NOTES
TO THE FINANCIAL STATEMENTS
September
30, 2016
(UNAUDITED)
NOTE
1.
Nature
of Operations
:
GeneSYS
ID Inc. (Formerly known as Rx Safes, Inc.) (“the Company”) was incorporated under the laws of the State of Nevada
on June 1, 2010. The Company
designs, develop and manufactures innovative biometric
products and systems that offer secure storage, access control, drug delivery and remote patient monitoring and medication adherence
solutions in both home and professional environments as well as within healthcare facilities, improving security, safety, levels
of patient care and employee accountability.
On
June 28, 2016, the Company formed subsidiaries named GeneSYS ID, INC. with 100,000,000 authorized shares of capital stock, $0.001
par value per share, and GeneSYS RX, INC. also with 100,000,000 authorized shares of capital stock, $0.001 par value per share.
These subsidiaries had no business transactions prior to June 30, 2016 other than incorporating.
On
July 8, 2016 the Company entered into an agreement to purchase 100% of the membership interests of My Touch ID, LLC from its members
Glenn McGinnis and Scott McGinnis, who each owned 50% of My Touch ID, LLC., for $125,000 payable in 357,143 shares of Company
stock (based on the closing price of the Company’s stock on July 8, 2016 at $0.35 per share).
In
addition, the Company agreed to pay to Sellers the following “Earn Out” as follows: 2.5% of any revenues up to a cap
of $1,000,000 generated from the assets acquired and held in My TOUCH; and 0.5% of any revenues above $1,000,000 up to a
cap of $5,000,000 generated from the assets acquired and held in My TOUCH. The Earn Out is payable in cash, common stock of the
Company or a combination thereof, in the sole discretion of Sellers.
Under
the Purchase Agreement, the Company is responsible for $2,500 in unpaid debts in My TOUCH and the Sellers were required to discharge
all debt beyond that amount before the July 8, 2016 Closing Date.
On
July 18, 2016, Rx Safes, Inc. (the “Company”) entered into a Contribution Agreement (the “Agreement”)
with GeneSYS-RX, Inc. (the “Subsidiary”), a Nevada corporation, pursuant to which the Company contributed certain
assets and liabilities to the Subsidiary in exchange for 5,000,000 shares of common stock in the Subsidiary. The assets excluded
all patents, designs, patent applications and trademarks currently owned by the Company as of the closing of the transfer.
In addition, all variable rate convertible notes remained with the Company.
On
July 20, 2016, the Company filed Articles of Merger with the Secretary of State of Nevada in order to effectuate a merger with
its wholly owned subsidiary, GeneSYS ID, Inc. Shareholder approval was not required under Section 92A.180 of the Nevada
Revised Statutes. As part of the merger, the Company’s board of directors authorized a change in the Company’s name
to “GeneSYS ID, Inc.” and the Company’s Articles of Incorporation have been amended to reflect this name change.
On
July 20, 2016, the Company formed a subsidiary named bioHEALTHMED, Inc., with 5,000,000 at $0.0001 par value authorized shares
of voting common stock.
On
July 29, 2016, FINRA announced the name/symbol change of ‘RX Safes, Inc.’ (RXSF) to “GeneSYS ID, Inc.”
its Daily List and this change took effect at the open of business on August 1, 2016. The new symbol for GeneSYS ID, Inc.
is GNID.
Principles
of consolidation and Basis of Presentation
The
Consolidated Financial Statements include the accounts of the Corporation and its majority-owned subsidiaries. All intercompany
accounts and transactions have been eliminated. For the three months and none months ended September 30, 2016 the results of operations
of companies purchased are included from the dates of acquisition.
Interim
reporting:
The
interim condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with generally accepted accounting principles (“U.S.
GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made
are adequate to provide for fair presentation and a reasonable understanding of the information presented. The Interim Condensed
Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included
in this Form 10-Q should be read in conjunction with the financial statements and the related notes, for the fiscal year ended
December 31, 2015, previously filed with the SEC.
In
the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement
of financial position as of September 30, 2016, results of operations for the three and nine months ended September 30, 2016 and
2015, and cash flows for the nine months ended September 30, 2016 and 2015, as applicable, have been made. The results of operations
for the three and nine months ended September 30, 2016 are not necessarily indicative of the operating results for the full fiscal
year or any future periods.
NOTE
2.
Summary
of Significant Accounting Policies
:
The
financial statements of the Company have been prepared using U.S. GAAP that are applicable to a going concern which contemplates
that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its
liabilities in the normal course of business.
Management’s
use of estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Cash
and cash equivalents
Cash
and cash equivalents include funds on hand and short-term investments with original maturities of three months or less. Cash deposits
are insured in limited amounts by the Federal Deposit Insurance Corporation (FDIC).
Accounts
receivable
Customer
accounts receivable consist of amounts owed from private individuals or organizations for product delivered. The Company provides
an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information,
and existing economic conditions. Normal receivable are due 30 days after the issuance of the invoice. Receivables past due more
than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluation and specific
circumstances of the customer.
Inventories
Inventories
consist of safes and brackets. All inventories are valued at lower of average cost or market. The company periodically reviews
inventories and items considered obsolete or outdated are reduced to their estimated net realizable value.
The
components of inventory as of September 30, 2016 and December 31, 2015 are valued as follows:
|
|
September 30, 2016
|
|
December 31, 2015
|
Safes
|
|
$
|
2,000
|
|
|
$
|
6,892
|
|
Brackets
|
|
|
20
|
|
|
|
44
|
|
Parts
|
|
|
—
|
|
|
|
2,200
|
|
Total Inventory
|
|
$
|
2,020
|
|
|
$
|
9,136
|
|
Property
and Equipment and Depreciation
Property
and Equipment are recorded at cost. Depreciation is recorded based on the estimated lives of the assets. Depreciation expense
was $-0- for the nine months ended September 30, 2016.
Shipping
and Handling Freight Fees and Costs
All
amounts billed to a customer in a sales transaction related to shipping and handling represent revenues earned and are reported
as revenue. The costs incurred by the Company for shipping and handling are reported as part of cost of goods sold.
Revenue
recognition
Revenue
is recognized when the four criteria for revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) shipment
or delivery has occurred; (3) the price is fixed or determinable and (4) collectability is reasonably assured. The Company has
recognized revenue associated with its mission as stated above in the nature of operations footnote. Sales to customers are recorded
when the goods are shipped to the customer. Sales are reported net of allowances for estimated returns and allowances in the accompanying
statements of income. Allowances for returns are estimated based on historical customer return rates. The Company has not had
any product returns since inception. Customers pre-pay for orders though a website with their credit cards prior to the shipment
of the goods, which takes place within a few days after the order is placed.
Advertising
expense
The
Company expenses advertising costs as incurred. Advertising expense charged to operating expenses was $1,688 and $10,588 for the
nine months ended September 30, 2016 and 2015, respectively.
Rent
expense
The
Company pays rent on a month-to-month basis. Rent expense charged to operating expenses was $5,791 and $5,195 for the nine months
ended September 30, 2016 and 2015, respectively.
Intangible
assets
Intangible
assets are stated at cost less accumulated amortization and are amortized over their expected life. Currently the Company owns
a patent which it amortizes over its remaining life.
Research
and development costs
Research
and development costs, consisting primarily of expenditures paid to our manufacturing and development partner in China, are expensed
as incurred. Research and development expense charged to operating expenses was $11,982 and $2,442 for the nine months ended September
30, 2016 and 2015, respectively.
Fair
value measurements
U.S.
GAAP requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which are
recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of
realization or settlement.
In
assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates
of market conditions and risks existing at the time. For certain instruments, including cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses, it was estimated that the carrying amount approximated fair value because of the short
maturities of these instruments. All debt is based on current rates at which the Company could borrow funds with similar remaining
maturities and approximates fair value.
GAAP
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the
use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that
market participants would use in pricing the asset or liability developed based on market data obtained from sources independent
of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy
is described below:
Level
1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
The fair value hierarchy gives the highest priority to Level 1 inputs.
Level
2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level
3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.
Determining
which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures
each quarter
Recent
Accounting Pronouncements
On
May 1, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which is the new comprehensive
revenue recognition standard that will supersede all existing revenue recognition guidance under GAAP. The standard’s core
principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective
for annual and interim periods beginning on or after December 15, 2016, and early adoption is not permitted. Entities will have
the option of using either a full retrospective approach or a modified approach to adopt the guidance in the ASU. The Company
will continue to assess the impact on its financial statements.
In
June 2014, the FASB issued ASU 2014-12, “Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments
When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period.” This
ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects
vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective
for annual and interim reporting periods beginning after December 15, 2015. The Company does not expect the adoption of this guidance
to have a material impact on the financial statements.
On
June 10, 2014, the Financial Accounting Standards Board (“FASB”) issued update ASU 2014-10, Development Stage Entities
(Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic
915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition,
the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements
of income, cash flows and shareholder’s equity, (2) label the financial statements as those of a development stage entity;
(3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year
in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments
are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December
15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements
have yet to be issued. The Company has elected to early adopt these amendments and accordingly have not labeled the financial
statements as those of a development stage entity and have not presented inception-to-date information on the respective financial
statements.
In
August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40)”,
which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going
concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new
standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is
permitted. The Company expects to adopt this new standard for the fiscal year ending December 31, 2016 and the Company will continue
to assess the impact on its financial statements
Income
Taxes
The
Company provides for income taxes under the provisions of Accounting Standards Codification (“ASC”) Topic No. 740,
“Income Taxes”, which requires that an asset and liability based approach be used in accounting for income taxes.
Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of the temporary differences
of revenue and expense items for financial statement and income tax purposes. Valuation allowances are provided against assets,
which are not likely to be realized.
Stock-based
Compensation
The
Company adopted ASC 718, "Compensation - Stock Compensation" for stock-based compensation. ASC 718 requires that the
fair value of the equity instruments (such as stock options) exchanged for services be recognized as an expense in the financial
statements as the related services are performed.
Earnings
Per Share
Earnings
per share ("EPS") has been calculated in accordance with ASC 260, “Earnings Per Share" which requires the
presentation of both basic net income per share and net income per common share assuming dilution. Basic earnings per share are
computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the year.
Diluted earnings per share reflects the potential dilution that could occur upon the exercise of common stock options resulting
in the issuance of common stock to stockholders who would then share in the earnings of the Company. ASC 260 precludes the inclusion
of any potential common shares in the computation of any diluted per-share amounts when such inclusion is anti-dilutive.
NOTE
3.
License
Agreements
Included
in the assets purchased from Axius Consulting Group, Inc. was a Patent & Licensing Rights Agreement with bioMETRX. The agreement
grants the licensee a royalty based, ($.50 per unit) exclusive license under their Patent License to use, manufacture, have manufactured,
license and/or sell licensed intellectual property for any legal purpose with North America within the health care and consumer
markets. The term of the agreement is from the effective date (March 1, 2009) to the full end of the term or terms for which Patent
Rights have not expired or, if only Technology Rights are licensed and no Patent Rights are applicable, for a term of 9 years.
On
November 11, 2015, the Company entered into a binding letter of intent to purchase all right, title and interest to patent number
7,806,852. The Company will pay to the seller 83,334 shares of the Company’s common stock. The Company shall pay the seller
$1.5 per unit on sales of current product as well as $3.00 per unit on sales of new devices incorporating the patented encasement.
If the Company sells a majority interest or there is a change in management from the original founders, the seller has the option
to continue the royalty agreement or take a one-time $250,000 cash payout and waive future rights. On February 2, 2016 the Company
entered into a definitive agreement with Philip Jurson MD and Steven F. Borsand. The agreement memorialized the terms set forth
in the binding letter of intent executed on November 11, 2015 for the purchase of USPTO patent number 7,806,852
In
the previous quarter ended March 31, 2016, the Company authorized the issuance of the shares and recorded the Patent as an Intangible
Asset in the interim financial information.
On
January 11, 2016 the Company entered in an Intellectual Property Licensing agreement with Talon Brands, LLC. Under this agreement
Talon Brands is responsible to pay a fee equivalent to $2.50 per unit sold in perpetuity unless or until the parties agree in
writing to modify, enter into a new agreement or terminate the agreement. As a result of the acquisition of 100% of the membership
interests of My TOUCH ID, LLC, (formerly Talon Brands, LLC.,) by the Company executed on July 8, 2016, all obligations under the
prior licensing agreement were terminated.
NOTE
4.
Income
Taxes
As
of September 30, 2016, the Company has net operating loss carry forwards of approximately $39,951,000 that may be available to
reduce future years’ taxable income in varying amounts through 2031. Future tax benefits which may arise as a result of
these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and
accordingly, the Company has not recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The
Company reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination
resulting in an uncertain tax position. The Company did not have any material unrecognized tax benefit at September 30, 2016 and
December 31, 2015, respectively. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in
tax expense. The Company recognized no interest and penalties during the three months and nine months ended September 30, 2016
and year ending December 31, 2015, respectively.
The
Company files U.S. federal tax returns and a tax return in states where obligated. All tax periods since inception remain open
to examination by the taxing jurisdictions to which the Company is subject.
NOTE
5.
Employment
Agreement
The President of the Company, Ms. Lorraine Yarde, signed an employment contract effective January 1, 2015 which is effective until
termination. The agreement stipulates a base salary of $175,000 plus an annual performance bonus targeted at fifty percent of
salary. The agreement entitles Ms. Yarde to annual salary increases of ten percent as well as other customary employee benefits
such as paid vacation and eligibility to participate in the Company’s health insurance plan or reimbursement of up to $1,000
per month until a company-health insurance plan is established. The agreement allows Ms. Yarde to convert any unpaid compensation
to Company stock at a 50% discount to the then market price, in the form of unregistered securities.
On
September 18, 2015, the employment contract was amended to re-price the exercise price on her 50,000 options from $0.25 to $0.001
per share resulting in additional estimated fair value of the stock options of $564,975 recognized as compensation expense (calculated
using the Black Scholes option pricing model). In addition, the calculation of the exercise price which was exercisable at 50%
of the trading price of the common shares was amended to apply the 50% discount to the lowest trading price of the Company’s
common stock as reported on the OTCQB for the ten prior trading days including the day upon which a notice of conversion is received
by the Company. Amendment for the ten day period resulted in an increase in the fair value of the options from $.23 to $.25 applied
per exercisable share.
On
September 21, 2015, Ms. Yarde converted $87,500 of the unpaid compensation into 265,152 shares of the Company’s common stock.
As of September 30, 2016, unpaid compensation under the agreement
totaled $195,584.
Upon the signing of the agreement, Ms. Yarde was granted
employee stock options to purchase 50,000 shares of the Company’s Common Stock with vesting period and strike price as follows:
|
(i)
|
25,000 shares vested immediately with a strike
price of $0.001 per share;
|
|
(ii)
|
12,500 shares vest on July 1, 2015 with a strike
price of $0.001 per share;
|
|
(iii)
|
7,500 shares vest on January 1, 2016 with a
strike price of $0.001 per share; and
|
|
(iv)
|
5,000 shares vest on January 1, 2017 with a
strike price of $0.001 per share.
|
On
February 1, 2016, the Company and Ms. Yarde entered into an amendment to the employment agreement to increase her salary from
$175,000 to $200,000 to be retroactive and amend the strike price on her options to $0.001. In addition, the Board of Directors
awarded her a 30% performance bonus for her services.
The
amendment of the strike price of the options was treated as a modification of an award according to ASC 718-20-35 and the
incremental fair value of the award costs of $12,543 was recorded as compensation expense in the Statement of Operations for
the nine months ended September 30, 2016
On
February 1, 2016, the Company executed an employment agreement with Mark Basile a Director of the Company. The employment calls
for a base salary of $175,000 per annum. He is also entitled to a performance bonus of 25% of his base salary. In addition the
Company will immediately grant to employee an option to purchase 50,000 shares of the Company’s common stock with a vesting
and strike price as follows:
|
(i)
|
25,000
shares vested immediately with a strike price of $0.001 per share;
|
|
(ii)
|
12,500
shares vest on the six month anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share;
|
|
(iii)
|
7,500
shares vest on the first anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share; and
|
|
(iv)
|
5,000
shares vest on the second anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share.
|
Effective September 29, 2016, Mark Basile resigned as the
Company’s Chief Strategy Officer and the Company’s board of directors appointed him to act as General Counsel. The
Company entered into an Amended and Restated Employment Agreement (the “ Agreement” ) with Mr. Basile. The Agreement
supersedes Mr. Basile’s employment agreement as Chief Strategy Officer in connection with his new appointment as General
Counsel.
As of September 30, 2016, unpaid compensation under the agreement
totaled $16,327.
On
February 1, 2016, the Company executed an employment agreement with William Koch a Director of the Company. The employment calls
for a salary of $150,000 per annum. He is also entitled to a performance bonus of 25% of his base salary. In addition, the Company
will immediately grant to employee an option to purchase 25,000 shares of the Company’s common stock with a vesting and
strike price as follows:
|
(i)
|
12,500
shares vested immediately with a strike price of $0.001 per share;
|
|
(ii)
|
6,250
shares vest on the six month anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share;
|
|
(iii)
|
3,750
shares vest on the first anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share; and
|
|
(iv)
|
2,500
shares vest on the second anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share.
|
At September 30, 2016, unpaid compensation under the agreement is $43,750.
On
February 1, 2016, the Company executed an employment agreement with Faruk Okcetin a Director of the Company. The employment calls
for a base salary of $125,000 per annum. He is also entitled to a performance bonus of 10% of his base salary. In addition, the
Company will immediately grant to employee an option to purchase 10,000 shares of the Company’s common stock with a vesting
and strike price as follows:
|
(i)
|
2,500
shares vested immediately with a strike price of $0.001 per share;
|
|
(ii)
|
2,500
shares vest on the six month anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share;
|
|
(iii)
|
2,500
shares vest on the first anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share; and
|
|
(iv)
|
2,500
shares vest on the second anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share.
|
At September 30, 2016, unpaid compensation under the agreement
is $62,500.
On
May 23, 2016, the Company executed an employment agreement with J. Richard Iler to serve as Chief Financial Officer for the Company.
The employment calls for a base salary of $100,000 per annum. He is also entitled to a performance bonus of 10% of his base salary.
In addition, the Company will immediately grant to employee an option to purchase 25,000 shares of the Company’s common
stock with a vesting and strike price as follows:
|
(i)
|
12,500
shares vested immediately with a strike price of $0.001 per share;
|
|
(ii)
|
6,250
shares vest on the six month anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share;
|
|
(iii)
|
3,750
shares vest on the first anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share; and
|
|
(iv)
|
2,500
shares vest on the second anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share.
|
At September 30, 2016, unpaid compensation under the agreement
is $35,410.
On September 1, 2016, the Company executed an employment
agreement with Glenn McGinnis to serve as Vice President of Product Development for the Company. The employment calls for a base
salary of $150,000 per annum. He is also entitled to a performance bonus of 10% of his base salary. In addition, the Company will
immediately grant to employee an option to purchase 25,000 shares of the Company’s common stock with a vesting and strike
price as follows:
|
(i)
|
6,250
shares vested immediately with a strike price of $0.001 per share;
|
|
(ii)
|
6,250
shares vest on the six month anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share;
|
|
(ii)
|
6,250
shares vest on the six month anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share;
|
|
(iv)
|
6,250
shares vest on the second anniversary of the agreement if the employee is still employed
to the Company with a strike price of $0.001 per share.
|
At
September 30, 2016, unpaid compensation under the agreement is $12,500.
The
estimated fair value of the options granted to the Officers was calculated using the Black Scholes Model and amounted to $225,577
of which $193,377 was charged to compensation expenses for the nine months ended September 30, 2016. Unrecognized costs relating
to these stock options totaled $32,200 as of September 30, 2016.
Each
director is entitled to director fees of $10,000 per annum. At September 30, 2016, unpaid accrued directors’ compensation
is $35,000.
NOTE
6.
Stock
options and warrants
A
summary of stock option and warrant activity as of September 30, 2016 is as follows:
Description
|
|
Stock
Options
|
|
Warrants
|
Outstanding
at January 1, 2015
|
|
50,000
|
|
41,250
|
Issued
January 1, 2015
|
|
12,500
|
|
|
Issued
January 1, 2015
|
|
12,500
|
|
|
Cancelled
March 3, 2015
|
|
—
|
|
(41,250
|
Issued
May 20, 2015
|
|
12,500
|
|
—
|
Issued
May 28, 2015
|
|
—
|
|
500
|
Issued
May 28, 2015
|
|
—
|
|
500
|
Issued
June 2, 2015
|
|
—
|
|
500
|
Issued
June 2, 2015
|
|
—
|
|
1,250
|
Issued
June 22, 2015
|
|
12,500
|
|
—
|
Issued
September 18, 2015
|
|
12,500
|
|
—
|
Issued
February 1,2016
|
|
85,000
|
|
—
|
Issued
May 23, 2016
|
|
25,000
|
|
|
Issued
June 26, 2016
|
|
|
|
12,500
|
Issued
June 27, 2016
|
|
|
|
137,500
|
Issued
June 29, 2016
|
|
|
|
12,500
|
Issued September 1, 2016
|
|
25,000
|
|
|
Outstanding
at September 30, 2016
|
|
247,500
|
|
165,250
|
Employee
stock options totaling 50,000 shares granted to Ms. Yarde on January 1, 2015, and as amended on February 1, 2016, can be exercised
at any time, up to and including 24 months after expiration or termination of the agreement. The estimated fair value of the options
at February 1, 2016 was $113,465 (calculated using the Black-Scholes option pricing model and the following assumptions: (i) $.001
(adjusted for one for two hundred reverse split,) share price, respectively, exercise price, (iii) term of 3 years (iv) 268% expected
volatility, respectively, and (v) 0.81%, risk free interest rate, respectively) will be expensed over the two year vesting period
of the options.
Stock
options totaling 62,500 were granted during the year of 2015 under the Director Compensation Plan effective January 1, 2015 to
five directors in the amounts of 12,500 options to each. The estimated fair value totaled $1,347,926.
On
February 1, 2016, stock options totaling 85,000 were granted to certain Directors under the Stock Option Plan. The estimated fair
value of the options calculated using the Black Scholes option pricing model at an exercise price of $0.001 with expiration date
of up to 2 years totaled $192,906.
On
March 18, 2016, the Company’s board of directors amended the Rx Safes, Inc. 2015 Incentive Plan to increase the shares reserved
under the Plan from 250,000 to 2,500,000 shares. There were no other amendments made to the Plan.
NOTE
7.
Equity
Common
Stock.
Stock
Split
On
August 22, 2012, the Company amended its Articles of Incorporation to split its outstanding shares of the company’s common
stock at a ratio of 5-for-1. The par value of the common stock was decreased to $.001 and increased the number of authorized shares
to issue to 250,000,000. The accompanying financial statements have been adjusted to retroactively reflect the stock split.
Effective
August 7, 2015, the aggregate number of shares which the Company shall have authority to issue is five hundred and fifty million
(550,000,000) shares, consisting of two classes to be designated, respectively, "Common Stock" and "Preferred Stock,"
with all of such shares having a par value of $.001 per share. The total number of shares of Common Stock that the Corporation
shall have authority to issue is five hundred million (500,000,000) shares. The total number of shares of Preferred Stock that
the Corporation shall have authority to issue is fifty million (50,000,000) shares.
Reverse
stock split
On
September 28, 2015, the Company authorized a one for two hundred reverse split of the Company’s common stock issued and
outstanding. Following this stock split the number of outstanding shares of the Company’s common stock decreased from 263,320,562
to 1,316,603. The accompanying financial statements have been adjusted to retroactively reflect the stock split.
On
March 21, 2016, the Company filed a registration statement under Form S-8 to register 2,387,500 shares of common stock, which
represents all reserved shares under the Plan not otherwise underlying prior outstanding options.
Preferred
Stock.
The
company is authorized to issue a second class of 50,000,000 preferred shares. In May 2015, the Company initiated a private offering
of units consisting of 240,000 shares of its newly created Series A Preferred Stock and a warrant to purchase our common stock,
for $2.50 per unit. The Company sold 22,000 units, consisting of 22,000 shares of our Series A Preferred Stock and warrants to
purchase 550,000 shares of our common stock at $.01 per share for total proceeds of $55,000. As of September 30, 2016 all series
A shares were converted to common.
Effective
September 18, 2015, the Company created, out of the fifty million (50,000,000) shares of preferred stock, par value $0.001 per
share, a series of preferred stock consisting of two thousand (2,000) shares and to be called “Series B Preferred Stock.”
Each Series B stock is convertible into 100,000 common shares. On September 23, 2015 the company issued all 2,000 shares of Series
B stock for compensation of $.001 per share.
On
February 1, 2016, 100 shares of the Series B preferred stock were converted into 10,000,000 shares of common stock. The compensation
expense associated with the conversion is $22,700,000.
NOTE
8.
Agreements
On
August 3, 2016 the Company entered into a subscription agreement with a shareholder to purchase 50,000 shares of the Company common
stock at a price of $0.05 per share for a total purchase price of $2,500.
On
August 4, 2016 the Company entered into a subscription agreement with a shareholder to purchase 100,000 shares of the Company
common stock at a price of $0.05 per share for a total purchase price of $5,000.
On
August 5, 2016 the Company entered into an agreement with a legal consultant to perform intellectual property consulting services.
The initial term of this agreement is for one year of services. The Company issued the consultant 25,000 shares of Company stock
with a value of $4,725 as a retainer for these services.
On
August 23, 2016 the Company entered into a subscription agreement with a shareholder to purchase 200,000 shares of the Company
common stock at a price of $0.05 per share for a total purchase price of $10,000.
On
September 6, 2016 the Company entered into an agreement with an engineering and design consultant for an initial 12 month period.
Under the agreement the Company issued the consultant 50,000 shares of Company stock with a value of $1,000 as a retainer. In
addition, the consultant will receive $2,500 cash compensation and $2,500 in shares of Company stock on a monthly basis. The cash
based compensation will be accrued until such time as the Company has adequate capital resources to make the payment.
NOTE
9.
Fair
Value Measurements and Derivative Liability
The
Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported
as charges or credits to income. For option-based derivative financial instruments, the Company
uses the Black-Scholes
option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each
reporting period.
Derivative
instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement
of the derivative instrument could be required within 12 months of the balance sheet date.
On
October 6, 2015, the Company entered into an agreement with Auctus Fund LLC to invest $55,250 into the Company in exchange for
the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable July 6, 2016. The note is convertible by Auctus into shares of the Company’s common stock at any
time on or after the Issuance Date. The conversion price for each share is equal to 65% multiplied by the lowest trading
price of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay this note up to
180 days after issuance. On March 31, 2016 the note was bought by EMA Financial LLC for $55,250 plus accrued interest of $2119.18.
On
October 7, 2015, the Company entered into an agreement Kodiak Capital Group to invest $50,000 into the Company in exchange for
the issuance of a $60,000 convertible promissory note which includes OID of $10,000. The note bears interest at the rate of 8%.
All outstanding interest and principle is due and payable October 7, 2016. The note is convertible by Kodiak into shares
of the Company’s common stock at any time on or after the Issuance Date. The conversion price for each share is equal
to 65% multiplied by the average of the three lowest trading prices of the Common Stock on the OTC Market for the 10 prior trading
days. The Company has the option to repay this note up to 180 days after issuance.
On November 11, 2015, the Company entered into an agreement with EMA Financial LLC to invest $50,000 into the Company in exchange
for the issuance of a $50,000 convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest
and principle is due and payable November 11, 2016. The note is convertible by EMA Financial into shares of the Company’s
common stock at any time on or after the Issuance Date. The conversion price for each share is equal to 65% multiplied by
the lowest trading price of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay
this note up to 180 days after issuance.
On
December 16, 2015, the Company entered into an agreement with Auctus Fund LLC to invest $110,000 into the Company in exchange
for the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and
principle is due and payable December 16, 2016. The note is convertible by Auctus into shares of the Company’s common
stock at any time on or after the Issuance Date. The conversion price for each share is equal to 65% multiplied by the lowest
trading price of the Common Stock on the OTC Market for the 20 prior trading days.
On
January 12, 2016, the Company entered into an agreement with Crown Bridge Partners LLC to invest $36,000 into the Company in exchange
for the issuance of a $40,000 convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest
and principle is due and payable January 12, 2017. Unpaid balance bears an interest at the rate of 22%. The note is
convertible by Crown Bridge Partners into shares of the Company’s common stock at any time on or after the Issuance Date.
The conversion price for each share is equal to 65% of the lowest trading prices of the Common Stock on the OTC Market for the
20 prior trading days. The Company has the option to repay this note up to 180 days after issuance.
On
January 20, 2016, the Company entered into an agreement with Yoshar Trading LLC to invest $30,000 into the Company in exchange
for the issuance of a $31,100 convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest
and principle is due and payable January 20, 2017. The note is convertible by Yoshar into shares of the Company’s
common stock at any time on or after the Issuance Date. The conversion price for each share is equal to 65% of the lowest
trading prices of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay this note
up to 180 days after issuance.
On
January 22, 2016, the Company entered into an agreement with Auctus Fund LLC to invest $77,750 into the Company in exchange for
the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable October 22, 2016. The note is convertible by Auctus into shares of the Company’s common stock at
any time on or after the Issuance Date. The conversion price for each share is equal to 70% multiplied by the lowest trading
price of the Common Stock on the OTC Market for the 20 prior trading days.
On February 28, 2016, the Company entered into an agreement with APG Capital Holdings, LLC to invest a total of $63,000 into the
Company in exchange for the issuance of 2 convertible promissory notes, each $31,500. The first $31,500 note is a front end note
and was purchased by APG Capital Holdings, LLC on February 28, 2016. The second $31,500 note is a back end note and will be funded
no later than October 29, 2016. The Company has the option to cancel the back end note and any obligation thereof by giving 30
days written notice of cancellation no later than the 5
th
month anniversary of the issuance of the front end note.
The notes bear interest at the rate of 8%. All outstanding interest and principle on the front end note is due and payable
February 28, 2017. The note is convertible by APG Capital Holdings, LLC into shares of the Company’s common stock
at any time on or after the Issuance Date. The conversion price for each share is equal to 65% multiplied by average of
the lowest trading price of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to prepay
this note up to 180 days after issuance
On
February 29, 2016, the Company entered into an agreement with Auctus Fund LLC to invest $77,750 into the Company in exchange for
the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable November 29, 2016. The note is convertible by Auctus into shares of the Company’s common stock
at any time on or after the Issuance Date. The conversion price for each share is equal to 70% multiplied by the lowest
trading price of the Common Stock on the OTC Market for the 20 prior trading days.
On
March 15, 2016, the Company entered into an agreement with Crown Bridge Partners LLC to invest $36,000 into the Company in exchange
for the issuance of a $40,000 convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest
and principle is due and payable March 15, 2017. Unpaid balance bears an interest at the rate of 22%. The note is
convertible by Crown Bridge Partners into shares of the Company’s common stock at any time on or after the Issuance Date.
The conversion price for each share is equal to 65% of the lowest trading prices of the Common Stock on the OTC Market for the
20 prior trading days. The Company has the option to repay this note up to 180 days after issuance.
On
March 29, 2016, the Company entered into an agreement with Auctus Fund LLC to invest $108,000 into the Company in exchange for
the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable December 29, 2016. The note is convertible by Auctus into shares of the Company’s common stock
at any time on or after the Issuance Date. The conversion price for each share is equal to 70% multiplied by the lowest
trading price of the Common Stock on the OTC Market for the 20 prior trading days.
On
March 31, 2016, the Company entered into an agreement with EMA Financial LLC to invest $50,000 into the Company in exchange for
the issuance of a $50,000 convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest
and principle is due and payable March 28, 2017. The note is convertible by EMA Financial into shares of the Company’s
common stock at any time on or after the Issuance Date. The conversion price for each share is equal to 65% multiplied by
the lowest trading price of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay
this note up to 180 days after issuance
On
March 31, 2016, EMA Financial, LLC entered a debt purchase agreement with Auctus Fund LLC to purchase the note dated October 6,
2015 for the amount of $55,250 principal and $2,119.18 of accrued interest. Conversion of this note is subject to a leak-out agreement
executed the same date.
On
May 6, 2016, Auctus Fund LLC entered a debt purchase agreement with EMA Financial to purchase the note dated November 15, 2015
for the amount of $50,000 principal and $1,940 of accrued interest. Conversion of this note is subject to a leak-out agreement
executed the same date.
On
May 6, 2016, the Company entered into an agreement with Auctus Fund LLC to invest $76,250 into the Company in exchange for the
issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable February 6, 2017. The note is convertible by Auctus into shares of the Company’s common stock at
any time on or after the Issuance Date. The conversion price for each share is equal to 70% of the lowest trading prices
of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay this note up to 180 days
after issuance.
On
May 23, 2016, the Company entered into an agreement with Black Mountain Equities, Inc. to invest up to $100,000 into the Company
in exchange for a convertible promissory note. The note bears interest at the rate of 9.99%. All outstanding principle and interest
is due and payable on May 26, 2017. The note is convertible by Black Mountain into shares of the Company’s common stock
at any time on or after the Issuance Date. The conversion price for each share is equal to 65% multiplied by the lowest trading
price of the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to prepay this note up to
90 days after issuance. As of September 30, 2016 only $25,000 of this note is funded.
On
May 24, 2016, the Company entered into an agreement with Adar Bays, LLC to invest into the Company $35,000 in exchange for a convertible
promissory note. The note bears interest at the rate of 8%. All outstanding principle and interest is due and payable on May 24,
2017. The note is convertible by Adar Bays into shares of the Company’s common stock at any time after 180 days from note
issuance (November 20, 2016). The conversion price for each share is equal to 65% multiplied by the lowest trading price of the
Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to prepay this note plus accrued interest
at 115% of face within 60 days from note issuance, at 125% of face within 61 to 120 days from note issuance, and at 135% of face
within 121 to 180 days from note issuance, after which time the note may not be prepaid.
On
July 15, 2016 EMA Financial elected to convert $7,150 of the principal of the note the purchased from Auctus Fund, LLC on March
31, 2016 originally issued on October 6, 2015. The Company issued to EMA Financial 55,000 shares of company stock.
On
July 29, 2016, Crownbridge elected to convert $8,060 of the principal amount of note issued on January 12, 2016. The Company issued
to Crownbridge 62,000 shares of Company stock.
On
August 3, 2016 the Company issued 9,204 shares of Company stock to a consultant for services performed under an agreement originally
signed on May 6, 2015.
On
August 3, 2016 the Company issued 20,000 shares to a consultant for services performed under an agreement originally signed on
June 6, 2016.
On
August 5, 2016, Crownbridge elected to convert $7,508 of the principal amount of note issued on January 12, 2016. The Company
issued to Crownbridge 77,000 shares of Company stock.
On
August 15, 2016 Yoshar Trading, LLC elected to convert $3,000 of the principal of the note issued on January 20, 2016. The Company
issued to Yoshar 43,956 shares of Company stock.
On
August 24, 2016 EMA Financial elected to convert $6,825 of the principal of the note the purchased from Auctus Fund, LLC on March
31, 2016 originally issued on October 6, 2015. The Company issued to EMA Financial 100,000 shares of Company stock.
On
August 24, 2016 the Company entered into an agreement with EMA Financial, LLC to invest $40,000 into the Company in exchange for
the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable August 24, 2017. The note is convertible by EMA into shares of the Company’s common stock at any
time on or after the Issuance Date. The conversion price for each share is equal to 50% of the lowest trading prices of
the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay this note up to 3 months
after issuance.
On
August 26, 2016 the Company entered into an agreement with Auctus Fund LLC to invest $41,250 into the Company in exchange for
the issuance of a convertible promissory note. The note bears interest at the rate of 8%. All outstanding interest and principle
is due and payable May 26, 2017. The note is convertible by Auctus into shares of the Company’s common stock at any
time on or after the Issuance Date. The conversion price for each share is equal to 70% of the lowest trading prices of
the Common Stock on the OTC Market for the 20 prior trading days. The Company has the option to repay this note up to 180 days
after issuance.
On
August 31, 2016, Crownbridge elected to convert $7,956 of the principal amount of note issued on January 12, 2016. The Company
issued to Crownbridge 390,000 shares of Company stock.
On
August 31, 2016 Yoshar Trading, LLC elected to convert $3,000 of the principal of the note issued on January 20, 2016. The Company
issued to Yoshar 153,846 shares of Company stock.
On
September 6, 2016 Yoshar Trading, LLC elected to convert $4,000 of the principal of the note issued on January 20, 2016. The Company
issued to Yoshar 361,991 shares of Company stock.
On
September 6, 2016, APG Capital Holdings, LLC elected to convert $4,000 of the principal amount and $165 of interest of a note
issued on February 29, 2016. The Company issued to APG 376,906 shares of Company stock.
On
September 6, 2016, Crownbridge elected to convert $7,007 of the principal amount of note issued on January 12, 2016. The Company
issued to Crownbridge 687,000 shares of Company stock.
On
September 6, 2016 EMA Financial elected to convert $4,420 of the principal of the note the purchased from Auctus Fund, LLC on
March 31, 2016 originally issued on October 6, 2015. The Company issued to EMA Financial 400,000 shares of Company stock.
On
September 6, 2016 the Company issued 92,105 shares of Company stock to a consultant for services performed under an agreement
originally signed on May 6, 2015.
On
September 26, 2016, Crownbridge elected to convert $2,473 of the principal amount of note issued on January 12, 2016. The Company
issued to Crownbridge 687,000 shares of Company stock.
The
company identified embedded derivatives related to the EMA, Auctus Fund LLC, Kodiak, Yoshar, Adar, APG, Black Mountain and Crownbridge
Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative
financial instruments requires that the company record the fair value of the derivatives as of the inception date of the Convertible
Promissory Note and to adjust the fair value as of each subsequent balance sheet date. Under ASC-815, the conversion options embedded
in the notes payable described in Note 8 require derivate liability classification because they do not contain an explicit limit
to the number of shares that could be issued upon settlement.
As
defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of
similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including
assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those
inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement)
and the lowest priority to unobservable inputs (level 3 measurement).
The
three levels of the fair value hierarchy are as follows:
Level
1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets
are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information
on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities
and listed equities.
Level
2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly
observable as of the reported date.
Level
3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used
with internally developed methodologies that result in management’s best estimate of fair value.
Derivative
liability — the Company’s derivative liability is classified within Level 3 of the fair value hierarchy.
The
following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that
were accounted for at fair value as at September 30, 2016 and December 31, 2015.
Recurring
Fair Value Measurements
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability – September 30, 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,391,814
|
|
$
|
8,391,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liability – December 31,2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
|
1,428,075
|
|
$
|
1,428,075
|
At
September 30, 2016, convertible notes payable consisted of:
Date of Note
|
|
Noteholder
|
|
Interest Rate
|
|
Maturity date
|
|
Face Value
|
|
OID
|
|
Proceeds
|
|
Unamortized
Debt Discount
|
|
Net
Carrying Amount
|
|
10/7/2015
|
|
|
Kodiak
|
|
|
8%
|
|
|
|
10/7/2016
|
|
|
|
60,000
|
(b)
|
|
|
10,000
|
|
|
|
50,000
|
|
|
|
966
|
|
|
|
59,034
|
|
|
11/11/2015
|
|
|
Auctus
|
|
|
8%
|
|
|
|
11/11/2016
|
|
|
|
14,096
|
(a)
|
|
|
|
|
|
|
14,096
|
|
|
|
1,630
|
|
|
|
12,466
|
|
|
12/16/15
|
|
|
Auctus
|
|
|
8%
|
|
|
|
9/16/16
|
|
|
|
80,266
|
(a)
|
|
|
|
|
|
|
80,266
|
|
|
|
—
|
|
|
|
80,266
|
|
|
1/12/2016
|
|
|
Crownbridge
|
|
|
8%
|
|
|
|
1/12/2017
|
|
|
|
6,996
|
(a)
|
|
|
4,000
|
|
|
|
2,996
|
|
|
|
1,773
|
|
|
|
5,223
|
|
|
1/20/2016
|
|
|
Yoshar
|
|
|
8%
|
|
|
|
1/20/2017
|
|
|
|
22,500
|
(a)
|
|
|
1,500
|
|
|
|
21,000
|
|
|
|
6,847
|
|
|
|
15,653
|
|
|
1/22/2016
|
|
|
Auctus
|
|
|
8%
|
|
|
|
10/22/16
|
|
|
|
77,750
|
(c)
|
|
|
|
|
|
|
77,750
|
|
|
|
6,297
|
|
|
|
71,453
|
|
|
2/29/2016
|
|
|
APG Securities
|
|
|
8%
|
|
|
|
2/28/2017
|
|
|
|
27,500
|
(a)
|
|
|
1,500
|
|
|
|
26,000
|
|
|
|
10,880
|
|
|
|
16,620
|
|
|
2/29/2016
|
|
|
Auctus
|
|
|
8%
|
|
|
|
11/29/2016
|
|
|
|
77,750
|
(c)
|
|
|
|
|
|
|
77,750
|
|
|
|
17,138
|
|
|
|
60,612
|
|
|
3/15/2016
|
|
|
Crownbridge
|
|
|
8%
|
|
|
|
3/15/2017
|
|
|
|
40,000
|
(a)
|
|
|
4,000
|
|
|
|
36,000
|
|
|
|
16,436
|
|
|
|
23,564
|
|
|
3/16/16
|
|
|
EMA
|
|
|
8%
|
|
|
|
7/16/2016
|
|
|
|
952
|
(a)
|
|
|
|
|
|
|
952
|
|
|
|
—
|
|
|
|
952
|
|
|
3/28/2016
|
|
|
Auctus
|
|
|
8%
|
|
|
|
12/30/2016
|
|
|
|
108,000
|
(c)
|
|
|
|
|
|
|
108,000
|
|
|
|
35,933
|
|
|
|
72,067
|
|
|
3/29/2016
|
|
|
EMA
|
|
|
8%
|
|
|
|
3/28/2017
|
|
|
|
52,500
|
(a)
|
|
|
|
|
|
|
52,500
|
|
|
|
25,842
|
|
|
|
26,658
|
|
|
5/6/2016
|
|
|
Auctus
|
|
|
8%
|
|
|
|
12/30/2016
|
|
|
|
76,750
|
(c)
|
|
|
|
|
|
|
76,750
|
|
|
|
—
|
|
|
|
76,750
|
|
|
05/23/2016
|
|
|
Black Mountain
|
|
|
9.99%
|
|
|
|
5/26/2017
|
|
|
|
25,000
|
(d)
|
|
|
|
|
|
|
25,000
|
|
|
|
16,252
|
|
|
|
8,748
|
|
|
5/24/2016
|
|
|
Adar Bays
|
|
|
8%
|
|
|
|
5/24/2017
|
|
|
|
35,000
|
(d)
|
|
|
|
|
|
|
35,000
|
|
|
|
22,561
|
|
|
|
12,439
|
|
|
8/24/2016
|
|
|
EMA
|
|
|
8%
|
|
|
|
8/24/2017
|
|
|
|
40,000
|
(e)
|
|
|
|
|
|
|
40,000
|
|
|
|
35,945
|
|
|
|
4,055
|
|
|
8/26/2016
|
|
|
Auctus
|
|
|
8%
|
|
|
|
5/26/2017
|
|
|
|
41,250
|
|
|
|
|
|
|
|
41,250
|
|
|
|
—
|
|
|
|
41,250
|
|
|
1/20/2016
|
|
|
Yoshar
|
|
|
8%
|
|
|
|
1/20//2017
|
|
|
|
30,000
|
|
|
|
|
|
|
|
30,000
|
|
|
|
20,364
|
|
|
|
9,636
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
816,310
|
|
|
|
21,000
|
|
|
|
795,310
|
|
|
|
218,864
|
|
|
|
597,446
|
|
(a)
Convertible in shares of common stock 65% of the lowest closing for the twenty days trading immediately preceding the date of
conversion.
(b)
Convertible in shares of common stock 65% of the lowest closing for the ten days trading immediately preceding the date of conversion.
(c)
Convertible in shares of common stock 70% of the lowest closing for the twenty days trading immediately preceding the date of
conversion.
(d) Convertible in shares of common stock 65% multiplied by the average of the 3 lowest closing trading prices ten days prior
to conversion.
(e)
Convertible in shares of common stock 50% multiplied by the average of the 3 lowest closing trading prices twenty
days prior to conversion.
NOTE
10.
Development
and Marketing Agreement
On
July 30, 2015, the Company entered into a co-operative developing and marketing agreement with Patient Safety Devices (PSD). The
agreement relates to co-development, co-marketing and sales of a biometric patient controlled analgesia device. The Company will
be responsible for the engineering and prototyping testing and manufacturing of the product as well as contributing its patent
license for the use of the biometrics. PSD is responsible for contributing the design specifications and functionality of the
product and shall also contribute previously developed intellectual property, assets and relationships. PSD will assign the rights
of intellectual property and assets formerly owned by Redesign Company LLC. The Company will be solely responsible for the final
sale of the product. The Company will pay PSD a commission of 10% of net sales. The initial term of the agreement is five years,
and shall be automatically renewed for successive periods of one year.
NOTE
11.
Intangible
Asset
Intangible
asset consists of the following:
September 30, 2016
Patent
(subject to amortization)
$ 100,000
Less
accumulated amortization
6,667
Intangible
Asset, net of accumulated amortization
$ 93,333
Effective
February 2, 2016, the Company recorded the purchase of a patent valued at $100,000. The patent had already been in existence for
approximately ten years and was assigned to the Company in exchange for stock valued at $100,000. Amortization is calculated over
the remaining ten year life of the patent estimated at 20 years.
NOTE
12
Assets
acquired from the MY Touch ID LLC purchase
On
July 8, 2016 the company purchased 100% interest in My Touch LLC (The LLC), which includes all of its assets for $125,000. As
of September 30, 2016 the company estimated that there were no change in the value of the assets acquired.
NOTE
13.
Going
Concern
The
accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company
as a going concern. However, the Company had minimal revenues for the nine months ended September 30, 2016 and 2015. The Company
currently has limited working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient
to cover operating costs over an extended period of time.
Management
anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses.
The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light
of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or
become financially viable and continue as a going concern.
NOTE
14.
Legal
Proceedings
Legal
Proceedings
On
March 5, 2015, Wall Street Buy Sell Hold filed a lawsuit against the Company in New York alleging breach of a consulting agreement
between the parties. On March 10, 2015 the company filed a lawsuit against Wall Street Buy Hold Sell in Nevada. The suit claims
WSBHS engaged in fraud as well as deceptive practices. The case is still in the motion phase. The case the Company filed
in Nevada against WSBSH has been stayed, pending a decision on a jurisdiction motion we filed in the New York case. The
Company has been asked by the judge in the New York case to try to come to a settlement and we have been negotiating back and
forth with their attorneys to reach a mutually acceptable settlement. Meanwhile, the court has scheduled a date, November 22,
2016, at which time the company will either announce the settlement or move forward with its Motion to Dismiss based on procedural
failures by the Plaintiff.
On
February 12, 2016, the company filed a lawsuit in New York against Kodiak Capital Group LLC, Ryan Hodson, BMA Securities, as well
as Island Capital Management LLC. Kodiak fraudulently purchased the company’s existing convertible note from LG capital.
Kodiak then began converting the note into common stock. The suit claims that Ryan Hodson, the principal of Kodiak Capital, engaged
in a scheme to defraud the company. Additionally, the suit claims Hodson and BMA Securities engaged in market manipulation causing
damage to the company. Island Capital is accused of a breach of fiduciary responsibility, by issuing Kodiak the shares of stock.
On
May 3 , 2016 a Notice of Dismissal was filed for the New York case and on 2016 May 5, 2016 the company filed a lawsuit against
all Kodiak Capital Group et al in the District of California, asserting all of the same allegations as the previously filed New
York case. The company re-filed the action in Federal Court in California to include a new state based fraud claim against the
defendants that are California residents. Our counsel failed to serve process on the defendants. The court dismissed the case
on the procedural ground of lack of prosecution. The Company terminated its litigation counsel due to lack of oversight and other
administrative disputes with counsel. It is expected that this lawsuit will be refiled in early 2017. The Statute of Limitations
for this action is 6 years so the Company has anple time to refile this action.
NOTE
15.
Subsequent
Events
On
October 1, 2016 the Company entered into an agreement with a consultant to perform investor relations and social media services.
The initial term of this agreement is for three months of services. As compensation for services the consultant shall be entitled
to receive 300,000 (Three Hundred Thousand) shares of Company stock.
On
October 4, 2016 the majority of the Series B Preferred shareholders voted in favor of increasing the number of authorized Series
B shares from 2,000 to 2,550 and the Company filed an amended Certificate of Designation with the Nevada Secretary of State to
reflect this increase.
On
October 4, 2016 the Board of Directors voted in favor of issuing new Series B shares as follows:
-
20 Preferred
B Shares to Faruk Okcetin
-
20 Preferred
B shares to Glenn McGinnis
-
10 Preferred
B Shares to J. Richard Iler
-
147 Preferred
B Shares to Lorraine Yarde
On
October 24, 2016 Mr. Iler’s Employment Agreement was amended (the “Amended and Restated Employment Agreement”)
to extend the term of employment, amend the employment from part-time to full time and to increase Mr. Iler’s salary from
$100,000 to $125,000.
On
November 11, 2016 the Company entered into an agreement with Cleartrust, LLC., to be engaged as the Company’s new Transfer
Agent. The agreement will be in effect until canceled by either party. Cancellation of the agreement by the Company requires thirty
day advanced written notice. Cancellation of the agreement by the Transfer Agent requires ten day advance written notice. In accepting
appointment as Transfer Agent for the Company, both the Transfer Agent and Company hereby acknowledge that the Transfer Agent
does not assume any contracts or agreements entered into by any prior Transfer Agent, the Company, or any Third Party.