Nevada
(State
or other jurisdiction
of
incorporation or organization)
|
|
27-1085858
(I.R.S.
Employer
Identification
No.)
|
4870 Sadler Road, Suite 300
Glen
Allen, Virginia
(Address
of principal executive offices)
|
|
23060
(Zip
Code)
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☒
|
Emerging
growth company ☐
|
|
|
Page Number
|
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1
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7
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17
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17
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17
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17
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18
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18
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19
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22
|
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23
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24
|
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24
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25
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||
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26
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27
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32
|
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34
|
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34
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36
|
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|
|
|
|
|
|
|
High
|
Low
|
Fiscal
year ended December 31, 2016
|
|
|
|
|
|
March 31,
2016
|
$3.05
|
$3.00
|
June 30,
2016
|
3.05
|
0.55
|
September 30,
2016
|
2.50
|
0.56
|
December 31,
2016
|
1.50
|
0.40
|
|
High
|
Low
|
|
|
|
Fiscal
year ended December 31, 2017
|
|
|
|
|
|
March 31,
2017
|
$1.00
|
$0.26
|
June 30,
2017
|
0.65
|
0.20
|
September 30,
2017
|
0.65
|
0.10
|
December 31,
2017
|
0.20
|
0.08
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2017
|
2016
|
change
|
Revenue
|
$-
|
$-
|
-
|
Operating
expenses
|
3,124,907
|
1,601,486
|
$1,523,421
|
|
|
|
|
Net
loss from operations
|
(3,124,907)
|
(1,601,486)
|
(1,523,421)
|
Total
other loss
|
(735,768)
|
(1,453)
|
(734,315)
|
|
|
|
|
Loss
from continuing operations
|
$(3,860,675)
|
$(1,602,939)
|
$(2,257,736)
|
CONTENTS
|
|
|
|
|
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
F-1
|
|
|
|
|
|
F-2
|
|
|
|
|
|
F-3
|
|
|
|
|
|
F-4
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
![]() |
|
We have
served as the Company’s auditor since 2014
New
York, New York
April
2, 2018
|
|
|
|
|
|
|
December 31,
|
December 31,
|
|
2017
|
2016
|
|
|
|
ASSETS
|
|
|
Current Assets
|
|
|
Cash
and cash equivalents
|
$161,215
|
$1,055,336
|
Prepaid
expenses
|
11,458
|
19,721
|
Total current assets
|
172,673
|
1,075,057
|
|
|
|
Non Current Assets
|
|
|
Prepaid
clinical trial
|
-
|
1,000,000
|
Intangible
asset- license agreement
|
-
|
50,000
|
Total non current assets
|
-
|
1,050,000
|
|
|
|
TOTAL ASSETS
|
$172,673
|
$2,125,057
|
|
|
|
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
|
|
|
|
|
|
Current Liabilities
|
|
|
Accounts
payable
|
735,051
|
566,495
|
Accrued
expenses
|
582,236
|
58,479
|
Note
payable
|
48,000
|
-
|
Convertible
loan notes, net
|
57,796
|
-
|
Derivative
liability
|
930,000
|
-
|
Settlement
payable
|
20,000
|
-
|
Interest
payable
|
15,232
|
-
|
Total Current Liabilities
|
2,388,315
|
624,974
|
|
|
|
TOTAL LIABILITIES
|
2,388,315
|
624,974
|
|
|
|
Commitments and contingencies (see note 7)
|
|
|
|
|
|
Stockholders' (Deficit) Equity
|
|
|
Preferred
stock: 50,000,000 authorized; $0.0001 par value 0 shares issued and
outstanding
|
-
|
-
|
Preferred
stock Series A: 5,000,000 authorized; $0.0001 par value 4,558,042
shares issued and 0 shares outstanding
|
-
|
-
|
Preferred
stock Series B-1: 32,000,000 authorized; $0.0001 par value
2,800,000 issued and outstanding
|
280
|
280
|
Preferred
stock Series B-2: 10,000,000 authorized; $0.0001 par value
8,684,000 and 8,584,000 shares issued and outstanding,
respectively
|
868
|
858
|
Preferred
stock Series C: 1,733,334 authorized; $0.0001 par value 1,733,334
shares issued and outstanding
|
173
|
173
|
Common
stock: 200,000,000 shares authorized; $0.0001 par value 35,071,862
and 34,071,862 shares issued and outstanding,
respectively
|
3,507
|
3,407
|
Additional
paid-in capital
|
3,980,103
|
3,835,263
|
Accumulated
deficit
|
(6,200,573)
|
(2,339,898)
|
Total
Stockholders' (Deficit) Equity
|
(2,215,642)
|
1,500,083
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
|
$172,673
|
$2,125,057
|
|
Year Ended December 31,
|
|
|
2017
|
2016
|
|
|
|
Revenues
|
$-
|
$-
|
|
|
|
Operating Expenses
|
|
|
General
and administration
|
1,219,309
|
759,145
|
Professional
|
499,522
|
368,917
|
Research
and development
|
356,076
|
369,344
|
Stock-based
compensation
|
-
|
100,000
|
Impairment
loss
|
1,050,000
|
4,080
|
Total operating expenses
|
3,124,907
|
1,601,486
|
|
|
|
Net loss from operations
|
(3,124,907)
|
(1,601,486)
|
|
|
|
Other Income (loss)
|
|
|
|
|
|
Derivative
expense
|
(667,200)
|
-
|
Interest
expense
|
(68,568)
|
-
|
Loss
on disposal of equipment
|
-
|
(1,453)
|
Total other (loss) income
|
(735,768)
|
(1,453)
|
|
|
|
Net
loss before income taxes
|
(3,860,675)
|
(1,602,939)
|
Provision
for income tax
|
-
|
-
|
|
|
|
Net Loss
|
$(3,860,675)
|
$(1,602,939)
|
|
|
|
Basic and Diluted Loss per Common Share
|
$(0.11)
|
$(0.08)
|
|
|
|
Weighted Average Number of Common Shares Outstanding
|
33,947,162
|
19,220,686
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Preferred Stock - Series A
|
Preferred Stock- Series B-1
|
Preferred Stock- Series B-2
|
Preferred Stock-
Series C
|
Common Stock
|
|
Additional
Paid
in |
Other Comprehensive
|
Accumulated
|
|
||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
(Loss)
|
Deficit
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
515,290
|
$52
|
$643,587
|
$-
|
$(736,959)
|
$(93,320)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Exchanged for Preferred Stock Series A
|
4,558,042
|
455
|
-
|
-
|
-
|
-
|
-
|
-
|
(393,314)
|
(39)
|
(416)
|
-
|
-
|
-
|
Preferred
Series A Stock purchased and cancelled, February 29,
2016
|
(50,000)
|
(5)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(49,995)
|
-
|
-
|
(50,000)
|
Preferred
Series B-1 stock issued for acquisition of Excatus Bioslution,
Inc., February 29, 2016
|
-
|
-
|
30,000,000
|
3,000
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,708)
|
-
|
-
|
292
|
Preferred
Series B-2 stock issued for cash, note payable and liability,
February 29, 2016
|
-
|
-
|
-
|
-
|
2,084,000
|
208
|
-
|
-
|
-
|
-
|
520,792
|
-
|
-
|
521,000
|
Preferred
Series A conversion to common stock, March 28, 2016 and March 30,
2016
|
(4,508,042)
|
(450)
|
-
|
-
|
-
|
-
|
-
|
-
|
4,508,042
|
450
|
-
|
-
|
-
|
-
|
Preferred
Series B-1 conversion to common stock, June 15, 2016
|
-
|
-
|
(27,200,000)
|
(2,720)
|
-
|
-
|
-
|
-
|
27,200,000
|
2,720
|
-
|
-
|
-
|
-
|
Common
stock, Preferred Series C stock, and warrants issued for prepaid
services, June 30, 2016
|
-
|
-
|
-
|
-
|
-
|
-
|
1,733,334
|
173
|
1,600,000
|
160
|
999,667
|
-
|
-
|
1,000,000
|
Preferred
Series B-2 stock issued for cash, July 15, 2016
|
-
|
-
|
-
|
-
|
500,000
|
50
|
-
|
-
|
-
|
-
|
124,950
|
-
|
-
|
125,000
|
Preferred
Series B-2 stock issued for cash, October 27, 2016
|
-
|
-
|
-
|
-
|
6,000,000
|
600
|
-
|
-
|
-
|
-
|
1,499,400
|
-
|
-
|
1,500,000
|
Common
Stock issued, Share based Payment, November 11, 2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
141,844
|
14
|
99,986
|
-
|
-
|
100,000
|
Common
Stock Issued, Share based Payment, December 13, 2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
500,000
|
50
|
-
|
-
|
-
|
50
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,602,939)
|
(1,602,939)
|
Balance, December 31, 2016
|
-
|
$-
|
2,800,000
|
$280
|
8,584,000
|
$858
|
1,733,334
|
$173
|
34,071,862
|
$3,407
|
$3,835,263
|
$-
|
$(2,339,898)
|
$1,500,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Series B-2 stock issued for cash, January 26, 2017
|
-
|
-
|
-
|
-
|
100,000
|
10
|
-
|
-
|
-
|
-
|
24,990
|
-
|
-
|
25,000
|
Cancellation
of Share based Payment on February 22, 2017 of Common Stock issued
December 13, 2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(500,000)
|
(50)
|
-
|
-
|
-
|
(50)
|
Common
Stock issued, debt settlement, October 19, 2017
|
|
|
|
|
|
|
|
|
1,500,000
|
150
|
119,850
|
|
|
120,000
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,860,675)
|
(3,860,675)
|
Balance, December 31, 2017
|
-
|
$-
|
2,800,000
|
$280
|
8,684,000
|
$868
|
1,733,334
|
$173
|
35,071,862
|
$3,507
|
$3,980,103
|
$-
|
$(6,200,573)
|
$(2,215,642)
|
|
Year Ended December 31,
|
|
|
2017
|
2016
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
Net
loss
|
$(3,860,675)
|
$(1,602,939)
|
Adjustments
to reconcile net loss to cash used in operations:
|
|
|
Derivative
expense
|
667,200
|
-
|
Amortization
of discount and debt issuance costs for convertible
notes
|
52,795
|
-
|
Bad
debt
|
-
|
7,010
|
Loss
on disposal of property and equipment
|
-
|
1,453
|
Impairment
|
1,050,000
|
4,080
|
Stock-based
compensation
|
-
|
100,000
|
Loss
on debt settlement in stock
|
78,315
|
-
|
Bank
overdraft write-off
|
-
|
(1,172)
|
Changes
in operating assets and liabilities:
|
|
|
(Increase)
decrease in operating assets:
|
|
|
Prepaid
expenses
|
8,214
|
(19,671)
|
Restricted
cash
|
-
|
72,342
|
Increase
(decrease) in operating liabilities:
|
|
|
Accounts
payable
|
210,241
|
491,012
|
Accrued
expenses
|
523,757
|
56,929
|
Settlement
payable
|
20,000
|
-
|
Interest
payable
|
15,232
|
-
|
Net Cash Used In Operating Activities
|
(1,234,921)
|
(890,956)
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
Acquisition
of cash balance from Exactus BioSolutions Inc.
|
-
|
1,292
|
Net Cash Provided by Investing Activities
|
-
|
1,292
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
Proceeds
from sale of Series B-2 Preferred Stock
|
25,000
|
1,995,000
|
Proceeds
from issuance of notes payable
|
48,000
|
-
|
Proceeds
from convertible loan notes
|
267,800
|
-
|
Payment
for Series A Preferred Stock
|
-
|
(50,000)
|
Net Cash Provided By Financing Activities
|
340,800
|
1,945,000
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
(894,121)
|
1,055,336
|
Cash and cash equivalents at beginning of period
|
1,055,336
|
-
|
|
|
|
Cash and cash equivalents at end of period
|
$161,215
|
$1,055,336
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
Cash
paid for interest
|
$-
|
$-
|
Cash
paid for taxes
|
$-
|
$-
|
|
|
|
Non-Cash transactions investing and financing
activity:
|
|
|
Acquisition
of license agreement from Exactus BioSolutions Inc
|
$-
|
50,000
|
Preferred
Stock Series B-2 issued as payment for Note payable
|
$-
|
$100,000
|
Preferred
Stock Series B-2 issued as payment for Exactus shareholder
loans
|
$-
|
$51,000
|
Preferred
Stock Series C, common stock, and warrants issued as part of Master
Service Agreement and Stock Subscription Agreement as prepaid
expense
|
$-
|
$1,000,000
|
Initial
beneficial conversion feature and debt discount on convertible
notes
|
$374,700
|
$-
|
Initial
derivative liability on convertible notes
|
$876,000
|
$-
|
Accounts
payable settled on issuance of stock
|
$41,685
|
$-
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
|
|
|
Convertible
Loan Notes
|
|
|
Principal
Amount
|
$332,500
|
$-
|
Less unamortized
debt discount and debt issuance costs
|
(274,704)
|
-
|
Current debt less
unamortized debt discount and
debt issuance
costs
|
$57,796
|
$-
|
|
August 14, 2017
|
December 31, 2017
|
Volatility
|
303.93%
|
333.89%
|
Risk-free
interest rate
|
1.23%
|
1.31%
|
Common
stock closing price
|
$0.20
|
$0.20
|
|
September 27, 2017
|
December 31, 2017
|
Volatility
|
319.5%
|
326.65%
|
Risk-free
interest rate
|
1.33%
|
1.31%
|
Common
stock closing price
|
$0.12
|
$0.20
|
|
December 21, 2017
|
December 31, 2017
|
Volatility
|
300.94%
|
303.97%
|
Risk-free
interest rate
|
1.73%
|
1.76%
|
Common
stock closing price
|
$0.20
|
$0.20
|
|
December 26, 2017
|
December 31, 2017
|
Volatility
|
320.69%
|
326.65%
|
Risk-free
interest rate
|
1.19%
|
1.53%
|
Common
stock closing price
|
$0.20
|
$0.20
|
|
Derivative
|
|
Liability
(convertible
|
|
notes)
|
Balance, December
31, 2016
|
$-
|
Initial fair value
at note issuances
|
876,000
|
Extinguishment of
derivative liability
|
-
|
Mark-to-market at
December 31, 2017
|
54,000
|
|
|
Balance, December
31, 2017
|
$930,000
|
Net loss for the
year included in earnings relating to the liabilities held at
December 31, 2017
|
$54,000
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
Current tax
benefit
|
$(810,000)
|
$(544,000)
|
Valuation
allowance
|
810,000
|
544,000
|
Total tax
expense
|
$-
|
$-
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
Balance
forward
|
$794,500
|
$250,500
|
Change in deferred
tax asset
|
490,500
|
544,000
|
Total deferred tax
asset
|
1,285,000
|
794,500
|
Valuation
allowance
|
(1,285,000)
|
(794,500)
|
Total tax
expense
|
$-
|
$-
|
|
Year
|
Salary
|
Bonus
|
Non-Equity Incentive Plan Compensation(1)
|
All Other Compensation
|
Total
|
|
|
|
|
|
|
|
Philip
J. Young
|
2017
|
$325,000
|
$--
|
$--
|
$--
|
$325,000
|
President and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip
J. Young
|
2016
|
$297,917
|
$--
|
$--
|
$--
|
$297,917
|
President and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
R. Erickson, Ph.D.
|
2017
|
$125,000
|
$--
|
$--
|
$--
|
$125,000
|
Chief Business Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
Ryan
|
2017
|
$120,000
|
$--
|
$--
|
$--
|
$120,000
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
Ryan
|
2016
|
$110,000
|
$--
|
$--
|
$--
|
$110,000
|
Executive Vice President
|
|
|
|
|
|
|
Title of Class
|
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class (1)
|
|
|
|
|
Common
Stock
|
Philip
J. Young
|
8,668,000(2)
|
24.6%
|
Common
Stock
|
Kelley
A. Wendt
|
600,000(3)
|
1.7%
|
Common
Stock
|
Timothy
Ryan
|
8,618,000(4)
|
24.5%
|
Common
Stock
|
James
R. Erickson
|
1,600,000
|
4.6%
|
|
|
|
|
|
|
|
|
|
Directors and executive officers as a group
(4 individuals)
|
19,486,000
|
55.4%
|
|
Name and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent of
Class (1)
|
|
|
|
|
Common
Stock
|
MagniSciFund,
LP
123
N Post Oak Lane, Suite 400
Houston,
TX 77024
|
6,000,000(2)
|
14.6%
|
Common
Stock
|
Digital
Diagnostics, PTY
606
Sherwood Road
Sherwood,
QLD, 4075 Australia
|
3,600,000(3)
|
9.3%
|
Common
Stock
|
PoC
Capital LLC
2995
Woodside Avenue, Suite 400-121
Woodside,
CA 94062
|
3,400,001(4)
|
8.8%
|
Common
Stock
|
Sandor
Capital Master Fund
2828
Routh Street, Suite 500
Dallas,
TX 75201-1438
|
2,300,000(5)
|
6.3%
|
Common
Stock
|
Velocity
Health Capital
95
White Bridge Road, Suite 509
Nashville,
TN 37205
|
2,068,000(6)
|
5.9%
|
|
|
|
Share
Exchange Agreement, dated February 29, 2016, by and among Spiral
Energy Tech, Inc., Exactus BioSolutions, Inc. and the stockholders
of Exactus BioSolutions, Inc. signatories thereto (attached as
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed March 4, 2016 and incorporated herein by
reference)
|
|
Amended
and Restated Articles of Incorporation (attached as Exhibit 3.2 to
the Company’s Registration Statement on Form S-1
(Registration No. 333-183360), filed August 16, 2012 and
incorporated herein by reference)
|
|
Certificate
of Amendment to Amended and Restated Articles of Incorporation
(attached as Exhibit 3.1 to Amendment No. 2 to the Registration
Statement on Form S-1 (Registration No. 333-183360, filed December
19, 2013 and incorporated herein by reference)
|
|
Articles
of Merger, dated March 10, 2016, between Exactus Acquisition Corp.
and Spiral Energy Tech, Inc. (attached as Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed March 28, 2016 and
incorporated herein by reference)
|
|
Certificate
of Designation for Series A Preferred Stock (attached as Exhibit
3.1 to the Company’s Amendment to the Current Report on Form
8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Certificate
of Designation for Series B-1 Preferred Stock (attached as Exhibit
3.1 to the Company’s Current Report on Form 8-K filed March
4, 2016 and incorporated herein by reference)
|
|
Certificate
of Designation for Series B-2 Preferred Stock (attached as Exhibit
3.2 to the Company’s Amendment to the Current Report on Form
8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Amendment
to Certificate of Designation After Issuance of Class or Series
(attached as Exhibit 3.1 to the Company’s Current Report on
Form 8-K filed November 1, 2016 and incorporated herein by
reference).
|
|
Certificate
of Designation for Series C Preferred Stock (attached as Exhibit
3.1 to the Company’s Current Report on Form 8-K filed July 7,
2016 and incorporated herein by reference)
|
|
Bylaws
(attached as Exhibit 3.3 to the Company’s Registration
Statement on Form S-1 (Registration No. 333-183360), filed August
16, 2012 and incorporated herein by reference)
|
|
Form of
Leak Out Agreement by and between Spiral Energy Tech, Inc. and the
holders signatory thereto (attached as Exhibit 4.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
|
Stock
and Warrant Subscription Agreement, between Exactus, Inc. and POC
Capital, LLC (attached as Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed July 7, 2016 and incorporated
herein by reference)
|
|
Warrant
to Purchase Common Stock of Exactus, Inc., dated June 30, 2016
(attached as Exhibit 10.3 to the Company’s Current Report on
Form 8-K filed July 7, 2016 and incorporated herein by
reference)
|
|
Form of
Exchange Agreement for Series A Preferred Stock (attached as
Exhibit 10.1 to the Company’s Amendment to the Current Report
on Form 8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Form of
Subscription Agreement for Series B-2 Preferred Stock (attached as
Exhibit 10.2 to the Company’s Amendment to the Current Report
on Form 8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Leak-Out
Agreement dated October 13, 2016 between Exactus, Inc. and MagnaSci
Fund LP (attached as Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed November 1, 2016 and incorporated herein
by reference).
|
|
Master
Services Agreement, dated June 30, 2016, between Exactus, Inc. and
Integrium, LLC (attached as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed July 7, 2016 and incorporated
herein by reference)
|
|
Amended
and Restated Collaboration and License Agreement dated August 18,
2016 between Digital Diagnostics Inc. and Exactus BioSolutions,
Inc. (attached as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the period ended June 30, 2016 and
incorporated herein by reference)**
|
|
Consulting
Agreement, dated January 20, 2016, between Exactus BioSolutions,
Inc. and KD Innovation Ltd. (attached as Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
(+)
|
|
Employment
Agreement, dated December 15, 2015, between Exactus BioSolutions,
Inc. and Philip J. Young (attached as Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
(+)
|
|
Employment
Agreement, dated December 15, 2015, between Exactus BioSolutions,
Inc. and Timothy J. Ryan (attached as Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
(+)
|
|
Employment
Agreement, dated March 16, 2017, between Exactus, Inc. and Kelley
Wendt (attached as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed March 22, 2017 and incorporated herein by
reference). (+)
|
|
Employment
Agreement, dated December 1, 2016, between Exactus, Inc. and James
R. Erickson (attached as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed December 8, 2016 and incorporated
herein by reference) (+)
|
|
Subsidiary
List (attached as Exhibit 21.1 to the Company’s Quarterly
Report on Form 10-Q for the period ended June 30, 2016 and
incorporated herein by reference)
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
and 15d-14(a) as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
and 15d-14(a) as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
Certification of Chief Executive Officer pursuant to Rule 18 U.S.C
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley act of 2002 (filed herewith)
|
|
Certification of Chief Financial Officer pursuant to Rule 18 U.S.C
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley act of 2002 (filed herewith)
|
|
101
|
Interactive
Data Files
|
|
|
|
|
|
|
|
EXACTUS, INC.
|
||
|
|
|
|
|
Date:
April 2, 2018
|
|
By:
|
/s/ Philip J.
Young
|
|
|
|
|
Philip
J. Young
President,
Chief Executive Officer and Chairman of the Board
(Principal
Executive Officer)
|
|
|
|
|
Date:
April 2, 2018
|
|
By:
|
/s/ Philip J.
Young
|
|
|
|
Philip
J. Young
President,
Chief Executive Officer and Chairman of the Board
(Principal
Executive Officer)
|
|
|
|
|
Date:
April 2, 2018
|
|
By:
|
/s/ Kelley A.
Wendt
|
|
|
|
Kelley
A. Wendt
Chief
Financial Officer
(Principal
Financial and Principal Accounting Officer)
|
|
|
|
|
Date:
April 2, 2018
|
|
By:
|
/s/ Timothy
Ryan
|
|
|
|
Timothy
Ryan
Executive
Vice President and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit No.
|
Description
|
Share
Exchange Agreement, dated February 29, 2016, by and among Spiral
Energy Tech, Inc., Exactus BioSolutions, Inc. and the stockholders
of Exactus BioSolutions, Inc. signatories thereto (attached as
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed March 4, 2016 and incorporated herein by
reference)
|
|
Amended
and Restated Articles of Incorporation (attached as Exhibit 3.2 to
the Company’s Registration Statement on Form S-1
(Registration No. 333-183360), filed August 16, 2012 and
incorporated herein by reference)
|
|
Certificate
of Amendment to Amended and Restated Articles of Incorporation
(attached as Exhibit 3.1 to Amendment No. 2 to the Registration
Statement on Form S-1 (Registration No. 333-183360, filed December
19, 2013 and incorporated herein by reference)
|
|
Articles
of Merger, dated March 10, 2016, between Exactus Acquisition Corp.
and Spiral Energy Tech, Inc. (attached as Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed March 28, 2016 and
incorporated herein by reference)
|
|
Certificate
of Designation for Series A Preferred Stock (attached as Exhibit
3.1 to the Company’s Amendment to the Current Report on Form
8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Certificate
of Designation for Series B-1 Preferred Stock (attached as Exhibit
3.1 to the Company’s Current Report on Form 8-K filed March
4, 2016 and incorporated herein by reference)
|
|
Certificate
of Designation for Series B-2 Preferred Stock (attached as Exhibit
3.2 to the Company’s Amendment to the Current Report on Form
8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Amendment
to Certificate of Designation After Issuance of Class or Series
(attached as Exhibit 3.1 to the Company’s Current Report on
Form 8-K filed November 1, 2016 and incorporated herein by
reference).
|
|
Certificate
of Designation for Series C Preferred Stock (attached as Exhibit
3.1 to the Company’s Current Report on Form 8-K filed July 7,
2016 and incorporated herein by reference)
|
|
Bylaws
(attached as Exhibit 3.3 to the Company’s Registration
Statement on Form S-1 (Registration No. 333-183360), filed August
16, 2012 and incorporated herein by reference)
|
|
Form
of Leak Out Agreement by and between Spiral Energy Tech, Inc. and
the holders signatory thereto (attached as Exhibit 4.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
|
|
Stock
and Warrant Subscription Agreement, between Exactus, Inc. and POC
Capital, LLC (attached as Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed July 7, 2016 and incorporated
herein by reference)
|
|
Warrant
to Purchase Common Stock of Exactus, Inc., dated June 30, 2016
(attached as Exhibit 10.3 to the Company’s Current Report on
Form 8-K filed July 7, 2016 and incorporated herein by
reference)
|
|
Form of
Exchange Agreement for Series A Preferred Stock (attached as
Exhibit 10.1 to the Company’s Amendment to the Current Report
on Form 8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Form of
Subscription Agreement for Series B-2 Preferred Stock (attached as
Exhibit 10.2 to the Company’s Amendment to the Current Report
on Form 8-K/A filed February 17, 2016 and incorporated herein by
reference)
|
|
Leak-Out
Agreement dated October 13, 2016 between Exactus, Inc. and MagnaSci
Fund LP (attached as Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed November 1, 2016 and incorporated herein
by reference).
|
|
Master
Services Agreement, dated June 30, 2016, between Exactus, Inc. and
Integrium, LLC (attached as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed July 7, 2016 and incorporated
herein by reference)
|
|
Amended
and Restated Collaboration and License Agreement dated August 18,
2016 between Digital Diagnostics Inc. and Exactus BioSolutions,
Inc. (attached as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the period ended June 30, 2016 and
incorporated herein by reference)**
|
|
Consulting
Agreement, dated January 20, 2016, between Exactus BioSolutions,
Inc. and KD Innovation Ltd. (attached as Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
(+)
|
Employment
Agreement, dated December 15, 2015, between Exactus BioSolutions,
Inc. and Philip J. Young (attached as Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
(+)
|
|
Employment
Agreement, dated December 15, 2015, between Exactus BioSolutions,
Inc. and Timothy J. Ryan (attached as Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2016 and incorporated herein by reference)
(+)
|
|
Employment
Agreement, dated March 16, 2017, between Exactus, Inc. and Kelley
Wendt (attached as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed March 22, 2017 and incorporated herein by
reference). (+)
|
|
Employment
Agreement, dated December 1, 2016, between Exactus, Inc. and James
R. Erickson (attached as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed December 8, 2016 and incorporated
herein by reference) (+)
|
|
Subsidiary
List (attached as Exhibit 21.1 to the Company’s Quarterly
Report on Form 10-Q for the period ended June 30, 2016 and
incorporated herein by reference)
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
and 15d-14(a) as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
and 15d-14(a) as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
Certification of Chief Executive Officer pursuant to Rule 18 U.S.C
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley act of 2002 (filed herewith)
|
|
Certification of Chief Financial Officer pursuant to Rule 18 U.S.C
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley act of 2002 (filed herewith)
|
|
101 INS
|
XBRL
Instance Document
|
101 SCH
|
XBRL Taxonomy Extension Schema Document
|
101 CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
101 LAB
|
XBRL Taxonomy Labels Linkbase Document
|
101 PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
101 DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Dated:
April 2, 2018
|
|
|
|
|
By: /s/ Philip
J. Young
Philip
J. Young
Chief
Executive Officer
|
Dated:
April 2, 2018
|
|
|
|
|
By: /s/ Kelley
A. Wendt
Kelley
A. Wendt
Chief
Financial Officer
|
Dated:
April 2, 2018
|
|
|
|
|
By: /s/ Philip
J. Young
Philip
J. Young
Chief
Executive Officer
|
Dated:
April 2, 2018
|
|
|
|
|
By: /s/ Kelley
A. Wendt
Kelley
A. Wendt
Chief
Financial Officer
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Mar. 30, 2018 |
Jun. 30, 2017 |
|
Document And Entity Information | |||
Entity Registrant Name | Exactus, Inc. | ||
Entity Central Index Key | 0001552189 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
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 | $ 5,474,210 | ||
Entity Common Stock, Shares Outstanding | 36,790,537 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2017 |
Statements of Operations and Comprehensive Loss - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Statement [Abstract] | ||
Revenues | $ 0 | $ 0 |
Operating Expenses | ||
General and administration | 1,219,309 | 759,145 |
Professional | 499,522 | 368,917 |
Research and development | 356,076 | 369,344 |
Stock-based compensation | 0 | 100,000 |
Impairment | 1,050,000 | 4,080 |
Total operating expenses | 3,124,907 | 1,601,486 |
Net loss from operations | (3,124,907) | (1,601,486) |
Other Income (loss) | ||
Derivative expense | 667,200 | 0 |
Interest expense | (68,568) | 0 |
Loss on disposal of equipment | 0 | (1,453) |
Total other (loss) income | (735,768) | (1,453) |
Net loss before income taxes | (3,860,675) | (1,602,939) |
Provision for income tax | 0 | 0 |
Net Loss | (3,860,675) | (1,602,939) |
Other comprehensive loss, net of tax | $ 0 | $ 0 |
Basic and Diluted Loss per Common Share | $ (.11) | $ (0.08) |
Weighted Average Number of Common Shares Outstanding | 33,947,162 | 19,220,686 |
BUSINESS DESCRIPTION |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS DESCRIPTION | Exactus was incorporated on January 18, 2008 as “Solid Solar Energy, Inc.” in the State of Nevada as a for-profit Company. On May 16, 2013, we filed a certificate of amendment to the Company’s amended and restated articles of incorporation to change our name to “Spiral Energy Tech., Inc.” from Solid Solar Energy, Inc. On February 29, 2016, we acquired all of the issued and outstanding capital stock of Exactus BioSolutions, Inc. (“Exactus BioSolutions”) pursuant to a Share Exchange Agreement, dated February 29, 2016, with Exactus BioSolutions (the “Share Exchange”). The Company issued 30 million shares of newly-designated Series B-1 Preferred Stock to the shareholders of Exactus BioSolutions in the Share Exchange, representing approximately 87% of voting control of the Company upon consummation of the Share Exchange. As a result of the Share Exchange, Exactus BioSolutions became a wholly-owned subsidiary of Exactus, Inc. Effective March 22, 2016, we changed our corporate name to “Exactus, Inc.” via a merger with our wholly-owned subsidiary, Exactus Acquisition Corp.
Following the Share Exchange, we became a life science company that plans to develop and commercialize Point-of-Care (“POC”) diagnostics for measuring proteolytic enzymes in the blood based on a proprietary detection platform (the “New Business”). Our primary product, the FibriLyzer, will employ a disposable test “biosensor” strip combined with a portable and easy to use hand held detection unit that provides a result in less than 30 seconds. The initial markets we intend to pursue for the FibriLyzer are (i) the management of hyperfibrinolytic states associate with surgery and trauma, (ii) obstetrics, (iii) acute events such as myocardial infarction and ischemic stroke, (iv) pulmonary embolism and deep vein thrombosis and (v) chronic coronary disease management. We expect to follow up the FibriLyzer with similar technology, the MatriLyzer, to detect collagenase levels in the blood for the detection of the recurrence of cancer. We intend to file to gain regulatory approval to sell our products in the United States, Canada and Europe. Management intends to primarily focus on the development and commercialization of the FibriLyzer and related technology exclusively licensed by Exactus.
Prior to our acquisition of Exactus BioSolutions pursuant to the Share Exchange, our primary business focus was on developing and commercializing drone technology (the “Former Business”). |
GOING CONCERN |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN | These financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. No adjustment has been made to the carrying amount and classification of our assets and the carrying amount of our liabilities based on the going concern uncertainty. We have considered ASU 2014-15 in consideration of reporting requirements of the going concern financial statements.
Since our inception in 2008, we have generated losses from operations and we anticipate that we will continue to generate significant losses from operations for the foreseeable future. As of December 31, 2017, our accumulated deficit was $5,200,573 of which $736,959 was related to the Former Business. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. As of December 31, 2017, we had $161,215 of cash. We expect that these funds will not be sufficient to enable us to complete the development of any potential products, including the FibriLyzer and related technology. Accordingly, we will need to obtain further funding through public or private equity offerings, debt financing, collaboration arrangements or other sources. The issuance of any additional shares of common stock, preferred stock or convertible securities could be substantially dilutive to our shareholders. In addition, adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital, we will be forced to delay, reduce or eliminate our research and development programs and may not be able to continue as a going concern. |
SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 31, 2017 | |||||||
Accounting Policies [Abstract] | |||||||
SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation. The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
Use of Estimates. The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the year ended December 31, 2017 includes realization of prepaid expenses and derivative liability.
Stock-Based Compensation. We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
We may issue restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Share-based expense totaled $0 and $100,000 for the year ended December 31, 2017 and 2016, respectively.
Research and Development Expenses. We follow ASC 730-10, “Research and Development,” and expense research and development costs when incurred. Accordingly, third-party research and development costs, including designing, prototyping and testing of product, are expensed when the contracted work has been performed or milestone results have been achieved. Indirect costs are allocated based on percentage usage related to the research and development. Research and development costs of $499,522 and $369,344 were incurred for the year ended December 31, 2017 and 2016, respectively.
Revenue Recognition. We recognize revenue when it is realized or realizable and estimable in accordance with ASC 605, “Revenue Recognition”. All revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) the service or sale is completed; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured.
Derivatives and Hedging- Contracts in Entity’s Own Equity. In accordance with the provisions of ASC 815 “Derivatives and Hedging” the embedded beneficial conversion features in the Convertible Loan Notes (Note 5) are not considered to be indexed to our stock. As a result, these are required to be accounted for as a derivative financial liability and have been recognized as a liability on the balance sheets. The fair value of the derivative financial liability is determined using the Monte Carlo valuation model and is affected by changes in inputs to that model including the Company’s stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. The derivative financial liability is subject to re-measurement at each balance sheet date and any changes in fair value is recognized as a component in other income (expenses) (Note 6).
Fair Value Measurements. We adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements. The guidance prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following:
Liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company has not transferred any liabilities between the classification levels.
Cash and Cash Equivalents. We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits. As of December 31, 2017, we had cash and cash equivalents of $161,215, and as of December 31, 2016, we had cash and cash equivalents of $1,055,336.
Restricted Cash. The carrying amounts of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. At December 31, 2017 and 2016, the Company had no restrictions on cash.
Long-Lived Assets Including Other Acquired Intangible Assets. Property and equipment is stated at cost. Depreciation is computed by the straight-line method over estimated useful lives, which is between 3 years for computer equipment and 5-20 years for production equipment. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, we estimate fair value by using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We recognized impairment losses of $1,050,000 and $4,080 for the year ended December 31, 2017 and 2016, respectively.
Related Parties. We follow ASC 850,” Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Income Taxes. We account for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Deferred tax assets totaled $0 as of December 31, 2017 and 2016.
Earnings per Share. We compute basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of December 31, 2017 and 2016, the Company had 17,863,168 and 14,784,001 dilutive potential common shares, respectively.
Comprehensive Income (Loss). Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), net of their related tax effect, arrived at a comprehensive income (loss). Other comprehensive loss was $0 for the year ended December 31, 2017 and 2016.
Recently Adopted Accounting Pronouncements
In November 2015, the FASB issued (ASU) 2015-17, “Balance Sheet Classification of Deferred Taxes.” Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company has adopted this guidance in the fourth quarter of the year ended December 31, 2015 on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows, and did not have any effect on prior periods due to the full valuation allowance against the Company’s net deferred tax assets.
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements – Going Concern (Subtopic 205-40), effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted. The Company adopted this guidance on January 1, 2017. The Company does not expect the adoption of this guidance to have any impact on its financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Cash Flow Statements, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow classification issues with the objective of reducing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
Recent Accounting Pronouncements Issued But Not Adopted as of December 31, 2017
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a single source of revenue guidance for companies in all industries. The new standard provides guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers, unless the contracts are within the scope of other accounting standards. It also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets. This guidance, as amended, must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach and will be effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Company will adopt this ASU effective January 1, 2018 using the modified retrospective method.
In February 2015, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification and creates Topic 842, "Leases." The new topic supersedes Topic 840, "Leases," and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method. The Company plans to adopt this ASU on January 1, 2019 and is in the process of evaluating the impact of adopting the guidance on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Cash Flow Statements, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow classification issues with the objective of reducing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other, Simplifying the Accounting for Goodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. This new guidance will be applied prospectively and is effective for calendar year end companies in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. Adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11, which amends the FASB Accounting Standards Codification. Part I of ASU No. 2017-11, Accounting for Certain Financial Instruments with Down Round Features, changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The guidance is effective for reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company is in the process of evaluating the impact of adopting the guidance on its consolidated financial statements.
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AGREEMENTS |
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Dec. 31, 2017 | |
Investments, All Other Investments [Abstract] | |
AGREEMENTS | Through the Share Exchange, the Company acquired an exclusive license agreement (the “Licensing Agreement”) between Exactus BioSolutions and Digital Diagnostics Inc. (“Digital Diagnostics”) that the Company recognized as an intangible asset. Pursuant to the Licensing Agreement, Digital Diagnostics granted to Exactus BioSolutions an exclusive license to develop, produce and commercialize certain diagnostic products, including the FibriLyzer and MatriLyzer, that utilize certain intellectual property rights owned or licensed by Digital Diagnostics. The Licensing Agreement provides for Exactus BioSolutions and Digital Diagnostics to collaborate through the various steps of the product and device development process, including the development, regulatory approval and commercialization stages. Exactus BioSolutions is required to pay Digital Diagnostics, in cash and/or stock, an initial signing payment, milestone fees triggered by the first regulatory clearance or approval of each of the FibriLyzer and the MatriLyzer, and various sales thresholds, and royalty payments based on the net sales of the products, calculated on a product-by-product basis. In 2016, the Company paid $50,000 to Digital Diagnostics as part of the initial signing payment under the Licensing Agreement and $21,659 in legal expenses. As of December 31, 2016, the Company accrued an additional $171,033 in licensing fees due to closing a financing transaction in the fourth quarter of 2016, of which $75,000 was paid during the first quarter of 2017. The Company accrued the remaining $30,000 due for the initial signing fee during the third quarter of 2017. The Company has also accrued interest, per the Licensing Agreement, of $9,802 for the remaining balance due as of December 31, 2017. As of December 31, 2017, $134,802 remained due to Digital Diagnostics. In the first quarter of 2018, the Company paid the entire balance due to Digital Diagnostics. No milestones have been met and no milestone fees have been paid or accrued through December 31, 2017.
The License Agreement is effective until such time as neither Digital Diagnostics nor Exactus Biosolutions has any obligation to the other under the Licensing Agreement in any country with respect to any product. The Licensing Agreement may be terminated by the Company effective upon at least six (6) months written notice if regulatory approval has been obtained in the U.S. or in the European Union, or upon at least three (3) months written notice if regulatory approval has not been obtained in the U.S. or in the European Union. Either party may terminate the Licensing Agreement in the event the other party materially breaches the Licensing Agreement, or becomes insolvent.
On June 30, 2016, in order to conduct a clinical trial for the FibriLyzer and other studies, the Company entered into a Master Services Agreement (the “MSA”) with Integrium LLC (“Integrium”) and PoC Capital, LLC (“PoC Capital”). Under the MSA, Integrium has agreed to perform clinical research services in support of the development of POC diagnostics devices. Integrium is to conduct one or more studies in compliance with FDA regulations and pursuant to the Company’s specific service orders. PoC Capital has agreed to fund up to the first $1,000,000 in study costs and fees due to Integrium, with all fees in costs in excess of that amount being the Company’s sole responsibility, in exchange for 1,600,000 shares of the Company’s common stock, 1,733,334 shares of newly designated Series C Preferred Stock, and 1,666,667 warrants to purchase the Company’s common stock at a price of $0.60 per share exercisable for three years. For the year ended December 31, 2016 the Company had accounted $1,000,000 as prepaid expenses on the balance sheet which was impaired during the year ended December 31, 2017 due to cash constraints to manufacture materials needed for trial. See Note 8 below for additional information regarding the Company’s common stock, Series C Preferred Stock and warrants.
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CONVERTIBLE LOAN NOTES |
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CONVERTIBLE LOAN NOTES | On August 14, 2017, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) under which it agreed to sell an 8% convertible promissory note in an aggregate principal amount of $110,000.00 (the “Initial Note”) to Morningview Financial, LLC (“Morningview”). The net proceeds of the sale of this Initial Note, after deducting the Morningview’s discount and the expenses payable by the Company, were $87,000. The Note will mature on August 14, 2018.
At any time on or after the earlier of (i) the date on which the Registration Statement (defined below) has become effective or (ii) 170th calendar day after the issue date of the Initial Note, Morningview has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Initial Note into shares of the Company’s common stock at the Conversion Price. The “Conversion Price” will be the lesser of (i) $0.25 and (ii) 60% of the average of the three lowest trading prices of the Company’s common stock during the twenty-day trading period prior to the conversion. The Conversion Price is subject to further reduction upon certain events specified in the Initial Note.
On December 18, 2017, the Company further amended the Initial Note to (i) increase the aggregate principal amount of the Initial Note to $115,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to January 4, 2018. On January 4, 2018, the Company further amended the Initial Note to (i) increase the aggregate principal amount of the Initial Note to $125,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to February 1, 2018.
On September 27, 2017, pursuant to Securities Purchase Agreement, the Company issued an 8% convertible promissory note (the “Additional Note,” and together with the Initial Note, the “Notes”) in an aggregate principal amount of $27,500 to Morningview, with terms and conditions identical to the initial Note. The net proceeds of this sale of the Initial Note, after deducting Morningview’s discount and the expenses payable by the Company, were $21,750.
The terms of the Notes require the Company to have a registration statement permitting Morningview to resell the shares of the Company’s common stock into which the Notes may be converted (the “Registration Statement”) declared effective by the SEC within 120 days of the issue date of the Initial Note. On December 18, 2017, the Company further amended the Initial Note (the "Second Amendment to Initial Note") to (i) increase the aggregate principal amount of the Initial Note to $115,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to January 4, 2018. On January 4, 2018, the Company further amended the Initial Note (the “Third Amendment to Initial Note”) to (i) increase the aggregate principal amount of the Initial Note to $125,000 and (ii) extend the date by which the Company is required to cause the Registration Statement to become effective to February 1, 2018. Starting in March 2018, the Company is repaying the Note $25,000 a month.
On December 29, 2017, the Company entered into a Securities Purchase Agreement, dated as of December 21, 2017 (the "EMA Securities Purchase Agreement"), under which it agreed to sell a 12% convertible promissory note in an aggregate principal amount of $65,000 (the "EMA Note") to EMA Financial, LLC ("EMA"). The net proceeds of the sale of the EMA Note, after deducting the expenses payable by the Company, were $62,400
The EMA Note and the shares of the Company's common stock issuable upon conversion of the EMA Note have not been, and will not be, registered under the Securities Act. The Company offered and sold the EMA Note to EMA in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
The EMA Note is dated December 21, 2017 and provides the terms and conditions of the Company's obligations to EMA. The EMA Note will bear interest at a rate of 12% per annum and will mature on December 21, 2018.
At any time after the 180th calendar day after the issue date of the EMA Note, EMA has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the EMA Note into shares of the Company's common stock at the EMA Conversion Price. The "EMA Conversion Price" will be the lesser of (i) the closing sale price of the Company's common stock on the trading day immediately preceding the date of conversion and (ii) 60% of either the lowest sale price of the Company's common stock during the twenty-day trading period prior to the conversion, or the closing bid price, whichever is lower. The EMA Conversion Price is subject to further reduction upon certain events specified in the EMA Note.
On December 29, 2017, the Company entered into a Securities Purchase Agreement, dated as of December 26, 2017 (the "Auctus Securities Purchase Agreement"), under which it agreed to sell a 12% convertible promissory note in an aggregate principal amount of $125,000 (the "Auctus Note") to Auctus Fund, LLC ("Auctus"). The net proceeds of the sale of the Auctus Note, after deducting the expenses payable by the Company, are expected to be $112,250.
The Auctus Note and the shares of the Company's common stock issuable upon conversion of the Auctus Note have not been, and will not be, registered under the Securities Act. The Company offered and sold the Auctus Note to Auctus in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
The Auctus Note is dated December 26, 2017 and provides the terms and conditions of the Company's obligations to Auctus. The Auctus Note will bear interest at a rate of 12% per annum and will mature on September 26, 2018.
At any time after the 180th calendar day after the issue date of the Auctus Note, Auctus has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Auctus Note into shares of the Company's common stock at the Auctus Conversion Price. The "Auctus Conversion Price" will be the lesser of (i) the lowest trading price of the Company's common stock during the twenty-five-day trading period prior to the issue date of the Auctus Note and (ii) 50% of the lowest trading price of the Company's common stock during the twenty-five-day trading period prior to the conversion. The Auctus Conversion Price is subject to further reduction upon certain events specified in the Auctus Note.
During the year ended December 31, 2017, the Company recognized $41,991 in interest expense for the amortization of debt discounts and $10,804 for amortization of deferred issuance costs for the Notes issued on August 14, 2017, September 27, 2017, December 21, 2017, and December 26, 2017.
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FAIR VALUE MEASUREMENT |
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FAIR VALUE MEASUREMENT | The guidance regarding fair value measurements prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following:
Liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company has not transferred any liabilities between the classification levels.
The Company estimates fair values of derivative liabilities utilizing Level 3 inputs. The Company uses the Monte Carlo valuation model for derivatives which embodies all of the requisite assumptions (including trading volatility, remaining term to maturity, market price, strike price, risk-free rates) necessary to determine fair value of these instruments. The Company’s derivative liabilities are marked-to-market with the changes in fair value recorded as a component of change in fair value of derivative liabilities in the Company’s condensed consolidated statements of operations. Estimating fair values of derivative liabilities requires the use of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors.
The Company identified financial instruments, the conversion options embedded in the Notes discussed in Note 6, which require liability presentation at fair value. Each of these instruments provide the holder with the right to convert into common stock at a fixed discount market, subject to a cap on the conversion price. These clauses cause uncertainty as to the number of shares issuable upon conversion of convertible debt and accordingly require liability presentation on the balance sheet in accordance with US GAAP.
The fair value of the Initial Note on the date of issuance and on December 31, 2017 was estimated using the Monte Carlo valuation model. This method of valuation involves using inputs such as the fair value of the Company’s common stock, stock price volatility, and risk–free interest rates. Due to the nature of these inputs, the valuation of the Initial Note is considered a Level 3 measurement. The following assumptions were used on August 14, 2017 (issuance date) and December 31, 2017:
Based on these assumptions, the Company recorded a $240,000 derivative liability on the issuance date of the Initial Note. The initial fair values of the embedded debt derivative $87,000 was allocated as a debt discount with the remainder $153,000 was charged to current period operations as derivative expenses. The derivative liability for the Initial Note was adjusted to fair market value of $264,000 as of December 31, 2017.
The fair value of the Additional Note on the date of issuance and on December 31, 2017 was also estimated using the Monte Carlo valuation model. The following assumptions were used on September 27, 2017 (issuance date) and December 31, 2017:
Based on these assumptions, the Company recorded a $46,000 derivative liability on the issuance date of the Additional Note. The initial fair values of the embedded debt derivative $21,750 was allocated as a debt discount with the remainder $24,250 was charged to current period operations as derivative expenses. The derivative liability for the Additional Note was adjusted to fair market value of $63,000 as of December 31, 2017.
The fair value of the EMA note on the date of issuance and on December 31, 2017 was also estimated using the Monte Carlo valuation model. The following assumptions were used on December 21, 2017 (issuance date) and December 31, 2017:
Based on these assumptions, the Company recorded a $163,000 derivative liability on the issuance date of the EMA Note. The initial fair values of the embedded debt derivative $56,800 was allocated as a debt discount with the remainder $106,200 was charged to current period operations as derivative expenses. The derivative liability for the EMA Note was adjusted to fair market value of $169,000 as of December 31, 2017.
The fair value of the Auctus Note on the date of issuance and on December 31, 2017 was also estimated using the Monte Carlo valuation model. The following assumptions were used on December 26, 2017 (issuance date) and December 31, 2017:
Based on these assumptions, the Company recorded a $427,000 derivative liability on the issuance date of the Auctus Note. The initial fair values of the embedded debt derivative $102,250 was allocated as a debt discount with the remainder $324,750 was charged to current period operations as derivative expenses. The derivative liability for the Auctus Note was adjusted to fair market value of $434,000 as of December 31, 2017.
The Company recorded change in fair value of the derivative liability on debt to market resulting in non-cash, non-operating loss of $54,000 and $0 for the years ended December 31, 2017 and 2016, respectively, under derivative expenses.
During the year ended December 31, 2017, the Company accrued $4,495 as interest expenses on the above convertible notes.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2016 and December 31, 2017:
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INCOME TAXES |
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INCOME TAXES | As of December 31, 2017, the Company has a deferred tax asset, resulting from benefits of net operating loss carry forward generated from inception, which expire in varying amounts between 2028 and 2037.
The tax reform bill that Congress voted to approve Dec. 20, 2017, also known as the “Tax Cuts and Jobs Act”, made sweeping modifications to the Internal Revenue Code, including a much lower corporate tax rate, changes to credits and deductions, and a move to a territorial system for corporations that have overseas earnings.
The act replaced the prior-law graduated corporate tax rate, which taxed income over $10 million at 35%, with a flat rate of 21%.
The Company has not reviewed the all of the changes the “Tax Cuts and Jobs Act” will apply to the Company, but is reviewing such changes. Due to the continuing loss position of the Company, such changes should not be material.
The carry-forwards may be further subject to the application of Section 382 of the Internal Revenue Code of 1986. The Company’s past sales and issuances of common and preferred stock have likely resulted in ownership changes as defined by Section 382 of the Code. The Company has not conducted a Section 382 study to date. It is possible that a future analysis may result in the conclusion that a substantial portion, or perhaps substantially all, of the NOLs and credits will expire due to the limitations of Sections 382 and 383 of the Code. As a result, the utilization of the NOLs and tax credits may be limited and a portion of the carry-forwards may expire unused. The Company has provided a valuation allowance to offset the deferred tax assets due to the uncertainty of realizing the benefits of the net deferred tax asset.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 21% to the net income (loss) before provision for income taxes. As of December 31, 2017, there was approximately $810,000 in deferred tax assets, which were off-set by an equal valuation allowance.
The Company has not taken positions contrary to the Internal Revenue Code, however, the tax years of 2013 through 2017 remain subject to audit by the Internal Revenue Service.
The tax effects of temporary differences that give rise to the Company’s net deferred tax asset as of December 31, 2017 and 2016 are as follows:
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EQUITY TRANSACTIONS |
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Dec. 31, 2017 | |
Equity [Abstract] | |
EQUITY TRANSACTIONS | Recapitalization and Change in Control
On February 29, 2016, the Company consummated the Share Exchange, which resulted in a change in control of the Company. As part of this transaction, the Company acquired a $50,000 license agreement and $1,292 in cash and assumed liabilities of $51,000. The Company initially reported an issuance of 32 million shares of newly designated Series B-1 Preferred Stock to the shareholders of Exactus BioSolutions in the Share Exchange. Due to an anticipated pre-acquisition investment in Exactus BioSolutions that was not made, the final total issued shares of Series B-1 Preferred Stock was 30 million.
The Company has considered the guidance pursuant to Rule 11-01(d) of Regulation S-X and related interpretations and has concluded the acquisition of Exactus BioSolutions pursuant to the Share Exchange is the acquisition of an asset and not of a business. The license agreement and shareholder loans have been accounted for and recorded at historical cost.
Concurrently with the closing of the Share Exchange, the Company closed a private offering of Series B-2 Preferred Stock. The Company sold a total of 2,084,000 shares of Series B-2 Preferred Stock at an offering price of $0.25 per share, for an aggregate subscription price of $521,000. The Company originally reported a total of 2,884,000 shares of Series B-2 preferred stock being issued in the offering. Due to: (i) an anticipated investment for 1,000,000 shares which was not made, and (ii) an additional subscription for 200,000 shares for which documentation had not been completed at that time, however, the final total issued shares of Series B-2 Preferred Stock was 2,084,000. The shares sold in the offering included 400,000 shares of Series B-2 preferred stock issued to extinguish a $100,000 loan and 204,000 shares of Series B-2 preferred stock issued to former creditors of Exactus BioSolutions in exchange for their release of $51,000 in debt owed by Exactus. After accounting for these issuances, net cash proceeds from the offering were $370,000. No underwriting discounts or commissions have been or will be paid in connection with the sale of Series B-2 Preferred Stock.
Also on February 29, 2016, the Company entered into Exchange Agreements with certain holders of common stock holding an aggregate of 393,314 post-split (11,636,170 pre-split) shares of common stock. Under the Exchange Agreements, these shareholders exchanged their common stock for a total of 4,558,042 shares of Series A Preferred Stock. These exchanges consisted of: (i) thirteen common stock holders holding 10,894,070 (pre-split) shares of common stock who exchanged their common stock for 3,458,042 shares Series A Preferred Stock, resulting in a (pre-split) exchange ratio of approximately 1 for 3.15, and (ii) one shareholder who, under a separately negotiated agreement, exchanged 742,100 (pre-split) shares common stock for 1,100,000 shares of Series A Preferred Stock, resulting at a (pre-split) exchange ratio of approximately 1.48 for 1. Immediately following such share exchanges, the Company repurchased 50,000 shares of Series A Preferred Stock from a shareholder for a total price of $50,000.
Reverse Stock Split
Effective March 22, 2016, the Company performed a reverse split of common stock on a 1 for 29.5849 basis, pursuant to the prior approval by the Board of Directors and a majority of shareholders. On March 22, 2016, the effective date of the reverse split, the Company had approximately 3,608,715 shares of common stock issued and outstanding, which were split into 121,978 shares of common stock. The par value of the common stock was unchanged at $0.0001 per share, post-split. All per share information in the condensed financial statements gives retroactive effect to the 1 for 29.5849 reverse stock split that was effected on March 22, 2016.
Preferred Stock
The Company’s authorized preferred stock consists of 50,000,000 shares with a par value of $0.0001. On February 17, 2016, the Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up to five million (5,000,000) shares, par value $0.0001. The shares of Series A Preferred Stock were automatically converted to 4,508,042 shares of common stock on March 30, 2016, thirty (30) days after the closing of the Share Exchange and offering of Series B-2 Preferred Stock. As a result, there are 4,558,042 Series A preferred stock issued and zero outstanding as of December 31, 2016.
Also on February 17, 2016, the Company’s Board of Directors voted to designate a class of preferred stock entitled Series B-2 Convertible Preferred Stock (“Series B-2 Preferred Stock”), consisting of up to six million (6,000,000) shares, par value $0.0001, with a stated value of $0.25 per share. With respect to rights on liquidation, winding up and dissolution, holders of Series B-2 Preferred Stock will be paid in cash in full, before any distribution is made to any holder of common or other classes of capital stock, an amount of $0.25 per share. Shares of Series B-2 Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose. Shares of Series B-2 Preferred Stock are convertible, at the option of the holder, into shares of common stock on a one (1) for one (1) basis. Holders of Series B-2 Preferred Stock have the right to vote as-if-converted to common stock on all matters submitted to a vote of the holders of the Company’s common stock. For so long as any shares of Series B-2 Preferred Stock are issued and outstanding, the Corporation shall not issue any notes, bonds, debentures, shares of preferred stock, or any other securities that are convertible to common stock unless such conversion rights are at a fixed ratio or a fixed monetary price (Note 9). On February 29, 2016, the Company issued 2,084,000 shares of Series B-2 Preferred Stock.
On August 1, 2016, the Company closed a private offering of Series B-2 Preferred Stock. The Company sold a total of 500,000 shares of Series B-2 Preferred Stock to accredited investors at an offering price of $0.25 per share, for an aggregate subscription price of $125,000. No underwriting discounts or commissions have been paid in connection with the sale of the Series B-2 Preferred Stock.
Effective October 13, 2016, the Company amended the Certificate of Designation for its Series B-2 Preferred Stock to increase the number of shares of the Series B-2 Preferred Stock from 6,000,000 to 10,000,000 shares. There were no other changes to the terms of the Company’s Series B-2 Preferred Stock.
On October 27, 2016, the Company closed a private offering of Series B-2 Preferred Stock. The Company sold a total of 6,000,000 shares of Series B-2 Preferred Stock to accredited investors at an offering price of $0.25 per share, for an aggregate subscription price of $1,500,000. No underwriting discounts or commissions have been or will be paid in connection with the sale of the Series B-2 Preferred Stock.
On January 26, 2017, the Company closed a private offering of Series B-2 Preferred Stock. The Company sold a total of 100,000 shares of Series B-2 Preferred Stock to accredited investors at an offering price of $0.25 per share, for an aggregate subscription price of $25,000. No underwriting discounts or commissions have been or will be paid in connection with the sale of the Series B-2 Preferred Stock.
As of December 31, 2017 and 2016, 8,684,000 and 8,584,000 shares, respectively, of Series B-2 Preferred Stock are issued and outstanding.
On February 29, 2016, the Company’s Board of Directors voted to designate a class of preferred stock entitled Series B-1 Convertible Preferred Stock (“Series B-1 Preferred Stock”), consisting of up to thirty-two million (32,000,000) shares, par value $0.0001. With respect to rights on liquidation, winding up and dissolution, the Series B-1 Preferred Stock ranks pari passu to the class of common stock. Shares of Series B-1 Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose. Shares of Series B-1 Preferred Stock are convertible, at the option of the holder, into shares of common stock on a one (1) for one (1) basis. Holders of Series B-1 Preferred Stock have the right to vote as-if-converted to common stock on all matters submitted to a vote of holders of the Company’s common stock. On February 29, 2016, the Company issued 30,000,000 shares of Series B-1 Preferred Stock, of which 2,800,000 remain outstanding as of December 31, 2017 and 2016.
On June 30, 2016, pursuant to the MSA summarized in Note 4, the Company’s Board of Directors approved a Certificate of Designation authorizing 1,733,334 shares of new Series C Preferred Stock, par value $0.0001. The Series C Preferred Stock ranks equally with our common stock with respect to liquidation rights and is convertible to common stock on a 1 for 1 basis. The conversion rights of holders of the Series C Preferred Stock are limited such that no holder may convert any shares of preferred stock to the extent that such holder, immediately following the conversion, would own in excess of 4.99% of our issued and outstanding shares of common stock. This limitation may be increased to 9.99% upon 61 days written notice by a holder of the Series C Preferred Stock to the Company. On June 30, 2016, the Company issued 1,733,334 shares of Series C Preferred Stock to PoC Capital valued at $511,334 as prepaid expenses on the balance sheet. As of December 31, 2017 and 2016, 1,733,334 shares of Series C Preferred Stock are issued and outstanding
Common Stock
The Company’s authorized common stock consists of 200,000,000 shares with a par value of $0.0001.
The Company automatically converted all outstanding shares of Series A Preferred Stock to common stock on March 30, 2016. As a result, 4,508,042 shares of common stock were issued in exchange of 4,508,042 shares of Series A Preferred Stock.
Certain shareholders converted their shares of Series B-1 Preferred Stock to common stock on June 15, 2016. As a result, 27,200,000 shares of common stock were issued in exchange of 27,200,000 shares of Series B-1 Preferred Stock.
On June 30, 2016, pursuant to the MSA summarized in Note 4, the Company issued 1,600,000 shares of common stock to PoC Capital valued at $480,000 as prepaid expenses on the balance sheet.
Pursuant to a services agreement with IRTH Communications, LLC (“IRTH”) in which IRTH agreed to perform certain investor relations, financial communications, and strategic consulting services, the Company issued $100,000 of our common stock, or 141,844 shares, to IRTH on November 18, 2016 in partial consideration for those services. On December 13, 2016, the Company issued an additional 500,000 shares of common stock to IRTH pursuant to an addendum to the services agreement and in consideration of certain additional services, including telemarketing and investor outreach services, to be provided by IRTH. On February 22, 2017, the Company and IRTH agreed that IRTH would not provide the additional services pursuant to an addendum to a services agreement and the 500,000 shares of common stock issued on December 13, 2016 were returned to the Company and retired.
On October 19, 2017, the Company issued 1,500,000 shares of its common stock to IRTH to settle $41,685 of outstanding advertising and promotion expenses and accounted for a debt settlement loss of $78,315.
There were 35,071,862 and 34,071,862 common shares issued and outstanding at December 31, 2017 and 2016, respectively.
Warrants and Options
On June 30, 2016, pursuant to the MSA summarized in Note 4, the Company issued warrants to purchase 1,666,667 common stock shares for a price of $0.60 per share exercisable for three years to PoC Capital.
These warrants have a grant date fair value of $0.0052 per warrant, determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.71%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 27.2%; and (4) an expected life of the warrants of 3 years.
The Company has recorded a prepaid expense on these warrants of $8,667 as of June 30, 2016.
There were 1,666,667 warrants outstanding at December 31, 2017 and 2016.
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COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
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Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of December 31, 2017, and 2016.
Per clause 7, No Variable Rate Convertible Securities, in the subscription agreements of Series B-2 Preferred Stock, for so long as any shares of Series B-2 Preferred Stock are issued and outstanding, the Corporation shall not issue any notes, bonds, debentures, shares of preferred stock, or any other securities that are convertible to common stock unless such conversion rights are at a fixed ratio or a fixed monetary price. The Company issued variable convertible notes during the yearwhich is in violation of this clause (Note 5). The Company kept the Series B-2 holders informed of the Company’s cash needs though out the year and Series B-2 holders had the opportunity to participate in convertible loan notes. Subsequently, the Company's largest Series B holder participated into two note purchase agreements on March 22, 2018 (Note 11).
On January 20, 2017, Robert F. Parker (the “petitioner”) filed a petition in the Supreme Court of the State of New York, County of New York (the “Court”), naming, among others, the Company and Ezra Green, a former shareholder, director and officer of the Company, as respondents. The petition was received by the Company on February 7, 2017. The petitioner previously had a judgment entered in his favor and against Clear Skies Solar, Inc. and its wholly owned subsidiary Clear Skies Group, Inc. (together, “Clear Skies”), in the amount of $331,132 with interest accruing at a rate of 9% per year from November 21, 2014 (the “Judgment”). The Judgment remains outstanding. The petition alleged, among other things, that through a series of allegedly fraudulent conveyances occurring before the Judgment was entered against Clear Skies, the major assets of Clear Skies, which were comprised of various patents, were transferred from Clear Skies to Carbon 612 Corporation (“Carbon”), and from Clear Skies and Carbon to the Company. The petition further alleged, among other things, that the transfers were without fair consideration and rendered Clear Skies, the judgment-debtor, insolvent. The petitioner sought the entry of a judgment against the Company and the other respondents in the amount of the outstanding Judgment, with all accrued interest, reasonable attorneys’ fees and costs and disbursements.
The parties reached an agreement on settlement and the Court entered the parties’ joint stipulation of discontinuance with prejudice on September 6, 2017. The settlement agreement requires co-defendant Ezra Green to make an initial payment with subsequent, additional payments over time. The Company has agreed, in exchange for the dismissal of all claims with prejudice, to pay up to $20,000, at $1,000 per month beginning in January 2018 at the earliest, if co-defendant Ezra Green defaults on his subsequent payment obligations under the terms of the settlement agreement. The Company’s liability is capped at $20,000 in total, memorialized in a confession of judgment note, plus statutory interest if the plaintiff must file suit against the Company to collect on the confession of judgment note. In management’s opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, estimated the loss to be $20,000, and recorded the appropriate accounting entries which are reflected in our financial statements.
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RELATED PARTY CONSIDERATIONS |
12 Months Ended |
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Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY CONSIDERATIONS | Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. We have not formulated a policy for the resolution of such conflicts.
On November 20, 2017, Dr. Dimitrov provided a notice dated November 21, 2017 to the Company stating that he was resigning from the Board, effective immediately. Dr. Dimitrov indicated that his resignation from the Board was based on the deteriorating relationship between the Company and Digital Diagnostics over the non-payment of fees owed by the Company pursuant to the licensing agreement between the Company and Digital Diagnostics. Dr. Dimitrov currently serves as the President of Digital Diagnostics, and the Company has licensed the right to develop, produce and commercialize certain diagnostic products, including the FibriLyzer and MatriLyzer, utilizing certain intellectual property rights owned or licensed by Digital Diagnostics. Dr. Dimitrov believes that, in light of these concerns, his role as both a Director of the Company and the President of Digital Diagnostics creates a conflict of interest and has decided to focus his time and energy on doing what is best for the shareholders of Digital Diagnostics. For the year ended December 31, 2017 and 2016, the Company accrued $30,000 and $171,033, respectively, in licensing fees expenses to Digital Diagnostics. As of December 31, 2017 and 2016, $126,032 and $171,032, respectively, are shown as accrual under accounts payable. The Company has also accrued interest at 3% over the prime rate, per the Licensing Agreement, of $9,802 for the remaining balance due as of December 31, 2017. The Company paid $75,000 and $50,000 during the years ended December 31, 2017 and 2016. In the first quarter of 2018, the Company paid the entire balance due to Digital Diagnostics.
For the years ended December 31, 2017 and 2016, $300,000 and $251,096, respectively, was recognized in Research and Development expenses for consulting provided by Dr. Dimitrov. As of December 31, 2017 and 2016, $275,000 and $101,095, respectively, are shown as accrual under accounts payable. During the year ended December 31, 2017 and 2016, $125,000 and $150,000, respectively was paid.
On June 28, 2017, the Company issued to two of the Company’s executive officers a promissory note in the principal amount up to $100,000, which amount may be drawn upon by the Company as bridge financing for general working capital purposes. The promissory note accrues interest at a rate of 8.0% per annum and matures on the earlier of (i) one (1) year from the date of the promissory note, and (ii) the closing the sale of the Company’s securities in a single transaction or a series of related transactions from which at least $500,000 of gross proceeds are raised. As of December 31, 2017, the Company has drawn $48,000 on the promissory note and recorded as a note payable. During the year ended December 31, 2017, the Company accrued $1,967 as interest expenses on the above notes payable.
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SUBSEQUENT EVENTS |
12 Months Ended |
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Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | In accordance with authoritative guidance, we have evaluated any events or transactions occurring after December 31, 2017, the balance sheet date, through the date of filing of this report and note that there have been no such events or transactions that would require recognition or disclosure in the consolidated financial statements as of and for the year ended December 31, 2017, except as disclosed below.
Common Stock On February 9, 2018, the Company issued 1,718,675 shares of its common stock to settle $91,306 of outstanding legal expenses and accounted for a debt settlement loss of $252,429.
Series D Preferred Stock The Company has filed the Series D Certificate of Designation with the Nevada Secretary of State to designate and offer for sale 200 shares of the Company’s preferred stock as the Series D Preferred Stock (the “Series D”) to certain accredited investors, including affiliates of the Company (collectively the “Investors”), with a maximum offering amount of $2,200,000 (the “Offering”).
Up to 200 shares of Series D are being offered at a purchase price of $10,000 per share. The Company is offering 70 shares of the 200 authorized Series D shares as re-payment for outstanding obligations of the Company at an effective re-payment price of $12,500 per share. To date the Company has received $550,000 in connection with the Offering including $50,000 in cash for 5 shares of Series D Preferred Stock and $500,000 in debt re-payment for 40 shares of Series D Preferred Stock. The Company intends to use the proceeds from the Offering immediately for general corporate purposes, including working capital.
Pursuant to the terms of the Series D Subscription Agreement, immediately following the consummation of an offering of the Company’s Common Stock for which the gross proceeds of the offering exceed $5,000,000 (a “Qualified Offering”), each share of Series D automatically converts into 200,000 shares of Common Stock (the “Conversion Shares”). The Company agreed that within 45 days of a Qualified Offering the Company shall file a registration statement with the SEC registering the Conversion Shares for resale by the Investors.
Series B-2 Preferred Stock Warrants On March 14, 2018 (the “Warrant Date”), the Board of Directors of the Company approved the issuance of up to 5,045,404 two-year Warrants to purchase shares of the Company’s Common Stock to the holders of the Company’s Series B 2 Preferred Stock (each a “B-2 Holder”). The Warrants are exercisable at of $0.05 per share. Each B-2 Holder shall be issued Warrants to purchase 0.581 shares of Common Stock for each share of Series B-2 Preferred Stock (the “Series B-2”) held by the B-2 Holder.
On March 20, 2018, the Company issued Warrants to purchase up to 3,486,000 shares of the Company’s Common Stock, to MS, who is a B-2 Holder. The Company intends to issue an additional 1,559,404 Warrants to the B-2 Holders.
MagnaSci Fund, L.P., Promissory Notes On March 22, 2018, the Company entered into two note purchase agreements (together “NPA”), under which the Company issued MagnaSci Fund, L.P. (“MS”) two convertible promissory notes (collectively the “Notes”) with a total principal amount of $100,000. The Notes bear interest at a rate of 5% per annum and will mature on February 1, 2023 (the “Maturity Date”).
If a Qualified Financing occurs prior to the Maturity Date, then the outstanding principal balance of the Notes, together with all accrued and unpaid interest thereon, shall be automatically converted into a number of shares of the Company’s common stock at $0.05 per Share. The Notes offers MS registration rights wherein the Company agrees that within 45 days of a Qualified Offering, prior to the Maturity Date, the Company shall file a registration statement with the SEC registering for resale the shares of Company’s common stock into which the Notes are convertible.
Convertible Loan Note
On March 22, 2018, The Company entered into a securities purchase agreement, effective March 16, 2018, with an investor pursuant to which the Company issued and sold a convertible promissory note (the “Note”) to the investor in the aggregate principal amount of $58,500 original issue discount of 10%, and received gross proceeds of $48,000. The Note matures on the earlier of (i) December 16, 2018, or (ii) the date in which a registration statement for the shares underlying the Note is declared effective (either the “Maturity Date”). The Note bears interest at 9% per annum. Beginning June 16, 2018, the investor may elect to convert the Note into shares of common stock of the Company at the lower of (i) $0.25 per share or (ii) 51% of the lowest trading price of the Company’s common stock during the 25 day period prior to the conversion, subject to adjustment (the “Conversion Price”).
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended | ||||||
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Dec. 31, 2017 | |||||||
Accounting Policies [Abstract] | |||||||
Basis of Presentation | The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States. |
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Use of Estimates | The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the year ended December 31, 2017 includes realization of prepaid expenses and derivative liability. |
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Stock-Based Compensation | We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
We may issue restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Share-based expense totaled $0 and $100,000 for the year ended December 31, 2017 and 2016, respectively. |
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Research and Development Expenses | We follow ASC 730-10, “Research and Development,” and expense research and development costs when incurred. Accordingly, third-party research and development costs, including designing, prototyping and testing of product, are expensed when the contracted work has been performed or milestone results have been achieved. Indirect costs are allocated based on percentage usage related to the research and development. Research and development costs of $499,522 and $369,344 were incurred for the year ended December 31, 2017 and 2016, respectively.
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Revenue Recognition | We recognize revenue when it is realized or realizable and estimable in accordance with ASC 605, “Revenue Recognition”. All revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) the service or sale is completed; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured. |
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Derivatives and Hedging- Contracts in Entity's Own Equity | In accordance with the provisions of ASC 815 “Derivatives and Hedging” the embedded beneficial conversion features in the Convertible Loan Notes (Note 5) are not considered to be indexed to our stock. As a result, these are required to be accounted for as a derivative financial liability and have been recognized as a liability on the balance sheets. The fair value of the derivative financial liability is determined using the Monte Carlo valuation model and is affected by changes in inputs to that model including the Company’s stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. The derivative financial liability is subject to re-measurement at each balance sheet date and any changes in fair value is recognized as a component in other income (expenses) (Note 6). |
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Fair Value Measurements | We adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements. The guidance prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following:
Liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company has not transferred any liabilities between the classification levels. |
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Cash and Cash Equivalents | We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits. As of December 31, 2017, we had cash and cash equivalents of $161,215, and as of December 31, 2016, we had cash and cash equivalents of $1,055,336. |
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Restricted Cash | The carrying amounts of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. At December 31, 2017 and 2016, the Company had no restrictions on cash. |
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Long-Lived Assets Including Other Acquired Intangible Assets | Property and equipment is stated at cost. Depreciation is computed by the straight-line method over estimated useful lives, which is between 3 years for computer equipment and 5-20 years for production equipment. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, we estimate fair value by using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We recognized impairment losses of $1,050,000 and $4,080 for the year ended December 31, 2017 and 2016, respectively. |
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Related Parties | We follow ASC 850,” Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. |
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Income Taxes | We account for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Deferred tax assets totaled $0 as of December 31, 2017 and 2016. |
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Earnings per Share | We compute basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of December 31, 2017 and 2016, the Company had 17,863,168 and 14,784,001 dilutive potential common shares, respectively. |
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Comprehensive Income (Loss) | Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), net of their related tax effect, arrived at a comprehensive income (loss). Other comprehensive loss was $0 for the year ended December 31, 2017 and 2016. |
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Recent Accounting Pronouncements | In November 2015, the FASB issued (ASU) 2015-17, “Balance Sheet Classification of Deferred Taxes.” Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company has adopted this guidance in the fourth quarter of the year ended December 31, 2015 on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows, and did not have any effect on prior periods due to the full valuation allowance against the Company’s net deferred tax assets.
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements – Going Concern (Subtopic 205-40), effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted. The Company adopted this guidance on January 1, 2017. The Company does not expect the adoption of this guidance to have any impact on its financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Cash Flow Statements, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow classification issues with the objective of reducing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
Recent Accounting Pronouncements Issued But Not Adopted as of December 31, 2017
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a single source of revenue guidance for companies in all industries. The new standard provides guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers, unless the contracts are within the scope of other accounting standards. It also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets. This guidance, as amended, must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach and will be effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Company will adopt this ASU effective January 1, 2018 using the modified retrospective method.
In February 2015, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification and creates Topic 842, "Leases." The new topic supersedes Topic 840, "Leases," and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method. The Company plans to adopt this ASU on January 1, 2019 and is in the process of evaluating the impact of adopting the guidance on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Cash Flow Statements, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow classification issues with the objective of reducing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other, Simplifying the Accounting for Goodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. This new guidance will be applied prospectively and is effective for calendar year end companies in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. Adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11, which amends the FASB Accounting Standards Codification. Part I of ASU No. 2017-11, Accounting for Certain Financial Instruments with Down Round Features, changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The guidance is effective for reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company is in the process of evaluating the impact of adopting the guidance on its consolidated financial statements.
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CONVERTIBLE LOAN NOTES (Tables) |
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Convertible Loan Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt |
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FAIR VALUE MEASUREMENT (Tables) |
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Fair Value Measurement Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value assumptions |
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Summary of changes in fair value of financial liabilities |
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INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax assets |
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BUSINESS DESCRIPTION (Details Narrative) |
12 Months Ended |
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Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Date of incorporation | Jan. 18, 2008 |
State of incorporation | Nevada |
Current Fiscal Year End Date | --12-31 |
GOING CONCERN (Details Narrative) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Cash and cash equivalents | $ 161,215 | $ 1,055,336 | $ 0 |
Accumulated deficit | (6,200,573) | (2,339,898) | |
Net loss from operations | (3,124,907) | (1,601,486) | |
Net Cash Used In Operating Activities | $ (1,234,921) | $ (890,956) |
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
12 Months Ended | ||
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Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Share based expense | $ 0 | $ 100,000 | |
Research and development | 356,076 | 369,344 | |
Cash and cash equivalents | 161,215 | 1,055,336 | $ 0 |
Marketable securities impairment | 1,050,000 | 4,080 | |
Impairment on equipment | 1,050,000 | 4,080 | |
Deferred tax | 0 | 0 | |
Other comprehensive loss, net of tax | $ 0 | $ 0 | |
Equipment [Member] | Minimum [Member] | |||
Property and equipment, estimated useful life | 5 years | ||
Equipment [Member] | Maximum [Member] | |||
Property and equipment, estimated useful life | 20 years | ||
Computer Equipment [Member] | |||
Property and equipment, estimated useful life | 3 years |
CONVERTIBLE LOAN NOTES (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Convertible Loan Notes Details | ||
Principal Amount | $ 332,500 | $ 0 |
Less unamortized debt discount and debt issuance costs | (274,704) | 0 |
Current debt less unamortized debt discount and debt issuance costs | $ 57,796 | $ 0 |
CONVERTIBLE LOAN NOTES (Details Narrative) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Debt Disclosure [Abstract] | ||
Note payable | $ 48,000 | $ 0 |
FAIR VALUE MEASUREMENT (Details) - $ / shares |
1 Months Ended | 12 Months Ended | ||
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Aug. 14, 2017 |
Dec. 21, 2017 |
Dec. 31, 2017 |
Dec. 26, 2017 |
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Initial Note | ||||
Volatility | 303.93% | 333.89% | ||
Risk-free interest rate | 1.23% | 1.31% | ||
Common stock closing price | $ 0.20 | $ 0.20 | ||
Additional Note | ||||
Volatility | 300.94% | 303.97% | ||
Risk-free interest rate | 1.73% | 1.76% | ||
Common stock closing price | $ 0.20 | $ 0.20 | ||
EMA Note | ||||
Volatility | 326.65% | 320.69% | ||
Risk-free interest rate | 1.53% | 1.19% | ||
Common stock closing price | $ 0.20 | $ 0.20 |
FAIR VALUE MEASUREMENT (Details 1) |
12 Months Ended |
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Dec. 31, 2017
USD ($)
| |
Fair Value Measurement Details 1 | |
Balance, beginning | $ 0 |
Initial fair value at note issuances | 876,000 |
Extinguishment of derivative liability | 0 |
Mark-to-market at December 31, 2017 | 54,000 |
Balance, ending | 930,000 |
Net loss for the year included in earnings relating to the liabilities held at December 31, 2017 | $ 54,000 |
INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Income Tax Disclosure [Abstract] | ||
Current tax benefit | $ (810,000) | $ (544,000) |
Valuation allowance | 810,000 | 544,000 |
Total tax expense | 0 | 0 |
Balance forward | 794,500 | 250,500 |
Change in deferred tax asset | 490,500 | 544,000 |
Total deferred tax asset | 1,285,000 | 794,500 |
Valuation allowance | (1,285,000) | (794,500) |
Total tax expense | $ 0 | $ 0 |
INCOME TAXES (Details Narrative) - USD ($) |
12 Months Ended | |
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Dec. 31, 2017 |
Dec. 31, 2016 |
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Change in deferred tax asset | $ 490,500 | $ 544,000 |
Deferred tax | 0 | 0 |
Total deferred tax asset | $ 1,285,000 | $ 794,500 |
SUBSEQUENT EVENTS (Details Narrative) - $ / shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Subsequent Events [Abstract] | ||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |