Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨
Yes
þ
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
¨
Yes
þ
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ
Yes
¨
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes
þ
No
¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant
’
s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
¨
Yes
þ
No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter ($0.35 per share). $2,229,119.90 on June 30, 2015.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date. As of April 17, 2017 there were 116,932,177 shares outstanding.
During the year ended December 31, 2016, the Company received $63,975 from a related party in exchange for convertible notes payable of $63,975 with the beneficial conversion feature valued at $62,725.
During the year ended December 31, 2016, the Company issued 590,000 shares of common stock valued at $360,200 and 200,000 shares of common stock valued at $47,480 for prepaid consulting services.
During the year ended December 31, 2016, the Company issued 2,026,785 shares of common stock valued at $1,114,732 ($0.55 per share) for the conversion of $36,500 of loans and purchase order financing. The Company recognized a loss on the conversion of $1,078,232.
During the year ended December 31, 2015, the Company received $359,500 from a related party in exchange for convertible notes payable of $359,500 with the beneficial conversion feature valued at $342,225.
During the year ended December 31, 2015 a related party elected to accept as the note receivable of $84,760 and accrued interest of $2,967 as payment against convertible notes payable related party.
During the year ended December 31, 2015 the Company purchased $300,000 of leasehold improvements in exchange for a $300,000 convertible note payable.
During the year ended December 31, 2015 the Company issued 250,000 shares for $97,500 ($0.39 per share) for prepaid services.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
NOTE 1 ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN
(A) Organization
On March 16, 2011 PayMeOn, Inc., a Nevada corporation organized on May 30, 2006 (the "Company") completed its agreement and plan of merger (the "Merger Agreement") to acquire Hyperlocal Marketing, LLC, a Florida limited liability company ("Hyperlocal"), pursuant to which Hyperlocal merged with and into HLM PayMeOn, Inc., a Florida corporation and wholly owned subsidiary of PAYM. Under the terms of the Merger Agreement, the Hyperlocal members received 301,296 shares of the Company common stock, which equals approximately 50.1% of the total shares of the Company issued and outstanding following the merger on a fully diluted basis. In accordance with ASC Topic 360-10-45-15, the transaction is accounted for as a reverse acquisition. Hyperlocal is considered the accounting acquirer and the acquiree is PayMeOn since the members of Hyperlocal obtained voting and management control of PayMeon and the transaction has been accounted for as a reverse merger and recapitalization.
Hyperlocal Marketing, LLC was originally organized in the State of Florida on January 22, 2010. The Company has focused its efforts on organizational activities, raising capital, software development and evaluating operational opportunities.
In 2014, the Company began selling Prodeco Technologies, LLC brand electric bicycles, an affiliate entity, of which the Company acquired a 19.4% equity interest (See note 13). During 2015, the Company expanded its sales of electric bicycles to include sales of electric bicycles and related products made by other manufacturers in a new retail store location in Fort Lauderdale.
During the first quarter of 2016, PayMeOn formed a new subsidiary, Paymeon Brands, Inc., to pursue the business of developing, marketing, managing and monetizing lifestyle brands and products. The Company intends to develop and leverage its relationships and expertise with respect to manufacturing processes, wholesale and retail distribution networks, and social influencer promotion, primarily targeting youth oriented "lifestyle" markets to create and grow new and existing brands across several market segments.
On April 19, 2016, the Companys wholly-owned subsidiary, Paymeon Brands, Inc., entered into a Memorandum of Understanding with Damion D Roc Butler to exclusively produce, manufacture and market certain intellectual property for certain trademarks held by Mr. Butler, including but not limited to, "Bad Boy Tour Merchandise," "Revolt," Invisible Bully and "Ciroc. The agreement provides for Paymeon Brands and Butler organizing a new entity equally owned by the parties. As of December 31, 2016 the parties have not formally reached an agreement.
On October 16, 2016, the Company formed a new, wholly-owned company called Xtreme Fat Tire Bike Holdings, LLC (Xtreme). The Company was formed to pursue potential development of the fat tire segment of the electric bikes market. To date, Xtreme has had no material operations.
PayMeOn Inc. and its wholly owned subsidiaries are herein referred to as the "Company".
(B) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of PayMeOn, Inc. and its wholly owned subsidiaries, Hyperlocal Marketing, LLC, PayMeOn Brands, Inc, HLM PayMeOn, Inc. and Xtreme Fat Tire Bike Holdings. LLC, All intercompany accounts have been eliminated in the consolidation.
(C) Going Concern
Since inception, the Company has incurred net operating losses and used cash in operations. As of December 31, 2016, the Company has an accumulated deficit of $11,764,087, a working capital deficiency of $2,320,139 and used cash in operations of $455,499 for the year ended December 31, 2016. Losses have principally occurred as a result of the substantial resources required for research and development and marketing of the Company's products which included the general and administrative expenses associated with its organization and product development.
F-8
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Cash and Cash Equivalents
The Company considers all highly liquid temporary cash instruments with a maturity of three months or less to be cash equivalents.
(B) Use of Estimates in Financial Statements
The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates during the period covered by these financial statements include the useful lives of depreciable assets, valuation of inventory allowances, valuation of accounts receivable allowance, valuation of deferred tax asset, stock based compensation and any beneficial conversion features on convertible debt.
(C) Fair value measurements and Fair value of Financial Instruments
The Company adopted FASB ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet date.
(D) Prepaid expenses
On November 6, 2015, the Company entered into a business consulting and strategic planning agreement with Mayer and Associates. The Company issued 250,000 shares of common stock valued at $97,500 ($0.39 per share) the fair market value on the date of issuance and a one-time cash payment of $50,000 to consultant. The agreement is for a six month term and includes standard non-competition, non-solicitation and other covenants. On January 4, 2016 both parties agreed to extend the consulting agreement six months and the Company issued an additional 500,000 shares of common stock valued at $235,000 ($0.47 per share). On June 10, 2016, the Company entered into a legal services consulting agreement, whereby consultant agrees to provide legal review of certain retail agreements for the Company on an as needed basis. The Company issued 100,000 shares of common stock valued at $50,000 ($0.50 per share) the fair market value on the date of issuance. The agreement is for a twelve month term and includes standard non-competition, non-solicitation and other covenants. On October 12, 2016 the Company issued 100,000 shares of common stock valued at $32,000 ($0.32 per share) the fair market value on the date of issuance to a consultant for services. The agreement is for a twelve month term and includes standard non-competition, non-solicitation and other covenants As of December 31, 2016 and December 31, 2015 Company has expensed $372,690 and $44,331 and has a prepaid expense of $47,480 and $103,169, respectively. As of December 31, 2016 the Company has other prepaid expenses of $882.
F-9
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
(E) Accounts Receivable
Accounts receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense.
(F)
Inventories
The Companys inventories consist entirely of purchased finished goods. Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis.
(G) Computer Equipment, Leasehold Improvements and Website Costs
Computer Equipment, Leasehold improvements and Website Costs are capitalized at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is three to five years for all categories. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of computer equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded in operations.
Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized.
The Company has adopted the provisions of ASC 350-50-15, "Accounting for Web Site Development Costs." Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years.
|
|
|
|
|
Depreciation/
|
|
|
Amortization
|
Asset Category
|
|
Period
|
Website costs
|
|
5 Years
|
Computer equipment
|
|
3 Years
|
Leasehold improvements
|
|
5 Years
|
Computer equipment, leasehold improvements and website costs consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
6,724
|
|
|
$
|
4,563
|
|
Lease hold improvements
|
|
|
300,000
|
|
|
|
300,000
|
|
Website development
|
|
|
24,775
|
|
|
|
24,775
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
331,499
|
|
|
|
329,338
|
|
Accumulated depreciation
|
|
|
(104,102
|
)
|
|
|
(38,970
|
)
|
Balance
|
|
$
|
227,397
|
|
|
$
|
290,368
|
|
Depreciation expense for years ended December 31, 2016 and 2015 was $65,131 and $11,478 respectively.
F-10
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On October 22, 2015, the Company issued an unsecured promissory note in the principal amount of $300,000 to PDQ Auctions, LLC for leasehold improvements of the facilities subleased from PDQ Auctions, LLC. The note bears interest at an annual rate of 7% and is payable on or before October 22, 2017, unless the note is converted or prepaid prior to the maturity date. Subject to certain limitations below, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.35 per share, subject to adjustment. In the event the Company issues any new or additional promissory notes that pay an interest rate that exceeds 7% per annum, then the holder shall be entitled to request an increase in the interest rate payable on the note to an amount equal to the rate being paid on the new or additional notes. The conversion of the note may be limited if, upon conversion, the holder thereof would beneficially own more than 4.9% of the Companys common stock. The note may be prepaid at the option of the Company commencing 190 days after the issuance of the note.
(H) Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or a change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset.
(I) Revenue Recognition
The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services or installation by the Company are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured in accordance with FASB ASC 605,
Revenue Recognition
, as amended and interpreted. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying financial statements.
Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products sold.
(J) Investment Equity Method
On July 18, 2014 the Company entered into and completed two membership interest purchase agreements to acquire a 19.4% equity interest in Prodeco Technologies, LLC, a private manufacturer of electric bicycles under the brand "Prodeco" with manufacturing facilities located in Oakland Park, Florida. Prodeco Technologies was organized under the laws of the State of Florida in June 2012. The Prodeco Technologies membership interests were acquired through the acquisition of all of the issued and outstanding membership interests of A Better Bike, LLC and EBikes, LLC, members of Prodeco Technologies, LLC. A Better Bike, LLC is owned by Vincent L. Celentano, the Company's largest individual shareholder. EBikes is owned by Vincent D. Celentano, II. In consideration of the acquisition of all of the issued and outstanding membership interests of A Better Bike and EBikes, the Company issued an aggregate of 2,941,176 restricted shares of its common stock to the members of A Better Bike and EBikes. For accounting purposes the transactions are recorded at the historical cost basis of $0 from the related parties. For financial statement purposes, the Company accounts for its investment in this affiliated entity under the equity method. During the year ended December 31, 2016 the Company sold its interest for total proceeds of $30,000.
Under the equity method, investments are carried at cost, plus or minus the Companys proportionate share, based on present ownership interests, of: (a) the investees profit or loss after the date of acquisition; (b) changes in the Companys equity that have not been recognized in the investees profit or loss; and (c) certain other adjustments. The Company enjoys a close association with this affiliate through participation that allows for a significant amount of influence over the affiliates business decisions.
F-11
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
(K) Loss Per Share
The basic loss per share is calculated by dividing the Company's net loss available to common shareholders by the weighted average number of common shares during the period. The diluted loss per share is calculated by dividing the Company's net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. The Company has 4,207,181 and 199,065 shares issuable upon the exercise of options and warrants and approximately 4 million and 2 million shares issuable upon conversion of convertible notes payable that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the years ended December 31, 2016 and 2015, respectively.
(L) Stock-Based Compensation
The Company recognizes compensation costs to employees under FASB ASC Topic 718, Compensation Stock Compensation. Under FASB ASC Topic. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC Topic 505, Equity Based Payments to Non-Employees. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
(M) Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 ("ASC 740-10-25"). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Companys income tax expense differs from the expected tax expense for federal income tax purpose by applying the Federal & State blended rate of 37.63% as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Expected income tax (benefit) expense at the statutory rate of 37.63%
|
|
$
|
(1,391,352
|
)
|
|
$
|
(274,869
|
)
|
Tax effect of expenses that are not deductible for income tax purposes (net of other amounts deductible for tax purposes)
|
|
|
906,433
|
|
|
|
23,450
|
|
Change in valuation allowance
|
|
|
484,919
|
|
|
|
251,419
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
|
|
|
$
|
|
|
The components of deferred income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred income tax asset:
|
|
$
|
756,064
|
|
|
$
|
681,306
|
|
Net operating loss carryforwards
|
|
|
2,124,553
|
|
|
|
1,715,697
|
|
Valuation allowance
|
|
|
(2,880,617
|
)
|
|
|
(2,397,003
|
)
|
Deferred income taxes
|
|
$
|
|
|
|
$
|
|
|
F-12
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
As of December 31, 2016, the Company has a net operating loss carry forward of approximately $5,600,000 available to offset future taxable income through 2036. This results in deferred tax assets of approximately $2,880,000 as of December 31, 2016. The valuation allowance at December 31, 2016 was approximately $2,880,000. The change in the valuation allowance for the year ended December 31, 2016 was an increase of approximately $484,000. Tax returns for the years ended December 31, 2016, 2015, 2014 and 2013 are subject to examination by the Internal Revenue Service.
As a result of the Hyperlocal acquisition in 2011 and the corresponding change in ownership, the Companys NOLs are subject to a Section 382.
(N) Cost of Sales
Components of cost of sales include product costs and shipping costs to customers.
(O) Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers as revenue and shipping and handling costs to customers as cost of revenue.
(P) Reclassification
Certain amounts from prior periods have been reclassified to conform to the current period presentation.
(Q) Segment information
In accordance with the provisions of ASC 280-10,
Disclosures about Segments of an Enterprise and Related Information
, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two identifiable operating segments based on the activities of the company in accordance with the ASC 280-10. We had two operating segments at December 31, 2016, one that sells electric bicycles and related products made by other manufacturers in a retail store location in Fort Lauderdale and during the first quarter of 2016, PayMeOn formed a new subsidiary, Paymeon Brands, Inc., to pursue the business of developing, marketing, managing and monetizing lifestyle brands and products. The Company intends to leverage its relationships and expertise with respect to manufacturing processes, wholesale and retail distribution networks, and social influencer promotion, primarily targeting youth oriented "lifestyle" markets to create and grow new and existing brands across several market segments.
NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02,
Leases
, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessees obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessees right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In March 2016, the FASB issued ASU 2016-09,
Compensation Stock Compensation: Improvements to Employee Share-Based Payment Accounting
, which relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
F-13
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
In April 2016, the FASB issued ASU 201610 Revenue from Contract with Customers (Topic 606): identifying Performance Obligations and Licensing. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entitys promise to grant a license provides a customer with either a right to use the entitys intellectual property (which is satisfied at a point in time) or a right to access the entitys intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
NOTE 4 NOTES RECEIVABLE RELATED PARTY
On January 20, 2015, the Company received a 7% unsecured promissory note in the principal amount of $75,000 (the Note Receivable) from Prodeco Technologies, LLC, an affiliated entity. The note was payable January 20, 2018. The note holder was required to pay interest in the amount of $1,312 per quarter due on the 15
th
each month following the end of the quarter until the maturity date. On February 6, 2015 the Company advanced an additional $9,761 to Prodeco Technologies, LLC under the same terms due on February 8, 2018. For the year ended December 31, 2015 the Company has $2,967 of interest income. During the year ended December 31, 2015 Prodeco Technologies, LLC, a related party, elected to accept the Note Receivable of $84,760 and accrued interest of $2,967 as payment against convertible notes payable to the related party. See Note 13.
NOTE 5 CONVERTIBLE NOTES PAYABLE RELATED PARTY
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Loan Amount
|
|
$
|
612,821
|
|
|
$
|
548,846
|
|
Discount
|
|
|
(12,407
|
)
|
|
|
(135,398
|
)
|
Balance
|
|
$
|
600,414
|
|
|
$
|
413,448
|
|
On December 27, 2012, the Company entered into an agreement to issue a secured convertible promissory note in the principal amount of $79,440 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.345 per share, subject to adjustment for stock splits and dividends. The Company recorded a debt discount of $79,440 for the fair value of the beneficial conversion feature. As of December 31, 2014 the Company amortized $79,440 of the debt discount. Accrued interest at December 31, 2016 and December 31, 2015 amounted to $22,320 and $16,744, respectively. On April 15, 2014, the note holder agreed to extend the note through December 23, 2014. On December 23, 2015, the note holder agreed to extend the note through December 23, 2016. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On December 27, 2012, the Company entered into an agreement to issue a secured convertible promissory note in the principal amount of $86,060 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.345 per share, subject to adjustment for stock splits and dividends. The Company recorded a debt discount of $86,060 for the fair value of the beneficial conversion feature. As of December 31, 2014 the Company amortized $86,060 of the debt discount. Accrued interest at December 31, 2016 and December 31, 2015 amounted to $24,179 and $18,138, respectively. On April 15, 2014, the note holder agreed to extend the note through December 23, 2014. On December 23, 2015, the note holder agreed to extend the note through December 23, 2016. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
F-14
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On May 15, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $760 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. The Company recorded a debt discount of $760 for the fair value of the beneficial conversion feature. On May 18, 2015, the note holder agreed to extend the note through May 15, 2016. On May 15, 2016, the note holder agreed to extend the note through May 15, 2017, As of December 31, 2016 and December 31, 2015 the Company amortized $760 and $760 and accrued interest amounted to $140 and $87, respectively.
On May 22, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $750 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. The Company recorded a debt discount of $750 for the fair value of the beneficial conversion feature. On May 18, 2015, the note holder agreed to extend the note through May 15, 2016. On May 22, 2016, the note holder agreed to extend the note through May 22, 2017. As of December 31, 2016 and December 31, 2015 the Company amortized $750 and $750 and accrued interest amounted to $137 and $85, respectively
On June 6, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $10,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On June 30, 2015, the note holder agreed to extend the note through June 6, 2016. On August 13, 2016 the note holder agreed to extend the note through June 2, 2017.The Company recorded a debt discount of $10,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $10,000 and $10,000 and accrued interest amounted to $1,801 and $1,099, respectively.
On June 15, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $781 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On June 30, 2015, the note holder agreed to extend the note through June 15, 2016. On August 13, 2016 the note holder agreed to extend the note through June 15, 2017.The Company recorded a debt discount of $781 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $781 and $781 and accrued interest amounted to $139 and $84, respectively.
On June 18, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On June 30, 2015, the note holder agreed to extend the note through June 18, 2016. On August 13, 2016 the note holder agreed to extend the note through June 18, 2017.The Company recorded a debt discount of $500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $500 and $500 and accrued interest amounted to $89 and $54, respectively.
On June 26, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $1,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On June 30, 2015, the note holder agreed to extend the note through June 26, 2016. On August 13, 2016 the note holder agreed to extend the note through June 26, 2017.The Company recorded a debt discount of $1,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $1,000 and $1,000 and accrued interest amounted to $176 and $106, respectively.
F-15
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On June 27, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $4,500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On June 30, 2015, the note holder agreed to extend the note through June 27, 2016. On August 13, 2016 the note holder agreed to extend the note through June 27, 2017.The Company recorded a debt discount of $4,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $4,500 and $4,500 and accrued interest amount to $792 and $476, respectively.
On July 8, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $5,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017.The Company recorded a debt discount of $5,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $5,000 and $5,000 and accrued interest amounted to $870 and $519, respectively.
On July 15, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $10,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017.The Company recorded a debt discount of $10,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 and 2014 the Company amortized $10,000 and $10,000 and accrued interest amounted to $1,726 and $1,024, respectively.
On July 17, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $7,500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. The Company recorded a debt discount of $6,250 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $6,250 and $6,250 and accrued interest amounted to $1,292 and $765, respectively.
On July 28, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $24,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. The Company recorded a debt discount of $12,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $12,000 and $12,000 and accrued interest amounted to $4,083 and $2,398, respectively.
On August 19, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $7,500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017.The Company recorded a debt discount of $6,875 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $6,875 and $6,875 and accrued interest amounted to $1,244 and $718, respectively.
F-16
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On September 10, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $10,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. The Company recorded a debt discount of $5,833 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $5,833 and $5,833 and accrued interest amounted to $1,617 and $915, respectively.
On September 30, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $10,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On September 30, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. The Company recorded a debt discount of $10,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $10,000 and $10,000 and accrued interest amounted to $1,578 and $876, respectively.
On October 1, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.30 per share, subject to adjustment. On November 20, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. There was no beneficial conversion expense recorded as the fair value of the common stock was less than the exercise price. As of December 31, 2016 and December 31, 2015 and 2014 the Company recorded accrued interest of $79 and $44, respectively.
On October 2, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $382 to a related party. The note bears interest at an annual rate of 7% and are payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.30 per share, subject to adjustment. On November 20, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017.There was no beneficial conversion expense recorded as the fair value of the common stock was less than the exercise price. As of December 31, 2016 and December 31, 2015 and 2014 the Company recorded accrued interest of $60 and $33, respectively.
On October 20, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $2,400 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On November 20, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017.The Company recorded a debt discount of $2,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $2,000 and $1,890 and accrued interest of $370 and $201, respectively.
On October 22, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $6,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On November 20, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. The Company recorded a debt discount of $5,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $5,000 and $4,699 and accrued interest amounted to $922 and $501.
F-17
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On October 30, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $10,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.12 per share, subject to adjustment. On November 20, 2015, the note holder agreed to extend the note through April 30, 2016. On August 13, 2016 the note holder agreed to extend the note through April 30, 2017. The Company recorded a debt discount of $9,167 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $9,167 and $8,414 and accrued interest of $1,521 and $819,
respectively.
On January 5, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $1,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.30 per share, subject to adjustment. On May 21, 2016 the note holder agreed to extend the note through January 5, 2017. The Company recorded a debt discount of $1,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $1,000 and $1,000 and accrued interest amounted to $139 and $69, respectively.
On January 20, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $85,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.30 per share, subject to adjustment. On May 21, 2017 the note holder agreed to extend the note through January 20, 2017. On March 15, 2016 note holder agreed to extend the note through December 31, 2017. The Company recorded a debt discount of $85,000 for the fair value of the beneficial conversion feature. As December 31, 2016 and December 31, 2015 the Company amortized $85,000 and $80,342 and accrued interest amounted to $11,590 and $5,624.
On February 6, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $47,500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.30 per share, subject to adjustment. On May 21, 2016 the note holder agreed to extend the note through February 6, 2017. The Company recorded a debt discount of $47,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $47,500 and $42,685 and accrued interest amounted to $6,322 and $2,988.
On March 13, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $50,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.30 per share, subject to adjustment. On May 21, 2016 the note holder agreed to extend the note through March 13, 2017. The Company recorded a debt discount of $50,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $50,000 and $40,137 and accrued interest amounted to $6,319 and $2,810, respectively.
On May 12, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $30,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through May 12, 2017.The Company recorded a debt discount of $30,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $30,000 and $19,068 and accrued interest amounted to $3,441 and $1,335, respectively.
F-18
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On June 3, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $1,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through June 3, 2017. The Company recorded a debt discount of $900 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $900 and $518 and accrued interest amounted to $110 and $40, respectively.
On June 9, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through June 9, 2017. The Company recorded a debt discount of $450 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $450 and $252 and accrued interest amounted to $55 and $20, respectively.
On June 9, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $5,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through June 9, 2017. The Company recorded a debt discount of $4,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $4,500 and $2,515 and accrued interest amounted to $547 and $196, respectively.
On June 16, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $1,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through June 16, 2017. The Company recorded a debt discount of $900 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31 2015 the Company amortized $900 and $488 and accrued interest amounted to $108 and $38, respectively.
On June 16, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $3,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through June 16, 2017. The Company recorded a debt discount of $2,700 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $2,700 and $1,457 and accrued interest amounted to $324 and $113, respectively.
On June 16, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $1,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through June 16, 2017. The Company recorded a debt discount of $900 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $900 and $486 and accrued interest amounted to $108 and $38, respectively.
On July 13, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $8,500 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. On August 13, 2016 the note holder agreed to extend the note through July 13, 2017. The Company recorded a debt discount of $6,375 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $6,375 and $1,834 and accrued interest amounted to $875 and $279, respectively.
F-19
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On August 11, 2015, the Company received $20,000 from an accredited investor for working capital in consideration of the issuance of unsecured convertible notes. These notes bear interest at 7% and are due in twelve months from issuance of the note. The note is convertible into shares of common stock at $0.20 per share, subject to adjustment and certain limitations on conversion. The Company recorded a debt discount of $15,000 for the fair value of the beneficial conversion feature. On August 13, 2016 the note holder agreed to extend the note through August 11, 2017. As of December 31,, 2016 and December 31, 2015 the Company amortized $15,000 and $5,507 and accrued interest amounted to $1,948 and $545, respectively.
On October 2, 2015, the Company received $1,000 from an accredited investor for working capital in consideration of the issuance of unsecured convertible notes. These notes bear interest at 7% and are due in twelve months from issuance of the note. The note is convertible into shares of common stock at $0.20 per share, subject to adjustment and certain limitations on conversion. The Company recorded a debt discount of $750 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $750 and $185 and accrued interest amounted to $87 and $17, respectively. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On October 16, 2015, the Company received $25,000 from an accredited investor for working capital in consideration of the issuance of unsecured convertible notes. This note bears interest at 7% and is due in twelve months from issuance of the note. The note is convertible into shares of common stock at $0.20 per share, subject to adjustment and certain limitations on conversion. The Company recorded a debt discount of $18,750 for the fair value of the beneficial conversion feature. As of December 31, and December 31, 2015 the Company amortized $18,750 and $3,904 and accrued interest amounted to $2,119 and $364, respectively. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On November 17, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $50,000 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $47,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $47,500 and $5,466 and accrued interest amounted to $3,912 and $403, respectively. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On December 18, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $2,500 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $2,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $2,500 and $89 and accrued interest amounted to $182 and $6, respectively. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On December 18, 2015, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $27,500 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $27,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 and December 31, 2015 the Company amortized $27,500 and $753 and accrued interest amounted to $1,983 and $53, respectively. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On January 15, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $12,500 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $12,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $12,021, and accrued interest amounted to $841. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
F-20
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On February 16, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $4,000 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $4,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $3,496 and accrued interest amounted to $245. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On February 16, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $3,500 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $3,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $3,059, and accrued interest amounted to $214. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On February 17, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $5,000 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $5,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $4,356, and accrued interest amounted to $305. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On February 26, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $10,000 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $10,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $8,466, and accrued interest amounted to $593. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On March 7, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $2,500 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $2,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $2,048 and accrued interest amounted to $143. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On March 7, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $2,500 to a related party. The note bears interest at 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $2,500 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $2,048, and accrued interest amounted to $143. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
On April 14, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $18,975 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $18,975 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $13,568 and accrued interest amounted to $143. On March 15, 2017 note holder agreed to extend the note through December 31, 2017.
F-21
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On July 1, 2016, the Company entered into an agreement to issue an unsecured convertible promissory note in the principal amount of $5,000 to a related party. The note bears interest at an annual rate of 7% and is payable on or before 12 months from the date of issuance. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company's common stock at a conversion price of $0.20 per share, subject to adjustment. The Company recorded a debt discount of $5,000 for the fair value of the beneficial conversion feature. As of December 31, 2016 the Company amortized $2,507, and accrued interest amounted to $175.
During the year ended December 31, 2015 the related party elected to accept the Note Receivable of $84,760 and accrued interest of $2,967 as payment against convertible notes payable related party.
NOTE 6 CONVERTIBLE NOTES PAYABLE
On October 22, 2015, the Company issued an unsecured promissory note in the principal amount of $300,000 to PDQ Auctions, LLC for leasehold improvements of the facilities subleased from PDQ Auctions, LLC. The note bears interest at an annual rate of 7% and is payable on or before October 22, 2017, unless the note is converted or prepaid prior to the maturity date. Subject to certain limitations below, the note may be converted at any time, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.35 per share, subject to adjustment. In the event the Company issues any new or additional promissory notes that pay an interest rate that exceeds 7% per annum, then the holder shall be entitled to request an increase in the Interest rate payable on the note to an amount equal to the rate being paid on the new or additional notes. The conversion of the note may be limited if, upon conversion, the holder thereof would beneficially own more than 4.9% of the Companys common stock. The note may be prepaid at the option of the Company commencing 190 days after the issuance of the note. As of December 31, 2016 and December 31, 2015 the Company accrued interest amounted to $25,085 and $4,027, respectively.
NOTE 7 NOTES PAYABLE
In December and September 2010, the Company issued unsecured, non-interest bearing, due on demand notes for $8,000 and $16,000, respectively. During the quarter ended December 31, 2010 the Company repaid $22,000. As of September 30, 2016, the outstanding principal balance of the notes was $2,000.
On July 13, 2016, HLM Paymeon, Inc., the Companys wholly owned subsidiary, entered into a merchant agreement with Summit Capital Partners (SCP), whereby it sold $40,500 of accounts receivable (the Receipts Purchased Amount) for a total purchase price of $30,000. HLM Paymeon shall repay $337 daily until the Receipts Purchased Amount is repaid. The Company recorded a $10,500 deferred finance charge on the date of issuance. To secure HLM Paymeons payment and performance obligations to SCP, HLM Paymeon has granted to SCP a security interest in all HLM Paymeons accounts, chattel paper, documents, equipment, general intangibles, instruments and inventory. In addition, the Companys directors have individually guaranteed repayment of the Receipts Purchased Amount. As of December 31, 2016 the Company has a balance owed $1,885 and has amortized a total of $10,500.
On September 23, 2016, the Company entered into demand note in the amount of $5,000. The Company is obligated to repay the holder a total of $6,333 after 30 days. During the year ended December 31, 2016 the Company repaid a total of $5,000. Accrued interest at December 31, 2016 amounted to $1,333.
NOTE 8 PURCHASE ORDER FINANCING
On August 17, 2016, Paymeon Brands, Inc., a wholly-owned subsidiary of the Company, entered into a purchase order purchase and sale agreement with a third party purchaser, whereby Paymeon Brands sold $50,000 of current purchase orders in exchange for $40,000. As a further inducement for purchaser to enter into the agreement as collateral security for any and all obligations owing by PayMeOn Brands to purchaser, PayMeOn Brands has granted to Purchaser, as collateral security, a first lien security interest in all of PayMeOn Brands accounts created as a result of purchase orders financed or purchased by purchaser and all inventory. The Company recorded a $10,000 deferred finance charge on the date of issuance. As of December 31, 2016 the Company amortized $10,000 of the deferred finance charge. During the year ended December 31, 2016 the Company repaid a total of $33,500. On December 15, 2016 the holder converted the remaining balance of $16,500 into 883,936 shares of common stock as$0.0187 per share. The fair value price per share at August 17, 2016 was $0.55 per share. Therefore the Company recorded a $469,665 loss on conversion of debt.
F-22
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On September 9, 2016, Paymeon Brands, Inc., a wholly-owned subsidiary of the Company, entered into a purchase order purchase and sale agreement with a third party purchaser, whereby Paymeon Brands sold $20,000 of current purchase orders in exchange for $15,000. As a further inducement for purchaser to enter into the agreement as collateral security for any and all obligations owing by PayMeOn Brands to purchaser, PayMeOn Brands has granted to purchaser, as collateral security, a first lien security interest in all of PayMeOn Brands accounts created as a result of purchase orders financed or purchased by purchaser and all inventory. The Company recorded a $5,000 deferred finance charge on the date of issuance. As of December 31, 2016 the Company amortized $5,000 of the deferred finance charge and repaid $5,000. On December 15, 2016 the holder converted the remaining balance of $20,000 into 1,142,849 shares of common stock as$0.0175 per share. The fair value price per share at August 17, 2016 was $0.55 per share. Therefore the Company recorded a $608,567 loss on conversion of debt.
NOTE 9 PURCHASE ORDER FINANCING RELATED PARTY
On September 14, 2016, Paymeon Brands, Inc. entered into a purchase order purchase and sale agreement with a related party, whereby Paymeon Brands sold $5,000 of current purchase orders in exchange for $4,000. As a further inducement for purchaser to enter into the agreement as collateral security for any and all obligations owing by PayMeOn Brands to purchaser, PayMeOn Brands has granted to purchaser, as collateral security, a first lien security interest in all of PayMeOn Brands accounts created as a result of purchase orders financed or purchased by purchaser and all inventory. The Company recorded a $1,000 deferred finance charge on the date of issuance. As of December 31, 2016 the Company amortized $1,000 of the deferred finance charge.
NOTE 10 COMMITMENTS AND CONTINGENCIES
On August 15, 2011, the Company entered into an employment agreement with its Chief Executive Officer. The agreement is for a period of one year and automatically extends for one day each day until either party notifies the other not to further extend the employment period, provides for an annual base salary totaling $250,000 and annual bonuses based on pre-tax operating income, as defined, for an annual minimum of $50,000 in total. On July 18, 2014, the Companys Chief Executive Officer forgave $326,727 of accrued payroll and amended his employment agreement to reduce his base salary by 30% and eliminated his guaranteed bonus of $50,000 per year.
For the years ended December 31, 2016 and 2015 recorded a salary expense of $175,000 and $175,000, respectively. Accrued compensation at December 31, 2016 and December 31, 2015 was $463,730 and $286,572, respectively (See Note 13).
On May 1, 2013, the Company entered into a lease agreement for executive offices located at 2400 E. Commercial Blvd., Suite 612, Fort Lauderdale, Florida. The facility was approximately 4,777 square feet. The lease was for a term of 39 months at a current cost of approximately $9,900 per month. The lease contained three months of deferred rent that would be forgiven if the Company made its 36 required monthly payments timely. The Company was also required to make a security deposit of $31,407. As of March 31, 2014, the Company had not been timely on its monthly payments and is in default of the agreement. On March 31, 2014, the company received a "notice of default" from legal counsel representing the landlord for the office space. The letter demanded immediate payment of $41,937 for rent past due as of April 1, 2014. On May 15, 2014, the Company returned the office space to the landlord. As of May 20, 2014, the Company has not been able to pay its outstanding rent obligation and the landlord has accelerated all rent obligations due under the lease agreement. The Company has been served with a civil lawsuit with Case # 14007105 filed on February 11, 2015. The Landlord is seeking $376,424 in accelerated rent and damages and $12,442 for its attorneys costs.
On April 22, 2015, the motion for unpaid rent, recovery of abated rents and tenant improvements and attorneys costs was granted by the Circuit Court for the 17
th
Judicial Circuit in and for Broward County in the amount of $388,866.
The Company has accrued the full amount of rent and attorney costs as of December 31, 2016.
On October 22, 2015, the Companys wholly owned subsidiary, HLM PayMeOn, Inc., entered into a sublease agreement with PDQ Auctions, LLC to lease retail premises located 2599 North Federal Highway, Fort Lauderdale, FL 33305. The premises are used to operate a retail electric hover board, bicycle and related product store under the Companys irideelectric brand. The sublease is for an initial term of approximately 5 years at an initial monthly sum of $5,617 and an additional 5 year term at a monthly sum of $5,899. As consideration for leasehold improvements, the Company issued PDQ Auctions, LLC a convertible note payable in the amount of $300,000 (See Note 6).
F-23
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
Future minimum lease commitments due for facilities leases under non-cancellable capital and operating leases at December 31, 2016 are as follows:
|
|
|
|
|
2017
|
|
$
|
67,410
|
|
2018
|
|
|
67,410
|
|
2019
|
|
|
67,410
|
|
2020
|
|
|
33,705
|
|
Total minimum lease payments
|
|
$
|
235,935
|
|
Total rent expense for the year ended December 31, 2016 and 2015 amounted to $65,410 and $11,798, respectively.
Through its wholly-owned subsidiary, Paymeon Brands, the Company launched a crowd sourcing campaign through the online platform known as Indiegogo. The Company intended to crowd source donations for the development of a new, electrically powered tricycle known as the eChariot. As part of the campaign, the Company was required to establish a minimum goal of donations for its funding requirements. The Company set a minimum goal target for donations of $25,000. The Company surpassed its goal during the quarter and on October 3, 2016 and October 31, 2016, received approximately $25,000 from Indiegogo (after deducting platform and transaction fees). The Company is currently deciding if it will move forward with this endeavor. If not it will repay the amounts received.
On October 7, 2016, legal representatives of Remrylie Licensing, Inc. asked one of the Companys retail customers to cease and desist from selling items related to Chistopher "Notorious BIG" Wallace's image on Paymeon Brands behalf. Remrylie, owner of the exclusive right to market Notorious BIG's image, claimed that Paymeon Brands did not have the right to sell certain items it was selling through its retail customer. While we believe that the claims were without merit, we decided to cooperate and allow our retail customer to remove the items in question. On November 29, 2016 the Company and Remrylie Licensing, Inc., agreed to settle their dispute over royalty payments for sales of merchandise related to the estate of Notorious BIG. The Company agreed to pay $7,000 and the Parties mutually agreed to end the dispute and mutually indemnify each other. Paymeon does not expect to engage in any sales related to the estate of Notorious BIG in the future.
NOTE 11 STOCKHOLDERS DEFICIT
The Company is authorized to issue up to 1,000,000,000 shares of common stock, par value $0.001, and up to 5,000,000 shares of preferred stock, the designations and attributes of the preferred stock are subject to the future determination by the Company's board of directors.
On January 5, 2015 the Company sold a total of 50,000 shares to an individual for proceeds of $17,500 ($0.35 per share).
On November 6, 2015, the Company entered into a business consulting and strategic planning agreement with Mayer and Associates. The Company issued 250,000 shares of common stock valued at $97,500 ($0.39 per share) the fair market value on the date of issuance and a one-time cash payment of $50,000 to consultant. The agreement is for a six month term and includes standard non-competition, non-solicitation and other covenants. On January 4, 2016 both parties agreed to extend the consulting agreement six months and the Company issued an additional 500,000 shares of common stock valued at $235,000 ($0.47 per share). As of December 31, 2016 and December 31, 2015, the Company has expensed $382,500 and $44,331 and has a prepaid expense of $0 and $103,169, respectively.
On January 2, 2016, the Company entered into a six month investor relations agreement. The Company issued 60,000 shares of common stock valued at $28,200 ($0.47 per share) the fair market value on the date of issuance and a one-time cash payment of $50,000 to consultant.
On March 8, 2016, the Company sold a total of 125,000 shares to an accredited investor for proceeds of $25,000 ($0.20 per share).
On March 9, 2016, the Company sold a total of 125,000 shares to an accredited investor for proceeds of $25,000 ($0.20 per share).
F-24
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On March 23, 2016 the Company sold a total of 200,000 shares to two accredited investors for proceeds of $40,000 ($0.20 per share).
On April 15, 2016, the Company sold a total of 50,000 shares to an accredited investor for proceeds of $10,000 ($0.20 per share).
On May 2, 2016, the Company sold a total of 100,000 shares to an accredited investor for proceeds of $20,000 ($0.20 per share).
On May 6, 2016, the Company sold a total of 50,000 shares to an accredited investor for proceeds of $10,000 ($0.20 per share).
On May 11, 2016, the Company sold a total of 100,000 shares to an accredited investor for proceeds of $20,000 ($0.20 per share).
On May 12, 2016, the Company sold a total of 100,000 shares to an accredited investor for proceeds of $20,000 ($0.20 per share).
On May 24, 2016, the Company sold a total of 125,000 shares to an accredited investor for proceeds of $25,000 ($0.20 per share).
On June 2, 2016, the Company sold a total of 125,000 shares to an accredited investor for proceeds of $25,000 ($0.20 per share).
On June 10, 2016, the Company sold a total of 100,000 shares to an accredited investor for proceeds of $20,000 ($0.20 per share).
On June 10, 2016, the PayMeOn Brands entered into a legal services agreement. The Company issued 100,000 shares of common stock valued at $50,000 ($0.50 per share) in consideration of the services to be provided under the agreement. The agreement is for a twelve month term and includes standard non-competition, non-solicitation and other covenants. As of December 31, 2016 Company has expensed $27,945 and has a prepaid balance of $22,055.
On August 16, 2016, the Company sold a total of 75,000 shares to an accredited investor for proceeds of $15,000 ($0.20 per share).
On August 18, 2016, the Company sold a total of 12,500 shares to an accredited investor for proceeds of $2,500 ($0.20 per share).
On October 17, 2016, the Company issued 100,000 shares of common stock valued at $32,000 ($0.32 per share) to a consultant that will provide various marketing and operations services to the Company. The consulting agreement is for a term of one year and contains standard confidentiality and non-solicitation provisions. The term of the agreement is for one year. As of December 31, 2016 the Company expensed $6,575 and has a prepaid balance of $25,425.
On November 14, 2016, the Company sold a total of 12,500 shares to an accredited investor for proceeds of $2,500 ($0.20 per share).
On December 15, 2016 the holder of $16,500 of purchase order financing converted the balance into 883,936 shares of common stock at a price of $0.0187 per share and $20,000 of purchase order financing and a $5,000 note payable converted the balance into 1,142,849 shares of common stock at a price of 0.0175 per share. The Company recognized a loss of $1,078,232 which was the difference of the stock price of $0.50 on the date of conversion. See note 8.
On December 21, 2016, the Company issued 30,000 shares of common stock valued at $15,000 ($0.50 per share) to a consultant for legal services.
F-25
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On December November 29, 2016, the Company sold a total of 200,000 shares to an accredited investor for proceeds of $33,000 ($0.165 per share).
NOTE 12 OPTIONS AND WARRANTS
The following tables summarize all options and warrant grants to consultants for the years ended December 31, 2016 and December 31, 2015 and the related changes during these periods are presented below.
Stock Options and Warrants
|
|
|
|
|
|
|
|
Number of Options
And Warrants
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
Balance at December 31, 2014
|
|
380,225
|
|
$7.23
|
Granted
|
|
|
|
|
Exercised
|
|
|
|
|
Expired
|
|
(181,160)
|
|
12.89
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
199,065
|
|
$2.06
|
Granted
|
|
4,040,000
|
|
.51
|
Exercised
|
|
|
|
|
Expired
|
|
(31,884)
|
|
12.82
|
Balance at December 31, 2016
|
|
4,207,181
|
|
$.49
|
As of December 31, 2016 there are 4,167,181 options and warrants that are vested.
The Company's stock price was lower than the weighted average exercise price at December 31, 2016 and 2015, therefore there is no aggregate intrinsic value of the options and warrants.
On February 23, 2012, the Company granted warrants to purchase 31,884 shares of its common stock to consultants at an exercise price of $12.42 per share. The warrants begin to vest upon the sale of 72 associated accounts by the consultant and will vest 6 warrants per account sold thereafter. The warrants were issued pursuant to a marketing and sales consulting agreement. The term of the agreement is through February 23, 2016, unless earlier terminated by either party. In the event the consultant ceases to perform services under the agreement or either party terminates the agreement, then any vested, but unexercised warrants shall expire at the earlier of 180 days of the date of termination or the expiration date of the warrants. The warrants expired on February 23, 2016.
On April 16, 2014, the Company granted options to purchase 167,181 shares of its common stock to consultants at an exercise price of $.10 per share. The options vest immediately. The options expire on April 16, 2017. The options were valued using the Black Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 105%, risk free interest rate of .87%, an expected life of 3 years.
On February 25, 2016, Mr. Vincent L. Celentano was appointed to the Board of Directors of the Company. In conjunction with his appointment, the Company issued Mr. Celentano an option to acquire 1,000,000 shares of the Companys common stock. The option was fully vested at issuance and has a strike price of $0.51 per share and expires February 25, 2023. In addition, the Company appointed Edward A. Cespedes to be its Chairman of the Board of Directors. In conjunction with his appointment, Edward A. Cespedes was issued an option to acquire 1,000,000 shares of the Companys common stock. The option was fully vested at issuance and has a strike price of $0.51 per share and expires February 29, 2023. The options were valued using the Black Scholes Option Pricing Model, with the following assumptions: dividend yield at 0%, annual volatility of 153%, risk free interest rates of .78% based on expected life of 2 years.
F-26
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On February 25, 2016, the Company issued two consultants options to acquire 1,000,000 shares of the Companys common stock each. The options were fully vested at issuance and have a strike price of $0.51 per share and expire February 25, 2023. In addition, based on consulting agreements, consultants may be entitled to additional compensation based on net income or net sales criteria. The option was fully vested at issuance and has a strike price of $0.51 per share and expires February 29, 2023. The options were valued using the Black Scholes Option Pricing Model, with the following assumptions: dividend yield at 0%, annual volatility of 153%, risk free interest rates of .78% based on expected life of 2 years.
On February 29, 2016, the Company issued stock options to acquire a total of 40,000 shares of the Companys common stock to three employees. The options have a strike price of $0.51 per share and expire on March 1, 2021. The options vest 25% per year over 4 years beginning on March 1, 2017. The options were valued using the Black Scholes Option Pricing Model, with the following assumptions: dividend yield at 0%, annual volatility of 153%, risk free interest rates of .78% based on expected life of 2 years.
During the year ended December 31, 2016 total stock option expense amounted to $1,138,842.
NOTE 13 RELATED PARTIES
On July 18, 2014, the Company entered into and completed two membership interest purchase agreements to acquire a 19.4% equity interest in Prodeco Technologies, LLC, a private manufacturer of electric bicycles under the brand "Prodeco" with manufacturing facilities located in Oakland Park, Florida. Prodeco was organized under the laws of the State of Florida in June 2012. The Prodeco membership interests were acquired through the acquisition of all of the issued and outstanding membership interests of A Better Bike, LLC and EBikes, LLC, members of Prodeco. A Better Bike, LLC was owned by Vincent L. Celentano, the Company's largest individual shareholder. EBikes was owned by Vincent D. Celentano, II, the son of Vincent L. Celentano. In consideration of the acquisition of all of the issued and outstanding membership interests of A Better Bike and EBikes, the Company issued an aggregate of 2,941,176 restricted shares of its common stock to the members of A Better Bike and EBikes. For accounting purposes the transactions are recorded at the historical basis of $0 from related parties. The effective closing date for this transaction is July 18, 2014. For financial statement purposes, the Company accounts for its investment in this affiliated entity under the equity method. The Company discontinued applying the equity method at December 31, 2015, as the investment is below $0 and will not resume applying the equity method until the affiliate reports income greater than its losses during the time period under equity method.
Effective November 18, 2016, the Company assigned all of its interests in Prodeco Technologies, LLC to a non-affiliate third party in consideration of a total cash payment of $30,000 pursuant to an Assignment and Assumption Agreement dated November 18, 2016.
On January 20, 2015, the Company received a 7% unsecured promissory note (the Note Receivable) in the principal amount of $75,000 from Prodeco Technologies, LLC, an affiliated entity. The note was payable January 20, 2018. The note holder shall pay interest in the amount of $1,312 per quarter due on the 15
th
each month following the end of the quarter until the maturity date. On February 6, 2015 the Company advanced an additional $9,761 to Prodeco under the same terms due on February 8, 2018. During the year ended December 31, 2015, the related party elected to accept the Note Receivable of $84,760 and accrued interest of $2,967 as payment against convertible notes payable related party.
During the year ended December 31, 2015, the Company reimbursed Vincent L. Celentano, the Company's majority shareholder $18,500 for marketing expenses paid on behalf of the Company.
On August 15, 2011, the Company entered into an employment agreement with its Chief Executive Officer. The agreement is for a period of one year and automatically extends for one day each day until either party notifies the other not to further extend the employment period, provides for an annual base salary totaling $250,000 and annual bonuses based on pre-tax operating income, as defined, for an annual minimum of $50,000 in total. On July 18, 2014, the Companys Chief Executive Officer forgave $326,727 of accrued payroll and amended his employment agreement to reduce his base salary by 30% and eliminated his guaranteed bonus of $50,000 per year.
For the years ended December 31, 2016 and 2015 recorded a salary expense of $175,000 and $175,000, respectively. Accrued compensation at December 31, 2016 and December 31, 2015 were $463,730 and $286,572, respectively (See Note 10).
F-27
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
As of December 31, 2016 and December 31, 2015, the Companys Chief Executive Officer was owed $56,635 and $23,238 for amounts he paid on behalf of the Company.
See Note 5 for Convertible Notes Payable Related Party, Note 9 for Purchase Order Financing Related Party and Note 12 for issuance of stock options to related parties.
NOTE 14 SEGMENTS
We had two operating segments one that sells electric bicycles and related products made by other manufacturers in a new retail store location in Fort Lauderdale and during the first quarter of 2016, PayMeOn formed a new subsidiary, Paymeon Brands, Inc., to pursue the business of developing, marketing, managing and monetizing lifestyle brands and products. The Company intends to leverage its relationships and expertise with respect to manufacturing processes, wholesale and retail distribution networks, and social influencer promotion, primarily targeting youth oriented "lifestyle" markets to create and grow new and existing brands across several market segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Service revenue, net
|
|
|
|
$
|
|
|
|
$
|
6,502
|
|
Product sales clothing, net
|
|
|
|
|
102,186
|
|
|
|
|
|
Product sales bicycles
|
|
|
|
|
292,033
|
|
|
|
168,654
|
|
Total Revenues
|
|
|
|
$
|
394,219
|
|
|
$
|
175,156
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold:
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
|
|
$
|
|
|
|
$
|
|
|
Clothing
|
|
|
|
|
66,836
|
|
|
|
|
|
Bicycles
|
|
|
|
|
187,386
|
|
|
|
101,386
|
|
Total cost of goods sold
|
|
|
|
$
|
254,222
|
|
|
$
|
28,748
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
|
|
$
|
|
|
|
$
|
6,502
|
|
Clothing
|
|
|
|
|
35,350
|
|
|
|
|
|
Bicycles
|
|
|
|
|
104,647
|
|
|
|
67,268
|
|
Total Gross Profit
|
|
|
|
$
|
139,997
|
|
|
$
|
73,770
|
|
As of December 31, 2016, the Company had inventory of bicycles and clothing $11,916 and $0, respectively.
NOTE 15 CONCENTRATIONS
For the year ended December 31, 2016, one customer amounted to74% of the product sales - clothing and one vendor accounted for100% of cost of goods clothing. One vendor an affiliate entity accounted for 13% of the cost of goods sold - bicycles.
For the year ended December 31, 2015, no customer accounted for more than 10% of sales.
F-28
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
NOTE 16 SUBSEQUENT EVENTS
On January 30, 2017, the Company granted 200,000 stock options with an exercise price of $.25 to a consultant. The options expire 7 years from the date of issuance.
On February 2, 2017, the Company sold a total of 349,800 shares to an accredited investor for proceeds of $34,980 ($0.10 per share).
On February 2, 2017, the Company sold a total of 250,000 shares to an accredited investor for proceeds of $25,000 ($0.10 per share).
On February 16, 2017, the Company sold a total of 200,000 shares to two accredited investor for proceeds of $25,000 ($0.125 per share).
On February 19, 2017, the Company sold a total of 322,857 shares to an accredited investor for proceeds of $56,500 ($0.175 per share).
On February 21, 2017, the Company entered into and completed a membership interest purchase agreement to acquire 100.0% of the membership interests of Rockstar Acquisitions, LLC (Rockstar). Rockstar was organized under the laws of the State of Florida in November 2016. Rockstar leverages its licensed intellectual property, technology and processes to produce Basalt Fiber Reinforced Polymer products that are used as replacements for steel products that reinforce concrete such as rebar. Our Chairman and CEO, Edward A. Cespedes and our Director and largest individual shareholder, Vincent L. Celentano, are the Managing Members of Rockstar. In consideration of the acquisition of all of the issued and outstanding membership interests of Rockstar, the Company issued an aggregate of 95,500,000 restricted shares of its common stock to the members of Rockstar. For accounting purposes the transactions are recorded at their historical cost. As part of this agreement Rockstar entered into a letter agreement with Raw Materials Corp and Raw Energy Materials, Corp. (RAW). The letter agreement called for, among other things, Rockstar to purchase equipment for $400,000, and when given notice in writing by RAW, to purchase additional equipment within 10 business days of receiving the notice. Rockstars approximate total obligation was approximately $3 million. On April 19, 2017, Rockstar received written notice from RAW to purchase the additional equipment. To date, Rockstar has funded approximately $260,000 towards the purchase of equipment. As of April 20, 2017, Paymeon, and its affiliates, including Rockstar, has secured a commitment for equipment debt financing in the amount of $600,000. Paymeon and its affiliates, including Rockstar, is currently in the process of pursuing additional financing to meet Rockstars obligation. There is no guarantee that we will be able to obtain the additional financing.
On March 7, 2017, the Company sold a total of 300,000 shares to an accredited investor for proceeds of $60,000 ($0.20 per share).
On March 17, 2017, the Company sold a total of 39,920 shares to an accredited investor for proceeds of $9,980 ($0.25 per share).
On March 17, 2017, the Company sold a total of 800,000 shares to an accredited investor for proceeds of $200,000 ($0.25 per share).
On March 17, 2017, the Company sold a total of 60,000 shares to an accredited investor for proceeds of $15,000 ($0.25 per share).
On March 17, 2017, the Company sold a total of 60,000 shares to an accredited investor for proceeds of $15,000 ($0.25 per share).
On March 17, 2017, the Company sold a total of 60,000 shares to an accredited investor for proceeds of $15,000 ($0.25 per share).
On March 19, 2017, the Company sold a total of 400,000 shares to an accredited investor for proceeds of $100,000 ($0.25 per share).
F-29
PAYMEON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
On March 23, 2017, the Company entered into a line of credit to purchase equipment in the amount up to $600,000. The line bears interest at a rate of 7.5%. The Company will repay loan over 60 months.
On March 24, 2017, the Company sold a total of 40,000 shares to an accredited investor for proceeds of $10,000 ($0.25 per share).
On March 29, 2017, the Company sold a total of 100,000 shares to an accredited investor for proceeds of $25,000 ($0.25 per share).
On April 4, 2017, a consultant exercised previously issued stock options of 167,181 with an exercise price of $.10
On April 5, 2017, the Company sold a total of 52,000 shares to an accredited investor for proceeds of $13,000 ($0.25 per share).
On April 5, 2017, the Company issued 250,000 shares of common stock to a newly appointed Director.
On April 10, 2017, the Company sold a total of 400,000 shares to an accredited investor for proceeds of $100,000 ($0.25 per share).
On April 11, 2017, the Company sold a total of 400,000 shares to an accredited investor for proceeds of $100,000 ($0.25 per share).
F-30