Starco Brands (STCB) 10-Q 15 May 20 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 12, 2020
Document And Entity Information
Entity Registrant Name	Starco Brands, Inc.
Entity Central Index Key	0001539850
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		159,090,914
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	CA
Entity File Number	0-54892

CONDENSED BALANCE SHEETS (Unaud

CONDENSED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Current Assets:
Cash	$ 50,581	$ 4,754
Accounts receivable	17,974	14,496
Prepaid and other expenses	28,199	38,661
Total Current Assets	96,754	57,911
Right of use lease asset, operating, net	75,175	85,077
Deposit	3,500	3,500
Total Assets	175,429	146,488
Current Liabilities:
Accounts payable	157,442	188,036
Other payable and accruals	284,883	284,883
Accrued compensation	89,200	83,900
Lease obligation	41,976	40,806
Loan payable - related party	512,000	411,862
Notes payable	22,029	35,629
Total Current Liabilities	1,107,530	1,045,116
Lease obligation - noncurrent portion	34,564	45,632
Total Liabilities	1,142,094	1,090,748
Stockholders' (Deficit):
Preferred Stock, par value $0.001 40,000,000 shares authorized, no shares issued and outstanding
Common Stock, par value $0.001 300,000,000 shares authorized, 159,090,914 and 159,090,914 shares issued and outstanding, respectively	159,091	159,091
Additional paid in capital	15,588,655	15,576,955
Accumulated deficit	(16,714,411)	(16,680,306)
Total Stockholders' Deficit	(966,665)	(944,260)
Total Liabilities and Stockholders' Deficit	$ 175,429	$ 146,488

CONDENSED BALANCE SHEETS (Una_2

CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	40,000,000	40,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	159,090,914	159,090,914
Common stock, shares outstanding	159,090,914	159,090,914

CONDENSED STATEMENTS OF OPERATI

CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenues	$ 55,674	$ 61,263
Operating Expenses:
Compensation expense	46,523	46,720
Professional fees	1,806	21,757
General and administrative	37,647	35,296
Total operating expenses	85,976	103,773
Loss from operations	(30,302)	(42,510)
Other Income (Expense):
Interest expense	(9,053)	(8,031)
Other income	5,250	5,250
Total other expense	(3,803)	(2,781)
Net Income (Loss)	$ (34,105)	$ (45,291)
Loss per Share, Basic & Diluted	$ 0	$ 0
Weighted Average Shares Outstanding	159,090,914	159,090,914

STATEMENTS OF STOCKHOLDERS EQUI

STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance at Dec. 31, 2018	$ 159,091	$ 15,530,155	$ (16,540,342)	$ (851,096)
Beginning Balance, Shares at Dec. 31, 2018	159,090,914
Contributed services		11,700		11,700
Net Loss for the period			(45,291)	(45,291)
Ending Balance at Mar. 31, 2019	$ 159,091	15,541,855	(16,585,633)	(884,687)
Ending Balance, Shares at Mar. 31, 2019	159,090,914
Beginning Balance at Dec. 31, 2019	$ 159,091	15,576,955	(16,680,306)	(944,260)
Beginning Balance, Shares at Dec. 31, 2019	159,090,914
Contributed services		11,700		11,700
Net Loss for the period			(34,105)	(34,105)
Ending Balance at Mar. 31, 2020	$ 159,091	$ 15,588,655	$ (16,714,411)	$ (966,665)
Ending Balance, Shares at Mar. 31, 2020	159,090,914

CONDENSED STATEMENTS OF CASH FL

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CASH FLOW FROM OPERATING ACTIVITES:
Net Loss for the Period	$ (34,105)	$ (45,291)
Adjustments to reconcile net loss to net cash used by operating activities:
Contributed services	11,700	11,700
Non cash lease expense	9,902
Changes in Operating Assets and Liabilities:
Accounts receivable	(3,478)	(1,749)
Prepaids & other assets	10,462	3,362
Accounts payable	(30,594)	20,318
Lease liability	(9,898)
Accrued expenses	5,438	6,911
Net Cash Provided by (Used in) Operating Activities	(40,573)	(4,749)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances/loans from a related party	100,000	37,197
Repayment of advances from a related party		(15,000)
Payments on notes payable	(13,600)	(9,926)
Net Cash Provided by Financing Activities	86,400	12,271
Net Increase (decrease) in Cash	45,827	7,522
Cash at Beginning of Period	4,754	721
Cash at End of Period	50,581	8,243
Cash paid during the year for:
Interest
Income taxes
Supplemental non-cash disclosure:
Establish operating lease asset and related liability		$ 122,825

ORGANIZATION AND DESCRIPTION OF

ORGANIZATION AND DESCRIPTION OF BUSINESS	3 Months Ended
	Mar. 31, 2020
Organization And Description Of Business
ORGANIZATION AND DESCRIPTION OF BUSINESS	NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS Starco Brands, Inc. (the "Company") then operating under a different name, was incorporated in the State of Nevada on January 26, 2010, to engage in Direct Response marketing of consumer products with the goal of producing sales through television and/or retail. On September 7, 2017 the Company filed an Amendment to the Articles of Incorporation to change the corporate name to Starco Brands, Inc. The Board determined the change of the Company’s name was in the best interests of the Company due to changes in our current and anticipated business operations. In July 2017 the Company entered into a licensing agreement with The Starco Group, located in Los Angeles, California. The Companies pivoted to commercializing novel consumer products manufactured by The Starco Group. The Starco Group is a private label and branded aerosol and liquid fill manufacturer which manufactures DIY/Hardware, paints, coatings and adhesives, household, hair care, disinfectants, automotive, motorcycle, arts & crafts, personal care cosmetics, personal care, FDA, sun care, food, cooking oils, beverage, spirits and wine.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2020. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles 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 may differ from those estimates. Recently issued accounting pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods.

GOING CONCERN

GOING CONCERN	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
GOING CONCERN	NOTE 3 – GOING CONCERN The accompanying unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $16,714,411, predominantly from the Company granting stock for services during its reorganization in 2017 and 2018, at March 31, 2020, had a net loss of $34,105 and net cash used by operating activities of $40,573 for the three months ended March 31, 2020. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

NOTES PAYABLE

NOTES PAYABLE	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
NOTES PAYABLE	NOTE 4 – NOTES PAYABLE The Company has a financing loan for its Director and Officer Insurance (“D&O”), that was renewed in September 2019. As of March 31, 2020, and December 31, 2019 the loan had a balance of $18,729 and $32,329, respectively. The new loan bears interest at 6.97% and is due within one year. During the fourth quarter of 2018 a third party loaned the Company $3,300 to pay for general operating expenses. The loan is unsecured, non-interest bearing and due on demand.

OPERATING LEASE

OPERATING LEASE	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
OPERATING LEASE	NOTE 5 – OPERATING LEASE The Company currently occupies office space in Burbank, California. The Company signed a three-year lease starting January 1, 2016. The lease has been extended for an additional three-year term. Current monthly lease payments are $3,855 with yearly increases. The lease required a deposit of $3,500 which was paid on December 10, 2015. The lease is being accounted for under ASU 2016-02 Leases (Topic 842). The company recorded an initial Right of Use of Asset and Lease Obligation of $122,825. As of March 31, 2020, the Company has accrued rent due of $21,653 and a Lease Obligation of $76,540. Asset Balance Sheet Classification March 31, 2020 December 31, 2019 Operating lease asset Right of use asset $ 75,175 $ 85,077 Total lease asset $ 75,175 $ 85,077 Liability Operating lease liability – current portion Current operating lease liability $ 41,976 $ 40,806 Operating lease liability – noncurrent portion Long-term operating lease liability 34,564 45,632 Total lease liability $ 76,540 $ 86,438 Lease obligations at March 31, 2020 consisted of the following: For the year ended December 31: 2020 $ 34,691 2021 47,644 Total payments $ 82,335 Amount representing interest $ (5,795) Lease obligation, net 76,540 Less current portion (41,976) Lease obligation – long term $ 34,564 The lease expense for the three months ended March 31, 2020 was $11,567, which consisted of amortization expense of $9,898 and interest expense of $1,666. The lease expense for the three months ended March 31, 2019 was $11,567, which consisted of amortization expense of $8,827 and interest expense of $2,400. The cash paid under this operating lease during the three months ended March 31, 2020 was $11,564. At March 31, 2020, the weighted average remaining lease term is 1.75 years and the weighted average discount rate is 8%.

COMMITMENTS & CONTINGENCIES

COMMITMENTS & CONTINGENCIES	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
COMMITMENTS & CONTINGENCIES	NOTE 6 – COMMITMENTS & CONTINGENCIES On February 18, 2020, the Company received a demand letter from a law firm representing certain individuals who purchased the Breathe brand home cleaning products. The demand letter alleges that the Company has unlawfully, falsely and misleadingly labeled and marketed the Breathe brand of products to consumers in violation of the Consumer Products Safety Act, the Federal Hazardous Substance Act and the FTC Act as well as various California and New York laws. The Company denies any and all claims in the demand letter, however it is negotiating to settle the issue. Accrued Liability On July 9, 2014, the Board of Directors approved an investment arrangement with an individual. Per the terms of the agreement, the investor transferred $150,000 to the Company to be used for the development of a specific product. The product for which the investment was intended was never produced this agreement is being renegotiated. The investment remains with the Company and is disclosed as an accrued liability on the balance sheet.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
RELATED PARTY TRANSACTIONS	NOTE 7 – RELATED PARTY TRANSACTIONS During the year ended December 31, 2017, Sanford Lang, the Company’s Chairman and former CEO, advanced the Company $289,821 to pay for general operating expenses, his and Martin Goldrod’s personal compensation. The advances are uncollateralized, require a monthly interest payment of $2,545 and due on demand. As of March 31, 2020, the Company owed The Starco Group, Inc, (“TSG”) $72,843 for expenses paid by The Starco Group on behalf of the Company for expenses to launch licensed brands. Once royalties exceed $250,000 in the aggregate, TSG will deduct the incurred expenses from the subsequent royalty payments until TSG is paid in full. In addition, the Company owes TSG an additional $47,129 for expenses paid on behalf of the Company or funds advanced to the Company to pay for other operating expenses. As of March 31, 2020, the Company owes two members of the board $1,570 and $637, respectively, for cash advances to the Company. On January 24, 2020, the Company executed a promissory note for $100,000 with Ross Sklar, CEO. The note bears interest at 4% per annum, compounded monthly, is unsecured and matures in two years. During the three months ended March 31, 2020 and 2019, the Company recognized royalty income of $55,674 on approximately $547,000 of related party gross sales and $61,263 on approximately $609,000 of related party gross sales, respectively. There is a $17,974 receivable from The Starco Group as of March 31, 2020. Mr. Sklar, CEO, is the founder and current CEO of TSG.

STOCK WARRANTS

STOCK WARRANTS	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
STOCK WARRANTS	NOTE 8 – STOCK WARRANTS A summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below: Shares available to purchase with warrants Weighted Average Price Weighted Average Fair Value Outstanding, December 31, 2018 2,000,000 $ 1.05 $ 0.003 Issued - $ - $ - Exercised - $ - $ - Cancelled - $ - $ - Expired - $ - $ - Outstanding, December 31, 2019 2,000,000 $ 1.05 $ 0.003 Issued - $ - $ - Exercised - $ - $ - Cancelled - $ - $ - Expired - $ - $ - Outstanding, March 31, 2020 2,000,000 $ 1.05 $ 0.003 Exercisable, March 31, 2020 2,000,000 $ 1.05 $ 0.003

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2020
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 9 – SUBSEQUENT EVENTS Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued and has determined that no material subsequent events exist.

SUMMARY OF SIGNIFICANT ACCOUN_2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Basis of presentation	Basis of presentation The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2020. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Use of estimates	Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles 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 may differ from those estimates.
Recently issued accounting pronouncements	Recently issued accounting pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods.

OPERATING LEASE (Tables)

OPERATING LEASE (Tables)	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
Schedule of Operating Lease	Asset Balance Sheet Classification March 31, 2020 December 31, 2019 Operating lease asset Right of use asset $ 75,175 $ 85,077 Total lease asset $ 75,175 $ 85,077 Liability Operating lease liability – current portion Current operating lease liability $ 41,976 $ 40,806 Operating lease liability – noncurrent portion Long-term operating lease liability 34,564 45,632 Total lease liability $ 76,540 $ 86,438
Schedule of Lease obligations	Lease obligations at March 31, 2020 consisted of the following: For the year ended December 31: 2020 $ 34,691 2021 47,644 Total payments $ 82,335 Amount representing interest $ (5,795) Lease obligation, net 76,540 Less current portion (41,976) Lease obligation – long term $ 34,564

STOCK WARRANTS (Tables)

STOCK WARRANTS (Tables)	3 Months Ended
	Mar. 31, 2020
Notes to Financial Statements
Schedule of Outstanding Stock Warrants	A summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below: Shares available to purchase with warrants Weighted Average Price Weighted Average Fair Value Outstanding, December 31, 2018 2,000,000 $ 1.05 $ 0.003 Issued - $ - $ - Exercised - $ - $ - Cancelled - $ - $ - Expired - $ - $ - Outstanding, December 31, 2019 2,000,000 $ 1.05 $ 0.003 Issued - $ - $ - Exercised - $ - $ - Cancelled - $ - $ - Expired - $ - $ - Outstanding, March 31, 2020 2,000,000 $ 1.05 $ 0.003 Exercisable, March 31, 2020 2,000,000 $ 1.05 $ 0.003

GOING CONCERN (Details Narrativ

GOING CONCERN (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Going Concern
Accumulated Deficit	$ 16,714,411		$ 16,680,306
Net Loss	34,105	$ 45,291
Net Cash (Used) in Operating Activities	$ 40,573	$ 4,749

OPERATING LEASE (Details)

OPERATING LEASE (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Asset
Operating lease asset	$ 75,175	$ 85,077
Liability
Operating lease liability - current portion	41,976	40,806
Operating lease liability - noncurrent portion	34,564	45,632
Lease Liability, net	$ 76,540	$ 86,438

OPERATING LEASE (Details 2)

OPERATING LEASE (Details 2) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Notes to Financial Statements
2020	$ 34,691
2021	47,644
Total payments	82,335
Amount representing interest	(5,795)
Lease Liability, net	76,540	$ 86,438
Less: Current portion	(41,976)	(40,806)
Lease obligation - long term	$ 34,564	$ 45,632

OPERATING LEASE (Details Narrat

OPERATING LEASE (Details Narrative)	Mar. 31, 2020USD ($)
Notes to Financial Statements
Accured Rent Due	$ 21,653

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2017	Dec. 31, 2019
General Operating Expenses	$ 37,647	$ 35,296
Common Shares Issued	159,090,914			159,090,914
Common Share, per price	$ 0.001			$ 0.001
Account Receivable	$ 17,974
Chairman And Former CEO [Member]
General Operating Expenses			$ 289,821
CEO [Member]
Cash Advance to Company	1,570
Chairman [Member]
Cash Advance to Company	637
The Starco Group [Member]
Royalty Income	$ 61,263	$ 55,674

STOCK WARRANTS (Details)

STOCK WARRANTS (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Shares
Exercisable-end of period (in shares)	2,000,000
Weighted Average Exercise Price
Exercisable-end of period (in dollars per share)	$ 1.05
Stock Warrants [Member]
Shares
Outstanding-beginning of period (in shares)	2,000,000	2,000,000
Issued
Exercised
Forfieted
Expired
Outstanding-end of period (in shares)	2,000,000	2,000,000
Weighted Average Exercise Price
Outstanding-beginning of period (in dollars per share)	$ 1.05	$ 1.05
Issued
Exercised
Forfieted
Expired
Outstanding-end of period (in dollars per share)	1.05	1.05
Weighted Average Fair Value
Outstanding-beginning of period (in dollars per share)	0.003	.003
Issued
Exercised
Forfeited
Outstanding-end of period (in dollars per share)	$ .003	$ 0.003