrued interest and were issued 124,566 shares of common stock. c) Unsecured Convertible Notes During the year ended December 31, 2016, the Company sold $600,500 of Units to investors (“Offering 3”). Of the $600,500 in Units issued, $575,500 resulted from the receipt of cash and the other $25,000 resulted from the conversion of promissory notes. (See Note 5). Each Unit was sold at a price of $10,000 per Unit and consisted of one (1) six (6) month, 18% convertible promissory note (36% on an annual basis) with a face value of $10,000 (the “Notes”) and warrants exercisable for an aggregate number of shares of common stock equal to 50% of the shares of common stock into which the Note is initially convertible, exercisable at a price of $0.10 per share during the four (4) year period commencing on February 15, 2017, the date of the final closing. Each of the Notes will be convertible at an initial price equal to $0.06 per share. In addition, during the two month period commencing on the final closing of the Offering, the Notes will contain a look-back provision pursuant to which the Notes will be convertible at the lower of $0.06 or the lowest volume weighted average price of the Company’s common stock (the “VWAP”) during any 10 day period during such two (2) month period, provided however, in the event that the VWAP during any such ten (10) day period is less than $0.06, then the reset conversion price of the Notes shall be no lower than $0.03. The Notes also contain a reset provision to the same price as any future offering in the next three (3) years in the event that the conversion or offering price of securities offered in such subsequent offering is less than the Conversion Price of the Notes in this Offering. The Company assessed the conversion feature of the Notes on the date of issuance and at the end of the reporting period and concluded the conversion feature of the Notes do not qualify as a derivative because the instrument is not readily convertible to cash. The Company will reassess the conversion feature of the Notes for derivative treatment at the end of each subsequent reporting period. In addition, to the extent that any investor that acquires Units in this Offering had previously acquired securities issued by the Company or its subsidiary in one of the two prior private offerings placed by the Placement Agent (each a “Prior Offering”), which collectively raised gross proceeds of $1,510,000 (each an “Existing Investor”), the Company has agreed to provide additional consideration to each such Existing Investor as follows: (i) if the Existing Investor acquires Units in this Offering in an amount equal to fifty percent (50%) or greater than the amount the Existing Investor invested in a Prior Offering, such Existing Investor will receive (a) an additional 7.33 shares, as amended, (if the investor invested in the first Prior offering) or 9 shares, as amended, of the Company’s common stock (if the investor invested in the second Prior Offering) (each “Incentive Shares”); and (b) the exercise price of each of the warrants purchased by the Existing Investor will be reduced from $0.60 per share (if the investor invested in the first Prior Offering) or $0.72 per share (if the investor invested in the second Prior Offering) to $0.10 per share (the “Incentive Warrant Price Reduction”); and (ii) if the Existing Investor acquires Units in this Offering in an amount equal to less than fifty percent (50%) of the amount the Existing Investor invested in a Prior Offering, such Existing Investor will receive a pro-rata number of Incentive Shares and Incentive Warrant Price Reduction on only a pro-rata portion of the warrants acquired by the Existing Investor in the Prior Offering. The Company issued investors who invested in prior offerings 9,563,332, as amended, shares of common stock and reduced the exercise price of 1,187,584 warrants as per the terms above. The incentive shares were recorded as a debt discount on the date of issuance based on the relative fair value of the shares. Upon modification, it is required under ASC 480 to analyze the fair value of the instruments, before and after the modification, recognizing the increase as a charge to the statement of operations. The Company computed the fair value of the warrants directly preceding the modification and compared the fair value to that of the modified warrants with new terms. The Company recorded the increased value of the warrants of $81,001 to interest expense with an offsetting entry to additional paid in capital on the date of the modification. The Company will have the ability to extend the Notes for an additional six (6) months (the “Extended Term”) and if so extended shall be referred to herein as the “Extended Notes”. The Extended Notes, upon maturity, will pay interest at a six (6) month rate of 18% (36% annualized) at the termination of the Extended Term. The Extended Notes, to the extent extended pursuant to their terms for the Extended Term, will carry an additional 50% warrant coverage (e.g. such warrant to be exercisable for an additional 50% of the number of shares into which the Extended Note is initially convertible (the “Extended Warrants”). The Extended Warrants shall be exercisable at a price equal to $0.10. The Extended Warrants will expire four (4) years from the Extended Term and shall contain customary anti-dilution rights (for stock splits, stock dividends and sales of substantially all the Company’s assets) and the shares underlying the Extended Warrants will contain registration rights. The Company recorded a $381,653 debt discount relating to 6,229,999 shares of common stock and 5,004,173 warrants issued to investors based on the relative fair value of each equity instrument. The debt discount is being accreted over the life of the Notes to interest expense. Debt discount in excess of the face of the Notes was recorded directly to interest expense on the date of issuance. The conversion feature of the Notes provide for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $218,848, the discount is being accreted over the life of the Notes to interest expense. As part of the transaction, the Company incurred placement agent fees based on the aggregate gross proceeds raised through December 31, 2016, or $122,386, which were recorded as debt issuance costs. Through December 31, 2016, the Company issued the placement agent 450,375 common shares with a fair value of $65,385 and 1,000,835 warrants (See Note 10) with a fair value of $161,388 which were recorded as debt issuance costs. In-addition, the Company accrued a liability of $57,500 for the fair value of 500,000 common shares which were earned by the placement agent in December of 2016 upon the Company receiving proceeds from Offering 3 of $500,000. The placement agent warrants have an exercise price of $0.001 per share, have a four (4) year term and vest immediately. Debt issuance costs in excess of the net face amount of the Notes, after subtracting the debt discount, was recorded directly to interest expense on the date of issuance. Amendment to Offering 3 On November 29, 2016, the Company entered into an amendment to Offering 3. Under the amendment Existing Investor incentive shares were modified as follows: · If the Existing Investor acquires Units in this Offering in an amount equal to fifty percent (50%) or greater than the amount the Existing Investor invested in a Prior Offering, such Existing Investor will receive (a) an additional 7.33 shares (if the investor invested in the first Prior offering). Prior to the amendment the Existing Investor received an additional 4 shares. · If the Existing Investor acquires Units in this Offering in an amount equal to fifty percent (50%) or greater than the amount the Existing Investor invested in a Prior Offering, such Existing Investor will receive (a) an additional 9 shares (if the investor invested in the second Prior offering). Prior to the amendment the Existing Investor received an additional 5 shares. In accordance with ASC 470, since the present value of the cash flows under the new debt instrument was at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the amendment to Offering 3 as a debt extinguishment. Accordingly, the Company wrote off the remaining debt discount on the original loan of $248,383. Due to the amendment the Company issued an additional 3,333,333 incentive shares to Existing Investors with a fair value of $483,332. The Company recorded a debt discount of $296,666 and recorded $186,667 to extinguishment expense for the value of the additional incentive shares. In accordance with ASC 470, the Company measured the intrinsic value of the conversion option on the date of extinguishment as part of allocating extinguishment proceeds to the reacquisition of the BCF. Accordingly, on the date of extinguishment, the Company recorded a decrease to additional paid-in capital of $675,418 on reacquisition of the beneficial conversion feature resulting in a gain of $675,418. As a result of the amendment, the Company recorded an overall $240,368 gain on extinguishment of debt in the consolidated statement of operations. The outstanding principal balance on the Notes at December 31, 2016 was $600,500. Certain convertible note agreements, warrant documents and stock certificates pertaining Offering 3 were issued to investors and the placement agent subsequent to December 31, 2016. The Company accounted for the convertible notes, warrants and shares of common stock as per the terms of the executed private placement memorandum and executed subscription agreements. |
7. Convertible Notes Payable -
7. Convertible Notes Payable - Related Party | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Convertible Notes Payable - Related Party | On December 1, 2013, the Company issued a Senior Unsecured Note in the principal amount of $2,433 to a shareholder of the Company. The note bore interest at a rate of 5% per annum. Principal and accrued interest on the note was due and payable on the earlier of (i) June 30, 2015 and (ii) the date upon which the Company receives gross proceeds of any offering of indebtedness, equity securities, or other of no less than $500,000. During 2014, the Company received additional advances under the note totaling $53,725. At December 31, 2014, the principal balance on the note was $56,158. Note principal and interest in the aggregate of $55,585 was repaid on March 6, 2015, at which time, the remaining outstanding principal and interest on the note in the amount of $2,577 was forgiven and accounted for as contributed capital. On April 8, 2016 (the “Initial Closing Date”), we entered into a Securities Purchase Agreement (the “ SPA During the year ended December 31, 2016, we issued and sold to the Investor, and the Investor purchased from us, Debentures in the principal amount of $87,500 for a purchase price of $70,000. $17,500 was recorded as an original issue discount and was accreted over the life of the Debentures to interest expense. The principal amount of the Debentures can be converted at the option of the Investor into shares of our common stock at a conversion price per share of the lower of (i) $0.05 or (ii) the price per share in an offering of securities prior to the maturity date. In order to induce Investors to invest in the Debentures, the Investors were issued 175,000 shares of Company common stock. The Company recorded a $13,260 debt discount relating to the common stock issued and such amount is being accreted over the life of the notes to interest expense. The shares were valued based on the quoted closing trading price on the dates of issuance. The Company analyzed the conversion feature and deemed that such feature did not represent an embedded derivative, because the instrument was not readily convertible to cash. The conversion feature of the first Debenture issued provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a BCF. When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $42,602, the discount was accreted over the life of the first Debenture to interest expense. The Company analyzed the second Debenture issued for a BCF and deemed no BCF existed. The Agreement provides that, the shares of Company common stock and stock options held by the CEO and former COO (the “Founders Shares”), together with medallion guaranteed stock powers relating thereto, shall be placed into an escrow account established by the Investor and shall be held pending a determination by the Board of Directors, in consultation with the Investor, of the status of the operations of the Company. Within 45 days following the Initial Closing Date the Company shall deliver to the escrow agent a written notice which shall state that the Board of Directors of the Company, in consultation and agreement with the Investor, have made one of the following determinations: (a) adequate funding, on terms and conditions acceptable to both the Company and the Investor, is made available to the Company and is sufficient to ensure that the Company can execute its business plan; or (b) such funding is not available to the Company, in which case the Company intends to structure a transaction as a result of which either (i) the shares of the Company and a wholly-owned subsidiary of the Company, and the operations thereof shall be returned to the CEO and former COO and the Founders Shares shall be cancelled, but the Company shall be entitled to a 10% royalty on sales generated by such operation for five years or (ii) the operations thereof shall be sold to a third party, and the CEO and former COO shall become employees thereof or, if not so employed, the unemployed individual shall accept from the Company a cash payment in lieu of such employment equal to $25,000. On September 27, 2016, the SPA The Company can give no assurance that such funding will be available on terms and conditions acceptable to both the Company and the Investor, or at all. During the year ended December 31, 2016, the Company repaid $17,500 in principal on the Debentures. The outstanding principal balance on the Debentures at December 31, 2016 was $70,000. |
8. Loans Payable - Officers
8. Loans Payable - Officers | 12 Months Ended |
Dec. 31, 2016 | |
Loans Payable - Officers | |
Loans Payable - Officers | During the year ended December 31, 2016 and in prior periods, one of the Company’s officers made non-interest bearing loans to the Company in the form of cash and payments to vendors on behalf of the Company. The loans are due on demand and unsecured. As of December 31, 2016, and December 2015 the Company is reflecting a liability of $34,254, and $33,648, respectively. The Company did not impute interest on the loan as it was deemed to be de minimis to the consolidated financial statements. |
9. Stockholders' Deficit
9. Stockholders' Deficit | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Stockholders' Deficit | Amendment to the Certificate of Incorporation On August 19, 2015, the Company filed with the Secretary of State of the State of Nevada an amendment to its Certificate of Incorporation increasing the number of shares of common stock that the Company is authorized to issue from 25,000,000 shares of common stock, par value $0.00001 per share, to 100,000,000 shares of common stock, par value $0.001 per share. In addition the Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001 per share, issuable in series with rights, preferences, privileges and restrictions as determined by the Company’s board of directors. The amendment was approved by the written consent of the holders of a majority of the outstanding shares of common stock of the Company Common stock issued for cash During February and March 2015 (“Offering 1”), the Company sold $500,000 of Units to investors. Each Unit was sold at a price of $0.50 per Unit and consisted of one (1) share of common stock, par value $0.001 per share, and one (1) warrant entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share. An aggregate of 1,000,000 shares and 1,000,000 warrants were issued to such investors. The placement agent received as compensation for its services $50,000 (10% commission) and warrants to purchase 50,000 Units at a price of $0.01 per Unit, with each Unit consisting of one share of common stock and one warrant to purchase a share of common stock at a price of $0.60 per Share. The value of the warrants was a direct cost of the private placement and has been recorded as an increase and decrease to additional paid in capital. In addition, the Company incurred legal and other miscellaneous costs in the amount of $14,263 related to the transaction, which were offset against equity. During August and September 2015 (“Offering 2”), the Company sold 1,683,333 Units at a price of $0.60 per Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants (the “Investor Warrants”) are exercisable for a period of five years at a purchase price of $0.72 per share of Common Stock. The investors in the closing collectively purchased 1,683,333 Units for total cash consideration of $1,010,000. The placement agent received as compensation for its services $101,000 (10% commission) and warrants to purchase 168,333 Units at a price of $0.60 per Unit, with each Unit consisting of one share of common stock and one warrant to purchase a share of common stock at a price of $0.60 per Share. The placement agent warrants are exercisable for a period of five years. The value of the warrants was a direct cost of the private placement and has been recorded as an increase and decrease to additional paid in capital. The placement agent also received payment of a 3% non-accountable expense allowance in the amount of $30,300. In addition the Company incurred legal and other miscellaneous costs in the amount of approximately $66,000 related to the transaction, which were offset against equity. On September 9, 2016, the Company sold 57,000 shares of common stock to an investor for proceeds of $2,000. Common stock issued for services During the year ended December 31, 2015, the Company granted an aggregate of 250,000 restricted common shares to a consultant with a fair value of $150,000. The restricted shares vested immediately on the dates of issuance. The Company has recorded $150,000 in stock-based compensation expense for the year ended December 31, 2015, which is a component of professional fees in the consolidated statements of operations. The shares were valued based on recent sales of its common stock to independent qualified investors. During the year ended December 31, 2016, the Company granted an aggregate of 40,000 restricted common shares to a consultant with a fair value of $8,000. The shares represented a bonus on a previous investor and public relations agreement. These shares vested immediately on the date of issuance. The Company has recorded $8,000 in stock-based compensation expense for the year ended December 31, 2016, which is a component of professional fees in the consolidated statements of operations. The shares were valued based on the quoted closing trading price on the date of issuance. During the year ended December 31, 2016, the Company granted an aggregate of 500,000 restricted During the year ended December 31, 2016, the Company issued an aggregate of 166,667 restricted During the year ended December 31, 2016, the Company issued an aggregate of 10,000 restricted During the year ended December 31, 2016, the Company granted an aggregate of 100,000 restricted During the year ended December 31, 2016, the Company granted an aggregate of 675,000 restricted During the year ended December 31, 2016, the Company granted an aggregate of 450,375 restricted Common stock issued with convertible notes During the year ended December 31, 2016, the Company granted an aggregate of 6,229,999 restricted Common stock issued with convertible notes - related party During the year ended December 31, 2016, the Company granted an aggregate of 175,000 restricted Common stock issued with promissory notes During the year ended December 31, 2016, the Company granted an aggregate of 100,000 restricted Common stock issued in connection with extinguishment of convertible notes During the year ended December 31, 2016, the Company granted an aggregate of 3,333,333 restricted Common stock issued in connection with settlement of vendor liabilities During the year ended December 31, 2016, the Company granted an aggregate of 240,000 restricted Cancellation of common stock On October 2, 2016, 8,324,084 shares originally issued to the Company’s founders were cancelled. (See Note 7). Preferred Stock The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.001 per share. No shares of its preferred stock are issued or outstanding. 2016 Amended and Restated Equity Incentive Plan The Board of Directors and stockholders of the Company adopted the 2015 Equity Incentive Plan prior to the closing of the Share Exchange, which was amended and restated in 2016, which reserves a total of 15,000,000 shares of Common Stock for issuance under the 2016 Plan. If an incentive award granted under the 2016 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2016 Plan. Shares issued under the 2016 Plan through the settlement, assumption or substitution of outstanding awards or obligations to grant future awards as a condition of acquiring another entity are not expected to reduce the maximum number of shares available under the 2016 Plan. In addition, the number of shares of common stock subject to the 2016 Plan, any number of shares subject to any numerical limit in the 2016 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction. As of December 31, 2016, there were 2,700,000 shares remaining available for future issuance under equity. Stock options issued for services During the year ended December 31, 2016, the Company granted three board members an aggregate of 12,100,000 stock options for services rendered, having a total grant date fair value of approximately $546,000. 2,200,000 options vest immediately and expire between 2021 and 2026. 2,700,000 options vest in the event that the average volume weighted average price of the Company’s common stock over any 10 day period is greater than or equal to $0.25 and expire between 2021 and 2026. 2,700,000 options vest in the event that the average volume weighted average price of the Company’s common stock over any 10 day period is greater than or equal to $0.50 and expire between 2021 and 2026. 2,250,000 options vest in the event that the average volume weighted average price of the Company’s common stock over any 10 day period is greater than or equal to $0.75 and expire in 2021. 2,250,000 options vest in the event that the average volume weighted average price of the Company’s common stock over any 10 day period is greater than or equal to $1.00 and expire in 2021. 1,750,000 of the options contain only service conditions and will be expensed on a straight-line basis over the service period of the agreement. The remaining options contain market conditions and are being expensed over the derived service period as computed by a Monte Carlo pricing model. During the year ended December 31, 2016, the Company granted of an aggregate of 200,000 stock options to two advisory board members, having a total grant date fair value of approximately $9,600. The options have an exercise price ranging from $0.06 to $0.10 per share, have a ten (10) year term and a vesting period of 1 year. These options will be revalued at the end of each reporting period until they vest and will be expensed on a straight-line basis over the term of the agreements. The Company uses the Black-Scholes model to determine the fair value of awards granted that contain typical service conditions that affect vesting. The Company uses the Monte Carlo model to determine the fair value of awards granted that contain complex features such as market conditions because the Company believes the method accounts for multiple embedded features and contingencies in a superior manner than a simple Black Scholes model. In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and differing terms. In applying the Black-Scholes and Monte Carlo option pricing models to options granted, the Company used the following assumptions: For the Year Ended December 31, 2016 Risk free interest rate 0.87 - 2.45% Dividend yield 0.00% Expected volatility 59.00 - 83.71% Expected life in years 5 - 10 Forfeiture rate 0.00% Since the Company has limited trading history, volatility was determined by averaging volatilities of comparable companies. The Company uses the simplified method to calculate expected term of share options and similar instruments issued to employees as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The contractual term is used as the expected term for share options and similar instruments issued to non-employees. The following is a summary of the Company’s stock option activity during the year ended December 31, 2016: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding - January 1, 2016 – $ – – Granted 12,300,000 0.11 5.94 Exercised – – – Forfeited/Cancelled – – – Outstanding - December 31, 2016 12,300,000 $ 0.11 5.64 Exercisable - December 31, 2016 2,300,000 $ 0.10 7.36 At December 31, 2016, the aggregate intrinsic value of options outstanding and exercisable was $1,066,510 and $217,510, respectively. Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $166,565, for the year ended December 31, 2016. The Company used the Black-Scholes model to determine the fair value of warrants granted during the year ended December 31, 2016. In applying the Black-Scholes option pricing model to warrants granted, the Company used the following assumptions: For the Year Ended December 31, 2016 Risk free interest rate 1.13 - 1.92% Dividend yield 0.00% Expected volatility 68.46 - 84.00% Contractual term 3.3 - 4 Forfeiture rate 0.00% The following is a summary of the Company’s warrant activity during the years ended December 31, 2016 and 2015: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding - December 31, 2014 – – – Granted 2,951,669 0.66 5.00 Exercised – – – Forfeited/Cancelled – – – Outstanding - December 31, 2015 2,951,669 $ 0.66 4.54 Granted 6,005,008 0.10 4.00 Exercised – – – Forfeited/Cancelled – – – Outstanding and Exercisable at – December 31, 2016 8,956,677 $ 0.20 3.65 At December 31, 2016, the aggregate intrinsic value of warrants outstanding and exercisable was $782,214. At December 31, 2015, the aggregate intrinsic value of warrants outstanding and exercisable was $0. The following is additional information with respect to the Company's warrants as of December 31, 2016: Number of Warrants Exercise Price Weighted Average Remaining Contractual Life (In Years) Currently Exercisable 1,000,835 $0.001 3.80 1,000,835 50,000 $0.01 3.22 50,000 6,191,757 $0.10 3.79 6,191,757 548,333 $0.10 3.36 548,333 1,165,752 $0.72 3.67 1,165,752 8,956,677 8,956,677 |
10. Commitments and Contingenci
10. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Litigations, Claims and Assessments The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no such matters that are deemed material to the consolidated financial statements as of December 31, 2016 and December 31, 2015. On January 31, 2017, the Company entered into a mutual general release and settlement agreement (the "Settlement Agreement") with Microcap Headlines, Inc. (“Microcap”) to settle a judgment against the Company in the sum of $17,042 entered pursuant to a lawsuit filed by Microcap against the Company (the "Action") in the New York County, New York, Superior Court (Index No. 653105/2016). In the Action, the plaintiff alleged that the Company owed the plaintiff past due amounts for investor relations services provided to the Company. Pursuant to the Settlement Agreement, the Company agreed to pay Microcap $14,700 upon execution of the Settlement Agreement. The Settlement Agreement also contains a general release by Microcap of the Company relating to the Action, such release however is predicated on the Company making payments pursuant to the Settlement Agreement. Pursuant to the Settlement Agreement, after receipt of the full $14,700 by Microcap, the Company and Microcap shall execute a written stipulation to set aside the default and judgment against the Company and dismiss the Action with prejudice. As of December 31, 2016 the Company had accrued a liability of $17,042 related to the Settlement Agreement which has been included in other accrued liabilities at December 31, 2016 in the accompanying consolidated Balance Sheet. On February 2, 2017 the Company paid the settlement in full. Employment Agreements On August 13, 2015 the Company entered into an employment agreement with Joshua Partridge as the Company’s Head of Business Development and Secretary. The agreement calls for a three year term, an annual salary of $120,000 per annum with annual 10% increases and a payment upon termination in an amount equal to any and all unpaid salary through the end of the term. On September 10, 2015, the Company entered into a new employment agreement with Mr. Partridge solely to reflect Mr. Partridge’s new position as the Company’s Chief Operating Officer. On April 22, 2016 Mr. Partridge resigned from the Company. On August 13, 2015 the Company entered into an employment agreement with William Gorfein as the Company’s Chief Executive Officer. The agreement calls for a three year term, an annual salary of $120,000 per annum with annual 10% increases and a payment upon termination in an amount equal to any and all unpaid salary through the end of the term. On March 6, 2017, Mr. Gorfein stepped down as the Company’s Chief Executive Officer and was named the Company’s Chief Strategy Officer. The terms of his employment agreement remain the same. On August 31, 2015 the Company entered into an employment agreement with Charles Gonsher as the Company’s Chief Accounting Officer. The agreement called for a two year term, an annual salary of $90,000 per annum. In addition, Mr. Gonsher was to be granted an option to purchase 240,000 shares of the Company’s common stock. As of December 31, 2015 the terms of the options were not finalized. On February 18, 2016 Mr. Gonsher’s employment agreement was terminated. Mr. Gonsher’s stock options were not granted prior to his termination. Registration Rights Agreement All of the securities issued in connection with Offering 1, Offering 2, and the Share Exchange (collectively the “Transactions”) are “restricted securities,” and as such are subject to all applicable restrictions specified by federal and state securities laws. In connection with Offering 1, Offering 2, and the Share Exchange, the Company entered into registration rights agreements with all of its shareholders. Under the terms of the registration rights agreements, the Company has committed to file a registration statement covering the resale of (i) all shares of common stock outstanding as of August 14, 2015, the closing date of the Share Exchange; (ii) all of the shares of common stock underlying the Investor Warrants in Offering 2 and the warrants that were included in the Offering 1 units; (iii) all of the shares issuable upon exercise of the placement agent warrants (and the shares underlying the warrants issuable upon exercise of such placement agent warrants) issued in Offering 1 and Offering 2 within 60 days from August 14, 2015 (the “Filing Deadline”), and shall use commercially reasonable efforts to cause the registration statement to become effective no later than 90 days after it is filed (the “Effective Deadline”). The Company has agreed to use reasonable efforts to maintain the effectiveness of the registration statement through the one year anniversary of the date the registration statement is declared effective by the Securities and Exchange Commission (“SEC’), or until Rule 144 of the Securities Act is available to investors in the Offering with respect to all of their shares, whichever is earlier. The holders of any registrable securities removed from the Registration Statement a result of a Rule 415 or other comment from the SEC shall have “piggyback” registration rights for the shares of Common Stock or Common Stock underlying such warrants with respect to any registration statement filed by the Company following the effectiveness of the registration statement which would permit the inclusion of these shares. In connection with Offering 3, the Company has agreed to file a registration statement covering the resale of the shares of common stock issuable upon exercise of the Investor Warrants in Offering 3, the Placement Agent Warrants in Offering 3 and upon conversion of the Notes in Offering 3. The Company has agreed to use commercially reasonable efforts to have the registration statement declared effective within ninety (90) days after the registration statement is filed. The Company has agreed to use reasonable efforts to maintain the effectiveness of the registration statement through the one year anniversary of the date the registration statement is declared effective by the SEC. As of the date of the filing of this report, a registration statement has not been filed. The registration rights agreements do not contain a penalty clause for the failure to file a registration statement within the period agreed upon. However, we do not exclude the possibility that our shareholders may bring litigations against us in connection with claims arising out of our failure to file a registration statement pursuant to the registration rights agreements and seek remedies under the common law. Payroll Tax Liabilities As of December 31, 2016 and through the date of this report, the Company has not filed certain federal and state income and payroll tax returns nor has it paid the payroll tax amounts and related interest and penalties relating to such returns. Amounts due under these returns with respect to penalties and interest are estimated to be $10,493 as of December 31, 2016 which has been included in other accrued liabilities at December 31, 2016 in the accompanying consolidated Balance Sheet. Penalties and interest were deemed to be de minimus to the consolidated financial statements as of December 31, 2015. Placement Agent and Finders Agreements In April 2016, the Company entered into a Financial Advisory and Investment Banking Agreement with WestPark Capital, Inc. (“WestPark”) (the “WestPark Advisory Agreement”). Pursuant to the WestPark Advisory Agreement, WestPark shall act as the Company’s financial advisor and placement agent in connection with a best efforts private placement (the “Financing”) of up to $750,000 of the Company’s debt and/or equity securities (the “Securities”) initially proposed to take place between April 2016 and June 2016. On September 20, 2016, the terms of the Financing were finalized and the offering period was to take place from September 20, 2016 through October 31, 2016. Subsequent to October 31, 2016, the Financing was extended to November 25, 2016, extended to December 30, 2016 and extended to January 30, 2017. The final closing of the Financing took place on February 15, 2017. The Company upon closing of the Financing will pay consideration to WestPark, in cash, a fee in an amount equal to 10% of the aggregate gross proceeds raised in the Financing from the sale of Securities placed by WestPark and warrants in the amount of 10% of the aggregate gross proceeds. The Company will also pay all WestPark legal fees and expenses as well as a 3% non-accountable expense allowance of the aggregate gross proceeds raised in the Financing. The Placement Agent Warrants will have: (a) a nominal exercise price of $0.001 per share, and (b) a cashless exercise provision. The shares underlying the Placement Agent Warrants will have standard piggyback registration rights. In April 2016, the Company issued to WestPark 675,000 shares of the Company’s common stock (see Note 9) for entering into the agreement. In addition the Company will issue 750,000 shares of the Company’s common stock for every $1,000,000 raised in the Financing on a pro-rata basis, 500,000 shares of the Company’s common stock upon $500,000 being raised in the Financing and 651,000 shares of the Company’s common stock upon $825,000 being raised in the Financing. The aforementioned shares will have standard registration rights. (See Note 6). The aforementioned shares will have standard registration rights. Subsequent to December 31, 2016, 1,151,000 shares were issued to the placement agent. Operating Lease The Company had an operating lease for its New York office facility under a month-to-month agreement which ended on March 31, 2016. The Company is not currently a party to any operating lease agreements. Rent expense for the year ended December 31, 2016 and 2015 totaled $20,231 and $33,125, respectively. |
11. Income Taxes
11. Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The tax effects of temporary differences that give rise to deferred tax assets as of December 31, 2016 and 2015 are presented below: The income tax provision (benefit) consists of the following: December 31, 2016 2015 Federal Current – – Deferred (377,200 ) (492,800 ) State and local Current – – Deferred (104,600 ) (146,500 ) Change in valuation allowance 481,800 639,300 Income tax provision (benefit) – – The reconciliation between the statutory federal income tax rate and the Company’s effective rate for the years ended December 31, 2016 and 2015 is as follows: 2016 2015 U.S. Federal statutory rate (34.0% ) (34.0% ) State tax benefit, net of federal tax (9.42 ) (10.11 ) Stock based compensation 10.33 – Non-deductible interest expense 6.46 – Other permanent differences 0.56 2.07 Change in valuation allowance 26.07 42.04 Income tax provision (Benefit) 0.0% 0.0% As of December 31, 2016 and 2015 the deferred tax asset consisted of the following: 2016 2015 Deferred Tax Asset Net operating loss carryovers $ 1,131,900 $ 650,100 Total deferred tax asset 1,131,900 650,100 Valuation allowance (1,131,900 ) (650,100 ) Net Deferred Tax Asset, net of valuation allowance $ – $ – The Company is required to file its income tax returns in the U.S. federal jurisdiction and the state of New York and such returns are subject to examination by tax authorities. Tax returns for the year ended December 31, 2014, 2015 and 2016 remain open to Internal Revenue Service and State audits. The Company is in the process of filing its federal and state tax returns for the years ended December 31, 2016 and 2015. The Net operating losses (“NOLs”) for these years will not be available to reduce future taxable income until the returns are filed. Assuming these returns are filed, as of December 31, 2016, the Company had approximately $2.6 million of federal and state net operating losses that may be available to offset future taxable income. The net operating loss carryforwards will begin to expire in 2034 unless utilized. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s U.S. net operating carryovers may be subject to an annual limitation in the event of a change of control as defined the regulations. A full Section 382 analysis has not been prepared and the Company’s NOLs could be subject to limitation under Section 382. The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the Company’s losses since inception, management believes that it is more likely than not that the future benefits of its deferred tax assets will not be realized and has therefore established a full valuation allowance. |
12. Related Party Transactions
12. Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | On March 9, 2015, the Company engaged with a lead generation and presales outsourcing firm, Corporate Rain International (“CRI”). Tim Askew, a member of the Company’s Board of Directors, is the founder and CEO of CRI. CRI will be compensated $6,000 per month along with a flat commission of $500 for each customer referred by CRI to the Company per the terms of the engagement. In December 2015, the Company and CRI suspended the engagement to reassess sales strategies. |
13. Subsequent Events
13. Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent to December 31, 2016, the Company sold an additional 22.5 Units for gross proceeds of $225,000. As additional consideration for entering in the private placement offering, the investors were granted a total of 4,478,334 shares of common stock and 1,875,003 warrants to purchase common stock. As part of the transaction, the Company incurred placement agent fees of $59,278. In addition, the placement agent was granted a total of 168,750 shares of common stock and 375,001 warrants to purchase common stock at an exercise price of $0.001. (See Note 10). On January 27, 2017, the Company issued 150,000 restricted common shares to a marketing consultant with a fair value of $30,000. The shares were valued based on the quoted closing trading price on the date of issuance. On February 21, 2017, the Company entered into an employment agreement with Ray Colwell (“Colwell”), pursuant to which, commencing March 6, 2017, Colwell will serve as the Interim Chief Executive Officer of the Company and, commencing 90 days thereafter, shall serve as Chief Executive Officer of the Company through March 5, 2019, subject to extension as provided in the employment agreement, and be appointed to the Board of Directors. The agreement calls for an annual salary of $250,000 per annum and a bonus in the amount of 10% of all incremental gross revenue generated by the Company, which bonus shall be determined and be payable quarterly. In addition, pursuant to the employment agreement, the Company granted to Colwell stock options exercisable for an aggregate of 7,000,000 shares of common stock, subject to vesting, exercisable for ten years at the exercise price of $0.11 per share, subject to adjustment as provided therein. On March 6, 2017, William Gorfein stepped down as the Company’s Chief Executive Officer and was named the Company’s Chief Strategy Officer and Principal Financial Officer. No changes were made to Mr. Gorfein’s existing employment agreement. On April 13, 2017, the Company sold 166,667 shares of common stock to an investor for proceeds of $10,000. As of the date of this filing the shares have not been issued. On March 1, 2017, the Company reached an agreement with a consulting firm to provide non-exclusive digital marketing advisory services. As compensation for the services, the Company shall pay the consultant $5,000 and is obligated to issue an aggregate of 3,000,000 shares of the Company common stock. The term of the agreement is for three months. As of the date of this filing such shares have not been issued. |
3. Summary of Significant Acc20
3. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP. |
Principles of Consolidation | Principles of Consolidation The Company's wholly-owned consolidated subsidiaries are as follows: Name of consolidated subsidiary or entity State or other jurisdiction of incorporation or organization Date of incorporation or formation (date of acquisition, if applicable) Attributable interest Peerlogix Technologies, Inc. Delaware December 9, 2014 (August 14, 2015) 100% IP Squared Technologies Holdings, LLC Delaware November 20, 2012 (December 9, 2014) 100% On August 14, 2015, the Company and Peerlogix Technologies, Inc. merged. The merger was treated as a reverse merger and recapitalization of Peerlogix Technologies, Inc. for financial accounting purposes. The historical financial statements of the Company are those of PeerLogix Technologies, Inc., and of the consolidated entities from the date of merger forward. All significant inter-company balances and transactions have been eliminated. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s equity instruments, convertible debt, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets. |
Concentration of Credit Rick | Concentration of Credit Risk The Company maintains deposits in a financial institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The balance at times may exceed federally insured limits. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2016 and 2015, the Company does not have any cash equivalents. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of these differences that have been included or excluded in the financial statements or tax returns. The Company follows a recognition threshold and measurement process for consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also prescribes direction on the recognition, classification, interest and penalties in interim periods, disclosure and transition. The Company classifies interest expense and any related penalties, if any, related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized as of December 31, 2016 and 2015. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements for the years ended December 31, 2016 and 2015. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date. |
Convertible Instruments | Convertible Instruments The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. |
Accounting for Warrants | Accounting for Warrants The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assessed the classification of its common stock purchase warrants as of the date of each equity offering and determined that such instruments met the criteria for equity classification, as the settlement terms indicate that the instruments are indexed to the entity’s underlying stock. |
Research and Development | Research and Development Research and development (“R&D”) expenses are charged to operations as incurred. |
Advertising | Advertising The Company expenses advertising when incurred. During the years ended December 31, 2016 and 2015, the Company incurred advertising expenses of $4,333 and $28,933, respectively. |
Net Loss Per Share | Net Loss Per Share Basic loss per share was computed using the weighted average number of outstanding common shares. Diluted earnings per share, when presented, includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. Common stock equivalents are excluded in the computation of diluted earnings per share since their inclusion would be anti-dilutive. Total shares issuable upon the exercise of warrants, exercise of stock options and conversion of convertible promissory notes for the year ended December 31, 2016 and 2015 were as follows: December 31, 2016 2015 Warrants 8,956,677 2,951,669 Stock options 12,300,000 – Convertible promissory notes 11,408,333 – Total 32,665,010 2,951,669 For the year ended December 31, 2016, 1,000,835 warrants were included in basic and diluted loss per share as their exercise price was determined to be nominal. |
Share-Based Compensation | Share-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and amortized over the respective employment agreements or director service periods. For non-employees, the fair value of the award is measured on the commitment date and generally re-measured on interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations as if such amounts were paid in cash. The Company generally issues new shares of common stock to satisfy option and warrant exercises and note conversions. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of cash, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Pricing inputs that are generally unobservable inputs and not corroborated by market data. Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the warrant liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Executive Officer determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Executive Officer. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. No such items existed as of December 31, 2016 and 2015. |
Recently Issued Accounting Pronouncements | Recently Adopted Accounting Guidance In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-12, Compensation-Stock Compensation In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern. In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03. ASU 2015-03 amends current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. We adopted the provisions of ASU 2015-03 on January 1, 2016. No prior period amounts were required to be reclassified to conform to the current period presentation. The adoption of ASU 2015-03 did not materially impact our consolidated financial position, results of operations or cash flows. Recent Accounting Guidance In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”).The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The adoption of ASU 2015-14 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging” (topic 815). The FASB issued this update to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-06 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-09 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” (topic 606). In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net)” (topic 606). These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity's promise to grant a license provides a customer with either a right to use an entity's intellectual property or a right to access an entity's intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity's adoption of ASU 2014-09, which we intend to adopt for interim and annual reporting periods beginning after December 15, 2017. The adoption of ASU 2016-10 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows. In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 addresses specific cash flow classification issues where there is currently diversity in practice including debt prepayment and proceeds from the settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18 “Statement of Cash Flows (Topic 230), Restricted Cash” which provides guidance on the presentation of restricted cash and restricted cash equivalents in the statements of cash flows. The new guidance requires restricted cash and restricted cash equivalents to be included within the cash and cash equivalents balances when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04 “Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment” which eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ASU is effective for reporting periods beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the new standard on our consolidated financial statements. There were no other new accounting pronouncements that were issued or became effective since the issuance of our 2015 Annual Report on Form 10-K that had, or are expected to have, a material impact on our consolidated financial position, results of operations or cash flows. |
Subsequent Events | Subsequent Events The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements, except as disclosed. |
3. Summary of Significant Acc21
3. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Consolidation table | Name of consolidated subsidiary or entity State or other jurisdiction of incorporation or organization Date of incorporation or formation (date of acquisition, if applicable) Attributable interest Peerlogix Technologies, Inc. Delaware December 9, 2014 (August 14, 2015) 100% IP Squared Technologies Holdings, LLC Delaware November 20, 2012 (December 9, 2014) 100% |
Shares issuable upon exercise of warrants and conversion of notes | December 31, 2016 2015 Warrants 8,956,677 2,951,669 Stock options 12,300,000 – Convertible promissory notes 11,408,333 – Total 32,665,010 2,951,669 |
9. Stockholders' Deficit (Table
9. Stockholders' Deficit (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Schedule of stock option activity | Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding - January 1, 2016 – $ – – Granted 12,300,000 0.11 5.94 Exercised – – – Forfeited/Cancelled – – – Outstanding - December 31, 2016 12,300,000 $ 0.11 5.64 Exercisable - December 31, 2016 2,300,000 $ 0.10 7.36 |
Schedule of Warrants, Activity | Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding - December 31, 2014 – – – Granted 2,951,669 0.66 5.00 Exercised – – – Forfeited/Cancelled – – – Outstanding - December 31, 2015 2,951,669 $ 0.66 4.54 Granted 6,005,008 0.10 4.00 Exercised – – – Forfeited/Cancelled – – – Outstanding and Exercisable at – December 31, 2016 8,956,677 $ 0.20 3.65 |
Schedule of Exerciseable and Outstanding Warrants | Number of Warrants Exercise Price Weighted Average Remaining Contractual Life (In Years) Currently Exercisable 1,000,835 $0.001 3.80 1,000,835 50,000 $0.01 3.22 50,000 6,191,757 $0.10 3.79 6,191,757 548,333 $0.10 3.36 548,333 1,165,752 $0.72 3.67 1,165,752 8,956,677 8,956,677 |
Stock Options [Member] | |
Assumptions | For the Year Ended December 31, 2016 Risk free interest rate 0.87 - 2.45% Dividend yield 0.00% Expected volatility 59.00 - 83.71% Expected life in years 5 - 10 Forfeiture rate 0.00% |
Warrants [Member] | |
Assumptions | For the Year Ended December 31, 2016 Risk free interest rate 1.13 - 1.92% Dividend yield 0.00% Expected volatility 68.46 - 84.00% Contractual term 3.3 - 4 Forfeiture rate 0.00% |
11. Income Taxes (Tables)
11. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income tax provision | December 31, 2016 2015 Federal Current – – Deferred (377,200 ) (492,800 ) State and local Current – – Deferred (104,600 ) (146,500 ) Change in valuation allowance 481,800 639,300 Income tax provision (benefit) – – |
Reconciliation of income tax rate | 2016 2015 U.S. Federal statutory rate (34.0% ) (34.0% ) State tax benefit, net of federal tax (9.42 ) (10.11 ) Stock based compensation 10.33 – Non-deductible interest expense 6.46 – Other permanent differences 0.56 2.07 Change in valuation allowance 26.07 42.04 Income tax provision (Benefit) 0.0% 0.0% |
Deferred tax assets | 2016 2015 Deferred Tax Asset Net operating loss carryovers $ 1,131,900 $ 650,100 Total deferred tax asset 1,131,900 650,100 Valuation allowance (1,131,900 ) (650,100 ) Net Deferred Tax Asset, net of valuation allowance $ – $ – |
1. Organization and Operations
1. Organization and Operations (Details Narrative) - shares | Dec. 31, 2016 | Dec. 31, 2015 | Aug. 14, 2015 |
Stock outstanding | 26,860,825 | 23,107,535 | 21,049,602 |
Former Owners of Peerlogix Technologies, Inc. | |||
Ownership percentage | 81.00% |
2. Going Concern and Manageme25
2. Going Concern and Management Liquidation Plans (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net loss | $ (1,847,867) | $ (1,520,514) |
Net cash used in operations | $ (511,056) | $ (1,198,829) |
3. Summary of Significant Acc26
3. Summary of Significant Accounting Policies (Details - Subsidiaries) | 12 Months Ended |
Dec. 31, 2016 | |
Peerlogix Technologies, Inc. | |
Name of subsidiary or entity | Peerlogix Technologies, Inc. |
State or other jurisdiction of incorporation or organization | Delaware |
Date of incorporation | Dec. 9, 2014 |
Date of acquisition | Aug. 14, 2015 |
Attributable interest | 100.00% |
IP Squared Technologies Holdings, LLC | |
Name of subsidiary or entity | IP Squared Technologies Holdings, LLC |
State or other jurisdiction of incorporation or organization | Delaware |
Date of incorporation | Nov. 20, 2012 |
Date of acquisition | Dec. 9, 2014 |
Attributable interest | 100.00% |
3. Summary of Significant Acc27
3. Summary of Significant Accounting Policies (Details - Share equivalents) - shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Antidilutive shares | 2,951,669 | 32,665,010 |
Warrants | ||
Antidilutive shares | 8,956,677 | 2,951,669 |
Stock Option [Member] | ||
Antidilutive shares | 12,300,000 | 0 |
Convertible Promissory Notes | ||
Antidilutive shares | 11,408,333 | 0 |
3. Summary of Significant Acc28
3. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accounting Policies [Abstract] | ||
Cash equivalents | $ 0 | $ 0 |
Advertising expenses | $ 4,333 | $ 28,933 |
4. Demand Loans Payable (Detail
4. Demand Loans Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Demand Loans Payable Details Narrative | ||
Proceeds from demand loans | $ 0 | $ 5,500 |
Repayment of demand loans | 0 | (5,500) |
Demand loans payable | $ 15,000 | $ 15,000 |
5. Notes Payable (Details Narra
5. Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Proceeds from notes payable | $ 130,000 | $ 17,500 |
Repayment of notes payable | 26,250 | 26,250 |
Stock issued new, value | 2,000 | 1,510,001 |
Debt discount | 512,014 | 0 |
Accrued interest | 1,359 | |
Notes payable | 106,000 | 0 |
Securities Purchase Agreement [Member] | ||
Repayment of notes payable | 26,250 | |
Interest expense | $ 6,149 | |
Debt maturity date | Jul. 28, 2016 | |
Original issue discount | $ 26,250 | |
Legal fees | 7,418 | |
Notes payable | $ 106,000 | |
Unsecured Convertible Promissory Note [Member] | ||
Debt stated interest rate | 12.00% | |
Debt issuance costs | $ 3,250 | |
Six Lenders [Member] | ||
Proceeds from notes payable | 17,000 | |
Repayment of notes payable | 26,250 | |
Interest expense | $ 17,500 |
6. Convertible Notes Payable (D
6. Convertible Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Proceeds from convertible notes | $ 575,500 | $ 0 |
Fair value of warrants issued with debt | 81,001 | 0 |
Debt discount | 512,014 | 0 |
Beneficial conversion feature | 261,450 | 0 |
Placement agent fees | 137,054 | 0 |
Stock issued new, value | 2,000 | 1,510,001 |
Debt discount Written off | 248,383 | |
Common stock issued in connection with extinguishment of convertible notes, value | 483,332 | |
Repurchase of beneficial conversion feature - extinguishment of convertible notes | (675,418) | |
Gain on extinguishment of debt | 240,368 | 0 |
Convertible notes payable balance | 600,500 | |
Unsecured Convertible Notes [Member] | ||
Debt face amount | 600,500 | |
Proceeds from convertible notes | 575,500 | |
Fair value of warrants issued with debt | 81,001 | |
Debt discount | 381,653 | |
Beneficial conversion feature | 218,848 | |
Placement agent fees | $ 122,386 | |
Unsecured Convertible Notes [Member] | Placement Agent [Member] | ||
Stock issued new, shares | 450,375 | |
Stock issued new, value | $ 65,385 | |
Warrants issued, shares | 1,000,835 | |
Warrants issued, value | $ 161,388 | |
Warrant liability | 57,500 | |
Amendment to Offering 3 [Member] | ||
Debt discount | 296,666 | |
Debt discount Written off | $ 248,383 | |
Common stock issued in connection with extinguishment of convertible notes, shares | 333,333 | |
Common stock issued in connection with extinguishment of convertible notes, value | $ 483,332 | |
Extinguishment expense for the value of additional incentive shares | 186,667 | |
Repurchase of beneficial conversion feature - extinguishment of convertible notes | $ 675,418 | |
Senior Unsecured Convertible notes | ||
Debt converted, amount converted | 58,000 | |
Interest converted, amount converted | $ 8,162 | |
Debt and interest converted, shares issued | 124,566 |
7. Convertible Notes Payable 32
7. Convertible Notes Payable - Related Party (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Debt discount | $ 512,014 | $ 0 |
Proceeds from convertible note - related party | 70,000 | 0 |
Beneficial conversion feature | 261,450 | 0 |
Repayment of notes payable - related party | 17,500 | 53,725 |
Convertible notes payable - related party | $ 70,000 | 0 |
SPA Agreement [Member] | Attia Investments [Member] | ||
Shares cancelled | 8,324,084 | |
SPA Agreement [Member] | Attia Investments [Member] | Tranche 1 [Member] | ||
Debt face amount | $ 87,500 | |
Debt discount | 17,500 | |
Proceeds from convertible note - related party | 70,000 | |
Beneficial conversion feature | 42,602 | |
SPA Agreement [Member] | Attia Investments [Member] | Tranche 1 [Member] | Common Stock [Member] | ||
Debt discount | $ 13,260 | |
Stock issued for note payable, shares | 175,000 | |
Convertible Notes - Related Party [Member] | ||
Repayment of notes payable - related party | 55,585 | |
Interest forgiven, contributed capital | $ 2,577 |
8. Loans Payable - Officer (Det
8. Loans Payable - Officer (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Loans Payable - Officers | ||
Loans payable - officers | $ 34,254 | $ 33,648 |
9. Stockholders' Deficit (Detai
9. Stockholders' Deficit (Details - Assumptions Options) | 12 Months Ended |
Dec. 31, 2016 | |
Stock Options [Member] | |
Risk free interest rate, minimum | 0.87% |
Risk-free interest rate, maximum | 2.45% |
Dividend yield | 0.00% |
Expected volatility, minimum | 59.00% |
Expected volatility, maximum | 83.71% |
Expected life in years/Contractual term | 5-10 years |
Forfeiture rate | 0.00% |
Warrants [Member] | |
Risk free interest rate, minimum | 1.13% |
Risk-free interest rate, maximum | 1.92% |
Dividend yield | 0.00% |
Expected volatility, minimum | 68.46% |
Expected volatility, maximum | 84.00% |
Expected life in years/Contractual term | 3.3-4 years |
Forfeiture rate | 0.00% |
9. Stockholders' Deficit (Det35
9. Stockholders' Deficit (Details - Option activity) - Stock Options [Member] | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Number of Options | |
Options outstanding, beginning balance | 0 |
Options granted | 12,300,000 |
Options exercised | 0 |
Options forfeited/cancelled | 0 |
Options outstanding, ending balance | 12,300,000 |
Options exercisable | 2,300,000 |
Weighted Average Exercise Price | |
Options granted | $ / shares | $ 0.11 |
Options outstanding, ending balance | $ / shares | .11 |
Options exercisable | $ / shares | $ 0.10 |
Weighted Average Remaining Contractual Life | |
Options granted | 5 years 11 months 9 days |
Options outstanding, ending balance | 5 years 7 months 21 days |
Options exercisable | 7 years 4 months 10 days |
9. Stockholders' Deficit (Det36
9. Stockholders' Deficit (Details - Warrant activity) - Warrants [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Warrants | ||
Warrants outstanding, beginning balance | 2,951,669 | 0 |
Warrants granted | 6,005,008 | 2,951,669 |
Warrants exercised | 0 | 0 |
Warrants forfeited/cancelled | 0 | 0 |
Warrants outstanding | 8,956,677 | 2,951,669 |
Warrants exercisable | 8,956,677 | 2,951,669 |
Weighted Average Exercise Price | ||
Weighted average exercise price, warrants outstanding beginning balance | $ 0.66 | |
Weighted average exercise price, warrants granted | 0.10 | $ 0.66 |
Weighted average exercise price, warrants outstanding ending balance | $ 0.20 | $ 0.66 |
Weighted Average Remaining Contractual Life | ||
Weighted average remaining contractual life, warrants outstanding | 3 years 7 months 24 days | 4 years 6 months 15 days |
Weighted average remaining contractual life, warrants granted | 4 years | 5 years |
9. Stockholders' Deficit (Det37
9. Stockholders' Deficit (Details - Exerciseable And Oustanding) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Warrants | 0.001 | ||
Number of Shares | 1,000,835 | |
Weighted Average Remaining Life (Years) | 3 years 9 months 18 days | |
Exercise Price ($) | $ 0 | |
Currently exercisable | 1,000,835 | |
Warrants | 0.01 | ||
Number of Shares | 50,000 | |
Weighted Average Remaining Life (Years) | 3 years 2 months 19 days | |
Exercise Price ($) | $ 0.01 | |
Currently exercisable | 50,000 | |
Warrants | 0.10 | ||
Number of Shares | 6,191,757 | |
Weighted Average Remaining Life (Years) | 3 years 9 months 15 days | |
Exercise Price ($) | $ 0.10 | |
Currently exercisable | 6,191,757 | |
Warrants | 0.72 | ||
Number of Shares | 1,165,752 | |
Weighted Average Remaining Life (Years) | 3 years 8 months 1 day | |
Exercise Price ($) | $ 0.72 | |
Currently exercisable | 1,165,752 | |
Warrants | 0.10 | ||
Number of Shares | 548,333 | |
Weighted Average Remaining Life (Years) | 3 years 4 months 10 days | |
Exercise Price ($) | $ 0.10 | |
Currently exercisable | 548,333 | |
Warrants [Member] | ||
Number of Shares | 8,956,677 | |
Weighted Average Remaining Life (Years) | 3 years 7 months 24 days | 4 years 6 months 15 days |
Currently exercisable | 8,956,677 | 2,951,669 |
9. Stockholders_ Deficit (Detai
9. Stockholders’ Deficit (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock issued new, value | $ 2,000 | $ 1,510,001 |
Other stock issuance costs | 137,054 | 0 |
Proceeds from sale of stock | 2,000 | 1,248,512 |
Stock based compensation | 361,956 | 150,000 |
Stock issued for services, value | 267,782 | 150,000 |
Aggregate intrinsic value options outstanding | 1,066,510 | |
Aggregate intrinsic value options exercisable | 217,510 | |
Common stock issued in connection with settlement of liabilities, value | 27,600 | |
Stock Option [Member] | ||
Stock based compensation | $ 166,565 | |
2016 Plan | ||
Shares authorized under plan | 3,000,000 | |
Offering 1 | ||
Stock issued new, value | $ 500,000 | |
Warrants issued | 1,000,000 | |
Commision fees paid | $ 50,000 | |
Warrants issued for services | 50,000 | |
Other stock issuance costs | $ 14,263 | |
Stock issued new, shares | 1,000,000 | |
Offering 2 | ||
Warrants issued | 1,010,000 | |
Commision fees paid | $ 101,000 | |
Warrants issued for services | 168,333 | |
Additional fee earned by placement agent | $ 30,300 | |
Other stock issuance costs | $ 66,000 | |
Stock issued new, shares | 1,683,333 | |
Warrants [Member] | ||
Aggregate intrinsic value of warrants outstanding | $ 782,214 | 0 |
Aggregate intrinsic value of warrants exercisable | $ 782,214 | $ 0 |
Two Advisory Board Members [Member] | ||
Stock options issued, shares | 200,000 | |
Fair value of options issued | $ 9,600 | |
Consultant [Member] | ||
Stock issued for compensation, shares | 40,000 | 250,000 |
Stock issued for compensation, value | $ 8,000 | $ 150,000 |
Stock based compensation | 8,000 | |
Investor [Member] | ||
Proceeds from sale of stock | $ 2,000 | |
Investor [Member] | Private Placement [Member] | ||
Stock issued new, shares | 3,333,333 | |
Placement Agent [Member] | ||
Stock based compensation | $ 67,500 | |
Stock issued for services, shares | 675,000 | |
Stock issued for services, value | $ 67,500 | |
PlacementAgent2Member | ||
Stock issued for services, shares | 450,375 | |
Stock issued for services, value | $ 65,385 | |
Three Board Members [Member] | ||
Stock options issued, shares | 12,100,000 | |
Fair value of options issued | $ 546,000 | |
Options vested | 2,200,000 |
10. Commitments and Contingen39
10. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 20,231 | $ 33,125 |
Settlement liability | 17,042 | |
Payroll tax liability | $ 10,493 |
11. Income Taxes (Details - Inc
11. Income Taxes (Details - Income tax provision) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Federal | ||
Current | $ 0 | $ 0 |
Deferred | (377,200) | (492,800) |
State and local | ||
Current | 0 | 0 |
Deferred | (104,600) | (146,500) |
Change in valuation allowance | 481,800 | 639,300 |
Income tax provision (benefit) | $ 0 | $ 0 |
11. Income Taxes (Details - Rec
11. Income Taxes (Details - Reconcilation percent) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
U.S. Federal statutory rate | (34.00%) | (34.00%) |
State tax benefit, net of federal tax | (9.42%) | (10.11%) |
Stock based compensation | 10.33% | 0.00% |
Non-deductible interest expense | 6.46% | 0.00% |
Other permanent differences | 0.56% | 2.07% |
Change in valuation allowance | 26.07% | 42.04% |
Income tax provision (Benefit) | 0.00% | 0.00% |
11. Income Taxes (Details - Def
11. Income Taxes (Details - Deferred tax assets) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryover | $ 1,131,900 | $ 650,100 |
Total deferred tax asset | 1,131,900 | 650,100 |
Valuation allowance | (1,131,900) | (650,100) |
Net deferred tax asset, net of valuation allowance | $ 0 | $ 0 |
11. Income Taxes (Details Narra
11. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carryforwards | $ 2,600,000 |
Operating loss beginning expiration date | Dec. 31, 2034 |
12. Related Party Transactions
12. Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Expenses paid to related party | $ 30,000 | |
Due to related party | 40,075 | $ 0 |
Debt Instrument, Decrease, Forgiveness | 6,000 | |
CRI [Member] | ||
Expenses paid to related party | 30,000 | |
Due to related party | $ 6,000 |