| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies There have been no changes in Significant Accounting
Policies from those described in our Form 10-K for our fiscal year ending December 31, 2017 filed with the Securities and Exchange
Commission on March 27, 2018. Principles of Consolidation The consolidated financial statements include
the accounts of the Company (a Nevada corporation) and its wholly owned subsidiary, Her Marketing. All significant intercompany
transactions have been eliminated in consolidation. Basis of Presentation of the Consolidated
Financial Statements The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary, Her Marketing. The Company maintains its books of account
and prepares consolidated financial statements in accordance with Generally Accepted Accounting Principles in the United States
of America (“U.S. GAAP”). The Company’s fiscal year ends on December 31. All significant intercompany balances
and transactions have been eliminated in consolidation. On January 31, 2017, the Company effected a
1-for-2 reverse stock split effective January 31, 2017. The par value was not adjusted as a result of the reverse stock split.
On April 9, 2018, the Company effected a 1-for-6 reverse stock split effective April 9, 2018. All references to numbers of shares
of our common stock and per-share information in the accompanying consolidated financial statements and in these notes to the consolidated
financial statements have been adjusted retroactively to reflect these splits. Use of Estimates The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses
during the reporting period. The Company evaluates its estimates on an ongoing basis, including those related to the fair values
of stock-based awards, income taxes and contingent liabilities, among others. The Company bases its estimates on historical experience
and on various other assumptions that the Company believes to be reasonable, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results could differ from those estimates and such differences could
be material to the consolidated financial position and results of operations. Fair Value of Financial Instruments The Company measures fair value based on the
prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure
fair value, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2);
and significant unobservable inputs (Level 3). The Company did not have any assets measured
at fair value on a recurring basis at December 31, 2018 and December 31, 2017. The Company believes the carrying amounts of
cash and cash equivalents, accounts receivable, other current assets, accounts payable, and other accrued liabilities are a reasonable
approximation of the fair value of those financial instruments because of the nature of the underlying transactions and the short-term
maturities involved. Deposits
December 31, 2018 December 31, 2017
Deposits on Products $ 122,599 $ 175,819
Security Deposits 23,273 20,573
Total $ 145,872 $ 196,392 Intangibles Intangible assets are comprised primarily of
trademarks that represent the Company’s exclusive ownership of the HER trademarks in the US and are inclusive all related
social media sites and domain names in the US., all used in connection with (consisting of the name, Her Imports and the Her Imports
Logo) the manufacture, sale and distribution of human hair extensions and related beauty products. In accordance with Financial
Accounting Standards Board Accounting Standard Codification 350 (FASB ASC 350), intangible assets with indefinite lives are not
amortized but instead are measured for impairment at least annually, or when events indicate that an impairment exists through
the use of discounted cash flow models. The Company calculates impairment as the excess of the carrying value of its indefinite-lived
assets over their estimated fair value. If the carrying value exceeds the estimate of fair value a write-down is recorded. For
the year ended December 31, 2018, based on expert analysis and advice we determined that there was an impairment to the carrying
value of our trademark in the amount of $3,560,000. For the year ended December 31, 2017 there were no impairments recorded. The following table presents the changes in
trademark:
Balance as of December 31, 2017 $ 8,200,000
Impairment expenses (3,560,000 )
Balance as of December 31, 2018 $ 4,640,000 Revenue Recognition In May 2014, the Financial Accounting Standards
Board (“FASB”) issued accounting standards update (“ASU”) No. 2014-09, Revenue from Contracts with Customers,
to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International
Financial Reporting Standards. ASU No. 2014-09, as amended, is effective for the Company as of January 1, 2018. The adoption did not result in any material
change in the timing of recognizing revenue The adoption will also result in a change in the timing of recognizing revenue for
sales where we ship the merchandise to the customer from a distribution center or store, as revenue for sales where we ship the
merchandise to customers will be recognized when control of the merchandise transfers to the customer, which is generally at the
time of shipment rather than upon delivery of the products to the customer. Additionally, the Company has had a deminimis amount
of sales returns. The Company, through the Her Imports retail
locations, its eCommerce Website, www.herimports.com and Amazon.com sells a variety of hair extensions and related products. Revenue is recognized at the “point of
sale” in the stores. Customers pay for the products using either cash, a debit card or a credit card. All sales are final.
In the case of cash sales at the store, the store manager makes a nightly deposit of the cash. For credit card and debit sales,
the Company recognizes the sale when the card is charged and approved. Sales tax collected from customers is excluded from revenue
and is included in accrued liabilities on our consolidated balance sheets. Product purchases on the Company’s Website
are paid for using either debit cards, credit cards, or PayPal Revenue for online product sales are recognized upon shipment of
the product. From time to time, the Company partners with
third-party financing companies which provide our customers the ability to pay over time. These arrangements are between the third-party
financing company and the customer and, hence, there is no recourse against the Company. In these instances, revenue is recorded
at the time of sale when the customer makes the purchase at a retail location and at the time of shipment when the purchase is
made online. Also included in revenue is shipping revenue
from our e-commerce customers. Sales taxes collected from retail customers are excluded from reported revenues when control of
the merchandise transfers to the customers, which is generally at the time of shipment rather than upon delivery of the products
to the customer. Revenue from sales on Amazon.com are recorded
net of certain expenses paid to Amazon.com including selling fees, transaction fees, service fees, administrative fees and inventory
and inbound service fees. All advertising fees paid to Amazon.com is recognized as a period expense and is booked to selling expense. Earnings (Loss) per Share The Company utilizes FASB ASC 260. Basic earnings
per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding.
Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include
the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. Reverse Stock Split All references to numbers of shares of our
common stock and per-share information in the accompanying financial statements have been adjusted retroactively to reflect the
Company’s 1-for-2 reverse stock split effected on January 31, 2017, and a 1-for-6 reverse stock split effective April 9,
2018. The par value was not adjusted because of the reverse stock splits. Stock-based compensation The Company records stock-based compensation
issued to external entities for goods and services at either the fair market value of the shares issued, or the value of the services
received, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50-30. For the
year ended December 31, 2018, and December 31, 2017 the Company recognized stock-based compensation expense of $70,932 and $28,530,
respectively. Liquidity At December 31, 2018, the Company had cash
and cash equivalents of $107,969, a positive working capital deficit of approximately $1,185,408 and an accumulated deficit of
$24,182,592. Additionally, the Company has incurred loss a loss from operations of $231,100 and a net loss of $8,197,563. Majority
of the loss was non-cash due to impairment of our trademark and contract termination expense. As of April 13, 2018, the Company had approximately
$172,000 in cash on hand as a result of our return to profitability. Our primary use of cash is the purchase of
inventory and the payment of dividends on outstanding callable non-cumulative preferred stock. We anticipate that inventory may
increase as a result of sales growth and the addition of more SKU’s to our product line and when we open new retail operations.
We currently plan to fund our growth through earnings, however, have obtained a credit facility related to the purchase of inventory.
We believe we have sufficient working capital to pay our expenses for the next twelve months and anticipate paying monthly dividends
of $60,000 on the preferred stock until such time that we call the preferred stock. Management has taken several actions to ensure
that the Company will continue as a going concern over the next twelve months, including the closing of certain stores, headcount
reductions, and reductions in discretionary expenditures. Recent Accounting Pronouncements Except as noted below, the Company has considered
all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements that may have a material
impact on its consolidated financial statements, based on current information. In March 2019, the FASB issued ASU 2019-01,
Leases (Topic 842) Codification Improvements, which provides clarification on implementation issues associated with adopting ASU
2016-02. The implementation issues noted in ASU 2019-01 include determining the fair value of the underlying asset by lessors
that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases,
and transition disclosures related to Topic 250, Accounting Changes and Error Corrections. We will apply the guidance, if
applicable, as of January 1, 2019, the date we adopted ASU 2016-02. The adoption of this ASU did not have a material impact
on our financial position, results of operations, cash flows, or presentation thereof. In October 2018, the FASB issued ASU 2018-17,
Targeted Improvements to Related Party Guidance for Variable Interest Entitles, that changes the guidance for determining whether
a decision-making fee paid to a decision makers and service providers are variable interests. The guidance is effective for fiscal
years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We will
adopt this standard on its effective date of January 1, 2020. We do not expect the adoption of this ASU to have a material
impact on our consolidated financial position, results of operations, cash flows, or presentation thereof. In August 2018, the FASB issued ASU 2018-15,
Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred
in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation
costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs
incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years, with early adoption permitted. We will adopt this standard on its effective
date of January 1, 2020. We are currently evaluating the impact of this ASU on our financial position, results of operations,
cash flows, or presentation thereof. In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU
2018-13 removes or modifies certain disclosures and in certain instances requires additional disclosures. The standard is
effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early
adoption permitted. We will adopt this standard on its effective date of January 1, 2020. We do not expect the adoption of
this ASU to have a material impact on our financial position, results of operations, cash flows, or presentation thereof. In July 2018, the FASB issued ASU No. 2018-11,
Leases (Topic 842): Targeted Improvements which provides a new transition method and a practical expedient for separating components
of a lease contract. ASU 2018-11 is intended to reduce the costs and ease the implementation of the new leasing standard for financial
statement preparers. The effective date and transition requirements for the amendments related to separating components of a contract
are the same as the effective date and transition requirements in ASU 2016-02. We adopted this ASU on its effective date of January 1,
2019. Refer to the discussion of ASU 2016-02 below for the impact on our financial position, results of operations, cash flows,
or presentation thereof. In July 2018, the FASB issued ASU 2018-09,
Codification Improvements. The amendments in ASU 2018-09 affect a wide variety of Topics in the FASB Codification and apply to
all reporting entities within the scope of the affected accounting guidance. The Company has evaluated ASU 2018-09 in its entirety
and determined that the amendments related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, are the only provisions
that currently apply to the Company. The amendments in ASU 2018-09 related to Topic 718-740, Compensation-Stock Compensation-Income
Taxes, clarify that an entity should recognize excess tax benefits related to stock compensation transactions in the period in
which the amount of the deduction is determined. The amendments in ASU 2018-09 related to Topic 718-740 are effective for fiscal
years beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of the new standard
to have a material impact on the Company’s Consolidated Financial Statements. In June 2018, the FASB issued ASU 2018-07,
Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment. ASU 2018-07 aligns the accounting
for share based payments granted to non-employees with that of share-based payments granted to employees. We adopted this ASU on
its effective date of January 1, 2019. The adoption of this ASU did not have a material impact on our financial position,
results of operations, cash flows, or presentation thereof. In March 2018, the FASB issued ASU 2018-05,
Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends
Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax
Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting
under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance.
As described in the footnotes to the Annual Report on Form 10-K, the Company’s accounting for the tax effects of enactment
of the Tax Reform Act is being assessed; however, in certain cases, as described below, we made a reasonable estimate of the effects
on our existing deferred tax balances and valuation allowance. The Company determined that the $62.9 million recorded in connection
with the re-measurement of certain deferred tax assets and liabilities, and corresponding valuation allowance was a provisional
amount and a reasonable estimate at December 31, 2017. The Company has not completed the accounting with regard to the tax effects
associated with an intra-entity transfer of certain intellectual property rights with the enactment of Tax Reform Act. Our accounting
for the intra-entity transfer reflects the utilization of net operating losses on the basis of the laws in effect before the Tax
Reform Act. The Company is evaluating the impact under Tax Reform Act on the Company’s global business structure. In all
aspects, the Company will continue to make and refine calculations as additional analysis is completed. The Company expects to
complete the accounting assessment during the one-year measurement period provided by SAB 118. |
