CONVERTIBLE NOTES PAYABLE (Tables)
|
12 Months Ended |
Dec. 31, 2018 |
|---|
| Debt Disclosure [Abstract] |
|
| Convertible notes payable |
Convertible notes payable consists of the following:
| |
|
2018 |
|
|
2017 |
|
| January and February 2018 Notes, issued January 3, 2018 and February 16, 2018,respectively, with a maturity date of March 31, 2019, as amended, with an interest rate of 10%. |
|
$ |
294,000 |
|
|
$ |
— |
|
| November 2017 Notes, issued November 10, 2017, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by the Company’s CEO. |
|
|
287,502 |
|
|
|
287,502 |
|
| November 2016 Notes, issued November 10, 2016, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and ASC. |
|
|
287,502 |
|
|
|
287,502 |
|
| December 2015 Notes, issued December 23, 2015, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and ASC. |
|
|
862,500 |
|
|
|
862,500 |
|
| Total convertible notes payable |
|
|
1,731,504 |
|
|
|
1,437,504 |
|
| Debt discount |
|
|
— |
|
|
|
224,904 |
|
| Convertible notes payable, net of unamortized debt discount |
|
$ |
1,731,504 |
|
|
$ |
1,212,600 |
|
|
| Summary of convertible debt |
The following represents a summary of the convertible
debt terms at December 31, 2018:
| |
|
|
Amount of
Notes
|
|
|
Debt Discount |
|
|
Maturity
Dates thru
|
|
|
Conversion
Price
|
|
|
Number of
Warrants
|
|
|
Exercise
Price
|
|
|
Warrants
Exercisable
thru
|
| January and February 2018 Notes |
|
|
$ |
294,000 |
|
|
$ |
— |
|
|
3/31/2019 |
|
|
$ |
0.08 |
|
|
|
1,960,000 |
|
|
$ |
0.15 |
|
|
2/16/2023 |
| November 2017 Notes |
|
|
|
287,502 |
|
|
|
— |
|
|
3/31/2019 |
|
|
$ |
0.08 |
|
|
|
3,593,776 |
|
|
$ |
0.15 |
|
|
11/10/2022 |
| November 2016 Notes |
|
|
|
287,502 |
|
|
|
— |
|
|
3/31/2019 |
|
|
$ |
0.08 |
|
|
|
3,593,776 |
|
|
$ |
0.15 |
|
|
11/10/2022 |
| December 2015 Notes |
|
|
|
862,500 |
|
|
|
— |
|
|
3/31/2019 |
|
|
$ |
0.08 |
|
|
|
10,781,250 |
|
|
$ |
0.15 |
|
|
11/10/2022 |
| Total |
|
|
$ |
1,731,504 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
19,928,802 |
|
|
|
|
|
|
|
|
| Schedule of fair value and relative fair value |
The debt discount is accreted to interest expense
over the term of the note.
| |
|
January 3, 2018 |
|
|
February 16, 2018 |
|
| |
|
Fair value |
|
|
Relative fair value |
|
|
Fair value |
|
|
Relative fair value |
|
| Warrant |
|
$ |
95,324 |
|
|
$ |
19,784 |
|
|
$ |
65,292 |
|
|
$ |
16,955 |
|
| Common sock |
|
$ |
70,833 |
|
|
$ |
14,701 |
|
|
$ |
54,167 |
|
|
$ |
14,066 |
|
| Redeemable shares |
|
$ |
255,000 |
|
|
$ |
52,923 |
|
|
$ |
195,000 |
|
|
$ |
50,637 |
|
| Remaining note value |
|
$ |
110,300 |
|
|
$ |
22,892 |
|
|
$ |
110,300 |
|
|
$ |
28,642 |
|
| Total |
|
$ |
531,457 |
|
|
$ |
110,300 |
|
|
$ |
424,759 |
|
|
$ |
110,300 |
|
| Additional discount (interest) |
|
$ |
— |
|
|
$ |
13,808 |
|
|
$ |
— |
|
|
$ |
8,058 |
|
|
| Schedule of change in fair value of warrant liabilities |
| |
|
2017 Change in
Fair Value of
Warrant Liability
|
| |
|
|
| November 2017 Note |
|
$ |
(19,938 |
) |
| November 2016 Note |
|
|
74,514 |
|
| December 2015 Note |
|
|
127,320 |
|
| Total |
|
$ |
181,896 |
|
| |
|
2017 Change in
Fair Value of
Warrant Liability
|
| |
|
|
| November 2017 Note |
|
$ |
(19,938 |
) |
| November 2016 Note |
|
|
74,514 |
|
| December 2015 Note |
|
|
127,320 |
|
| Total |
|
$ |
181,896 |
|
| |
|
2017 Change in
Fair Value of
Warrant Liability
|
| |
|
|
| November 2017 Note |
|
$ |
(19,938 |
) |
| November 2016 Note |
|
|
74,514 |
|
| December 2015 Note |
|
|
127,320 |
|
| Total |
|
$ |
181,896 |
|
|
| Schedule of modification of derivatives |
| |
|
|
2017 Modification
of |
|
|
|
|
| |
|
|
Warrant Liability |
|
|
Derivative Liability |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| November 2017 Note |
|
|
$ |
13,819 |
|
|
$ |
(5,000 |
) |
|
$ |
8,819 |
|
| November 2016 Note |
|
|
|
28,993 |
|
|
|
15,301 |
|
|
|
44,294 |
|
| December 2015 Note |
|
|
|
182,173 |
|
|
|
3,649 |
|
|
|
185,822 |
|
| Total |
|
|
$ |
224,985 |
|
|
$ |
13,950 |
|
|
$ |
238,935 |
|
| |
|
|
2017 Modification
of |
|
|
|
|
| |
|
|
Warrant Liability |
|
|
Derivative Liability |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| November 2017 Note |
|
|
$ |
13,819 |
|
|
$ |
(5,000 |
) |
|
$ |
8,819 |
|
| November 2016 Note |
|
|
|
28,993 |
|
|
|
15,301 |
|
|
|
44,294 |
|
| December 2015 Note |
|
|
|
182,173 |
|
|
|
3,649 |
|
|
|
185,822 |
|
| Total |
|
|
$ |
224,985 |
|
|
$ |
13,950 |
|
|
$ |
238,935 |
|
| |
|
|
2017 Modification
of |
|
|
|
|
| |
|
|
Warrant Liability |
|
|
Derivative Liability |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| November 2017 Note |
|
|
$ |
13,819 |
|
|
$ |
(5,000 |
) |
|
$ |
8,819 |
|
| November 2016 Note |
|
|
|
28,993 |
|
|
|
15,301 |
|
|
|
44,294 |
|
| December 2015 Note |
|
|
|
182,173 |
|
|
|
3,649 |
|
|
|
185,822 |
|
| Total |
|
|
$ |
224,985 |
|
|
$ |
13,950 |
|
|
$ |
238,935 |
|
|
| Schedule of reclassification of warrant liability to equity |
| |
|
|
2017
Reclassification of Warrant liability to Equity |
|
| |
|
|
|
|
|
| November 2017 Note |
|
|
$ |
284,493 |
|
| November 2016 Note |
|
|
|
284,493 |
|
| December 2015 Note |
|
|
|
853,473 |
|
| Total |
|
|
$ |
1,422,459 |
|
| |
|
|
2017
Reclassification of Warrant liability to Equity |
|
| |
|
|
|
|
|
| November 2017 Note |
|
|
$ |
284,493 |
|
| November 2016 Note |
|
|
|
284,493 |
|
| December 2015 Note |
|
|
|
853,473 |
|
| Total |
|
|
$ |
1,422,459 |
|
| |
|
|
2017
Reclassification of Warrant liability to Equity |
|
| |
|
|
|
|
|
| November 2017 Note |
|
|
$ |
284,493 |
|
| November 2016 Note |
|
|
|
284,493 |
|
| December 2015 Note |
|
|
|
853,473 |
|
| Total |
|
|
$ |
1,422,459 |
|
|
| Schedule of fair value assumptions using monte carlo simulation |
The fair value of the embedded derivative liability
is measured in accordance with ASC 820 “Fair Value Measurement”, using “Black Scholes Merton Method” and
“Monte Carlo Method” modeling as of December 31, 2018 and 2017, respectively, incorporating the following inputs:
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
47.5 |
% |
| Risk-free interest rate |
|
|
2.45 |
% |
|
|
1.53 |
% |
| Expected term of options (years) |
|
|
0.3 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.01 |
|
|
$ |
0.12 |
|
| Conversion price |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
The fair value of the embedded derivative liability
is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating
the following inputs:
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
47.5 |
% |
| Risk-free interest rate |
|
|
2.45 |
% |
|
|
1.53 |
% |
| Expected term of options (years) |
|
|
0.3 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.01 |
|
|
$ |
0.12 |
|
| Conversion price |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
fair value of the embedded derivative liability
is measured in accordance with ASC 820 “Fair Value Measurement”, using “Black Scholes Merton Method” and
“Monte Carlo Method” modeling as of December 31, 2018 and 2017, respectively, incorporating the following inputs:
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
47.5 |
% |
| Risk-free interest rate |
|
|
2.45 |
% |
|
|
1.53 |
% |
| Expected term of options (years) |
|
|
0.3 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.01 |
|
|
$ |
0.12 |
|
| Conversion price |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
| Schedule of optional redemption fair value assumptions |
The fair value of the embedded derivative liability
is measured in accordance with ASC 820 “Fair Value Measurement”, incorporating the following inputs:
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
47.5 |
% |
| Risk-free interest rate |
|
|
2.45 |
% |
|
|
1.53 |
% |
| Expected term of options (years) |
|
|
0.3 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.01 |
|
|
$ |
0.12 |
|
| Conversion price |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
47.5 |
% |
| Risk-free interest rate |
|
|
2.45 |
% |
|
|
1.53 |
% |
| Expected term of options (years) |
|
|
0.3 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.01 |
|
|
$ |
0.12 |
|
| Conversion price |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
The fair value of the embedded derivative liability
is measured in accordance with ASC 820 “Fair Value Measurement”, using “Black Scholes Merton Method” and
“Monte Carlo Method” modeling as of December 31, 2018 and 2017, respectively, incorporating the following inputs:
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
47.5 |
% |
| Risk-free interest rate |
|
|
2.45 |
% |
|
|
1.53 |
% |
| Expected term of options (years) |
|
|
0.3 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.01 |
|
|
$ |
0.12 |
|
| Conversion price |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
| Schedule of purchaser warrants fair value assumptions using monte carlo simulation |
The assumptions used
in the Black-Scholes option-pricing method is set forth below:
| |
|
January 3, 2018 |
|
|
February 16, 2018 |
|
| Common stock price |
|
$ |
0.17 |
|
|
$ |
0.13 |
|
| Term |
|
|
5 years |
|
|
|
5 years |
|
| Strike price |
|
$ |
0.15 |
|
|
$ |
0.15 |
|
| Dividend yield |
|
|
0 |
|
|
|
0 |
|
| Risk free rate |
|
|
2.25 |
% |
|
|
2.63 |
% |
| Volatility |
|
|
62.5 |
% |
|
|
62.5 |
% |
The fair value of the November 2017 Purchaser
Warrants is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo simulation”
modeling, incorporating the following inputs:
| |
|
December 31, 2017 |
|
|
November 10, 2017 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
55.0 |
% |
| Risk-free interest rate |
|
|
2.07 |
% |
|
|
2.06 |
% |
| Expected term of options (years) |
|
|
0.5 |
|
|
|
1.5 |
|
| Stock price |
|
$ |
0.12 |
|
|
$ |
0.20 |
|
| Exercise price |
|
$ |
0.15 |
|
|
$ |
0.08 |
|
The fair value of the November 2016 Purchaser
Warrants is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo simulation”
modeling, incorporating the following inputs:
| |
|
December 31, 2017 |
|
|
December 31, 2016 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
55.0 |
% |
| Risk-free interest rate |
|
|
2.07 |
% |
|
|
1.93 |
% |
| Expected term of options (years) |
|
|
0.5 |
|
|
|
1.5 - 5 |
|
| Stock price |
|
$ |
0.12 |
|
|
$ |
0.11 |
|
| Exercise price |
|
$ |
0.15 |
|
|
$ |
0.30 |
|
The fair value of the November 2015 Purchaser
Warrants is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo simulation”
modeling, incorporating the following inputs:
| |
|
December 31, 2017 |
|
|
December 31, 2016 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Expected stock-price volatility |
|
|
47.5 |
% |
|
|
50.0 |
% |
| Risk-free interest rate |
|
|
2.07 |
% |
|
|
1.70 |
% |
| Expected term of options (years) |
|
|
0.5 |
|
|
|
0.5 |
|
| Stock price |
|
$ |
0.12 |
|
|
$ |
0.11 |
|
| Exercise price |
|
$ |
0.15 |
|
|
$ |
0.30 |
|
|
| Schedule of changes in derivative and warrant liabilities |
Changes in the derivative liabilities were as follows:
| Derivative liabilities: |
|
|
|
| December 31, 2017 |
|
$ |
470,839 |
|
| Decrease in fair value |
|
|
(530,838 |
) |
| Change due to extinguishment of debt |
|
|
59,999 |
|
| December 31, 2018 |
|
$ |
— |
|
|