STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

Our Company’s articles of incorporation authorize 25,000,000 shares of Preferred Stock with a par value of $0.0001. We designated 2,000,000 shares of Preferred Stock as Series A Convertible Preferred Stock. The Series A Preferred Stock is convertible into common stock at a ratio of one to one. Additionally, as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding, the holders of the Series A Preferred Stock have the right to elect a majority of our Company’s Board of Directors. Finally, in all manners brought to a vote of the shareholders, the holders of the Series A Preferred Stock have three votes to every one vote of common stock. As of December 31, 2015 and December 31, 2014, there were 1,917,720 shares of Series A Preferred Stock outstanding which were issued to the founders of NuGene, Ali and Saeed Kharazmi. Ali and Saeed Kharazmi each own 50% of the outstanding Series A Preferred Stock and are our Company’s Chief Executive Officer and Chairman of the Board, respectively.

Common Stock Split

We have 100,000,000 shares of common stock authorized with a par value of $0.0001. On December 26, 2014, our Board of Directors approved a 15.04 to one stock split (“Stock Split”) in the form of a stock dividend to holders of our common stock as of that date.   To effect that Board action, we delivered to each recipient of the stock dividend 14.04 additional shares of common stock for every share of common stock held. Unless otherwise noted, all share numbers shown in these condensed consolidated financial statements give effect to the Stock Split as approved by our Board of Directors.

Merger Agreement

On December 29, 2014, we completed a merger (the “Merger”) whereby NuGene, Inc. became a wholly owned subsidiary of our Company.  In connection with the merger, we entered into a Business Transfer and Indemnity Agreement with our former Chief Executive Officer and Director providing for:

1. The transfer of our jewelry business operations existing on the date of the Indemnity Agreement;

2. The assumption by our former CEO of all liabilities of our Company and her indemnification holding our Company harmless for all liabilities arising at or before December 29, 2014;

3. The payment of $350,000 in cash to our former CEO; and

4. The surrender by our former CEO of 15,000,000 shares (before giving effect to the Stock Split discussed below) (the "Indemnity Shares") of our Company’s common stock representing 95% of the then outstanding common stock (all of which shares have been cancelled by our Company and are now included in our Company’s pool of authorized but unissued shares).  

At the time of the Merger, all of the issued and outstanding shares of NuGene, Inc. were exchanged (after giving effect to the Stock Split), for 26,052,760 shares of our common stock and 1,917,720 our Series A Preferred Stock. On December 29, 2014, we completed the sale of 2,000,000 shares of our common stock to 18 purchasers (“Stock Placement”) for proceeds totaling $2,000,000, including (a) $1,625,000 of cash and (b) automatic conversion of $375,000 of outstanding promissory notes. Prior to the Merger, NuGene, Inc. received proceeds totaling $1,333 in exchange for 4,000,000 shares of its common stock from five persons and issued 1,500,000 shares of common stock, valued at $500, to a consultant for services rendered during the last quarter of 2014.

On March 31, 2015, we entered into a stock purchase agreement with a shareholder of our Company (the “Buyer”) resulting in the issuance of 50,000 shares of common stock to the Buyer for proceeds of $50,000. Under the agreement, we extended to the Buyer an option to purchase an additional 60,000 shares of common stock at $1 per share within 45 days of the Closing. On May 8, 2015, the Buyer exercised his option to purchase the remaining shares under the stock purchase agreement and accordingly, we issued the Buyer an additional 60,000 shares of our common stock for cash proceeds of $60,000. On April 20, 2015, our Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 27,273 shares of common stock at $1.10 per share, resulting in total cash proceeds of $30,000. On June 2, 2015, our Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 100,000 shares of common stock at $2.00 per share, resulting in total cash proceeds of $200,000.

Common Stock

As of December 31, 2015, our Company had entered into Advisory Agreements with members of its Advisory Board. The terms of the individual Advisory Agreements vary and provide for up to 50,000 initial sign-on shares vesting for a maximum of an 18-month period, and up to 50,000 shares of common stock per annum issued on the anniversary of the effective date of the agreement. Expenses for the issuance of common stock for services related to these share issuances was recognized over the service period in which the shares are earned or over the respective vesting period, as applicable, and was calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace. Selling, general and administrative expenses (“SGA”) recognized in connection with the Advisory Agreements totaled $572,216 for the year ended December 31, 2015.

During 2015, offered positions on our Company’s Board of Directors to two individuals, although one of the offers was later rescinded. In addition to annual cash stipends of $30,000, the candidates were granted a total of 200,000 shares of our Company’s common stock vesting 25% on the third, sixth, ninth and twelfth month following the inception of the proposed Board service. SGA totaling $164,416 was recognized in connection with these shares over the service periods in which the shares were earned and was calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace.

In February 2015, we entered into a six-month consulting agreement with an investor relations firm. In addition to a $27,000 retainer, the consulting agreement (as amended) called for the vesting of 110,000 shares of our common stock over the six-month term, issuable upon the conclusion of the agreement. On August 17, 2015, we issued the 110,000 shares of common stock owed to the investor relations firm. We recognized $167,092 of SGA in connection with the consulting agreement during the year ended December 31, 2015.

In March 2015, we purchased technology from an individual in exchange for 150,000 (as amended) shares of our common stock. The common stock was valued at the closing price per share of our common stock, on the date of issuance resulting in the recognition of $150,000 in SGA for the year ended December 31, 2015. During 2015, we issued 200,000 fully vested shares of our common stock to three consultants as compensation for services rendered. The common stock was valued at the closing price per share of our common stock, on the date of issuance, as quoted on the OTC Marketplace resulting in the recognition of $452,100 in stock based compensation for the year ended December 31, 2015.

Common Stock Options

On August 14, 2015, we granted an option to purchase up to 1,000,000 shares of our common stock to each of two employees. The options have a strike price of $1.50 per share, have a term of five years from the date of grant, vest evenly over 24 months and have a cashless exercise feature.The fair value of these options was estimated using the Black-Scholes option-pricing model based on the following assumptions: expected dividend yield 0%, expected volatility 130%, risk-free interest rate 1.61% and expected life of 5 years. We recognized $483,719 of SGA as stock based compensation in connection with the vesting of the options during year ended December 31, 2015.

Common Stock Warrants

Our Company has issued warrants to purchase shares of our common stock to accredited investors and consultants as compensation for services rendered, as well as, in conjunction with the purchase of our common stock. A summary of the Company’s warrants activity and related information as of December 31, 2015 is provided below.

On August 14, 2015, we granted a five-year fully vested warrant to purchase up to 150,000 shares of our common stock to each of two consultants as compensation for financial services rendered. The warrants have a strike price of $2.00 per share and have a cashless exercise feature. The fair value of the warrants was estimated to be $377,327 using the Black-Scholes option-pricing model based on the following assumptions: expected dividend yield 0%, expected volatility 130%, risk-free interest rate 1.61%, and expected life of 5 years and is included in SGA as stock based compensation in the accompanying statement of operations.

On August 14, 2015, we granted a three-year fully vested warrant to purchase up to 50,000 shares of our common stock to a former consultant of our Company in satisfaction of amounts previously owed to him. The warrant has a strike price of $1.50 per share and has a cashless exercise feature. The fair value of the warrants was estimated to be $55,821 using the Black-Scholes option-pricing model based on the following assumptions: expected dividend yield 0%, expected volatility 130%, risk-free interest rate 1.08%, and expected life of 3 years and is included in SGA as stock based compensation in the accompanying statement of operations.

On December 11, 2015, we entered into a service agreement (the “SA”) with KBHJJ, LLC (“KBHJJ”). KBHJJ will provide media awareness services to the Company over the five-year life of the SA. In consideration for these services, our Company agreed to compensate KBHJJ as follows:

· The grant of a two-year warrant to purchase up to 1,350,000 shares at an exercise price of $0.001 per share of the Company’s Common Stock vested as follows: 450,000 shares upon execution of the agreement; 450,000 shares upon the six-month anniversary of the SA; and 450,000 shares upon the one-year anniversary of the SA, contingent upon the completion of certain conditions.

· Payment of $50,000 upon execution of the SA.

· Payment of $50,000 due January 4, 2016.

· Up to 500,000 shares of the Company’s Common Stock that can be earned over the first 18 months of the SA, contingent on hitting benchmarks defined in the SA.

We recognized $567,000 of SGA as stock based compensation in connection with the SA in the accompanying statement of operations in the year ended December 31, 2015.

We have a warrant outstanding held by an investor to purchase up to 500,000 shares of our common stock at a price of $2.50 per share through December 26, 2020, exercisable beginning on December 26, 2015. Any shares acquired thereunder upon exercise may not be sold until June 26, 2016.

Stock Warrants Outstanding as of December 31, 2015
Exercise		Warrants		Remaining		Warrants
Price		Granted		Life (Years)		Exercisable
$	0.001		1,350,000		1.97		450,000
$	1.50		50,000		2.87		50,000
$	2.00		300,000		4.88		300,000
$	2.50		500,000		5.25		-
			2,200,000				800,000