| Summary of Significant Accounting Policies | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Nature of Operations
and Organization Indoor Harvest Corp. (the “Company,”)
is a Texas corporation formed on November 23, 2011. Our principal executive office is located at 5300 East Freeway Suite A, Houston,
Texas 77020. On August 3, 2017, we formed Alamo Acquisition, LLC, a wholly owned Texas limited liability company (“Alamo
Acquisition Sub”). On August 4, 2017, we consummated a reverse triangular merger (the “Alamo Merger”) pursuant
to which Alamo Acquisition Sub acquired all of the outstanding member interests of Alamo CBD, LLC. (“Alamo CBD”), a
Texas limited Liability Company. Upon closing of the Alamo Merger, the member interests (“Alamo Surviver Members”)
of Alamo CBD were exchanged for 7,584,008 shares of Indoor Harvest’s common stock, the parent company of Alamo Acquisition
Sub, and Alamo CBD continued as our surviving wholly-owned subsidiary, and Alamo Acquisition Sub ceased to exist. From inception until August 4, 2017, the Company
provided full service, state of the art design-build, engineering, procurement and construction services to the indoor and vertical
farming industry. The Company provided production platforms, mechanical systems and complete custom designed build outs for both
Controlled Environment Agriculture (“CEA”) and Building Integrated Agriculture (“BIA”), for two unique
industries, produce and cannabis. In mid-2016, the Company began efforts to separate its produce and cannabis related operations
due to ongoing feedback from both clients and potential institutional investors. It was determined that the Company’s involvement
in the cannabis industry was creating conflicts for clients and potential institutional investors wishing to work with the Company
from the produce industry due to the public perception and political issues surrounding the cannabis industry. By late-2016, the
Company had decided to cease actively selling its products and services to the vertical farming industry and to focus on utilizing
the Company’s developed technology and methods for the cannabis industry. On August 4, 2017, the Company ceased actively
supporting business development of vertical farms for produce production. Basis of Presentation The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (“GAAP”). It is management’s opinion, however,
that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial
statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the
year. 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 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 include, but are not
limited to, the estimate of percentage of completion on construction contracts in progress at each reporting period which we rely
on as a primary basis of revenue recognition, estimated useful lives of equipment for purposes of depreciation and the valuation
of common shares issued for services, equipment and the liquidation of liabilities. Principles of Consolidation The consolidated financial statements include
the accounts of Indoor Harvest Corp. and its wholly-owned subsidiary, Alamo CBD. All significant inter-company accounts and transactions
have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid instruments
with a maturity of three months or less to be cash and cash equivalents. Accounts Receivable and Work in Progress Work in progress consists of costs recorded
and revenue earned on projects recognized on the percentage of completion method for work performed on contracts in progress at
March 31, 2018 and December 31, 2017. The Company records revenue based on contractual agreements entered into at the inception
of construction contracts. Amounts are payable from customers based on milestones established in each contract. Amounts are billed
at milestone completion and are reflected as accounts receivable when billed. Costs and estimated earnings are accumulated on projects
in process and compared to amounts billed based on the percentage of completion method of accounting (cost to cost). Costs incurred
in excess of amounts billed and related profit recognized are reflected as an asset on the balance sheet as costs and estimated
earnings in excess of billings. Unearned billings are reflected in the balance sheet as a liability as billings in excess of costs
and estimated earnings on projects in process. Stock Based Compensation The Company recognizes stock-based compensation
in accordance with ASC 718-10, Stock Compensation. ASC 718-10 focuses on transactions in which an entity exchanges its equity instruments
for goods or services, with a primary focus in which an entity obtains employee services in stock-based payment transactions. ASC
718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the
grant date fair value of the award (with limited exceptions). Loss per Share Basic earnings per share amounts are calculated
based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is based
on the weighted average numbers of shares of common stock outstanding for the periods, including dilutive effects of stock options,
warrants granted and convertible preferred stock. Dilutive options and warrants that are issued during a period or that expire
or are canceled during a period are reflected in the computations for the time they were outstanding during the periods being reported.
Since Indoor Harvest has incurred losses for all periods, the impact of the common stock equivalents would be anti- dilutive and
therefore are not included in the calculation. Fair Value of Financial Instruments We adopted accounting guidance for financial
and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial
position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.
This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that
require or permit fair value measurements. This guidance does not apply to measurements related to share- based payments. This
guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value
of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The
guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The following is a brief description of those three levels:
● Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
● Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
● Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. Income Taxes The Company accounts for income taxes pursuant
to FASB ASC 740—Income Taxes, which requires recognition of deferred income tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the financial statements or tax returns. The Company provides for deferred
taxes on temporary differences between the financial statements and tax basis of assets using the enacted tax rates that are expected
to apply to taxable income when the temporary differences are expected to reverse. ASB ASC 740 establishes a more-likely-than-not
threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process
for measuring those tax positions that meet the recognition threshold of being ultimately sustained upon examination by the taxing
authorities. There are no uncertain tax positions taken by the Company on its tax returns. The Company files tax returns in the
U.S. and states in which it has operations and is subject to taxation. Tax years 2017, 2016, 2015, 2014, and 2013,
remain subject to examination by the IRS and respective states. On December 22, 2017, the U.S. government enacted
comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). We recognize
the impact of tax legislation in the period in which the law is enacted. In December 2017, the SEC staff issued Staff Accounting
Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information
available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the
changes in the Tax Reform Act. Consistent with that guidance, we recognized provisional amounts based upon our interpretation of
the tax laws and estimates which require significant judgments. The actual impact of these tax laws may differ from these provisional
amounts, possibly materially, due to, among other things, additional analysis, changes in our interpretations and assumptions,
additional guidance that may be issued by the government and actions we may take as a result of these enacted tax laws. Any adjustments
recorded to the provisional amounts will be included in income from operations as an adjustment to tax expense. Property and Equipment Property and equipment is recorded at cost
and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease
term for leasehold improvements, whichever is shorter. The estimated useful life by asset description is noted in the following
table:
Asset description Estimated Useful Life (Years)
Furniture and equipment 3 - 5
Tooling equipment 10
Leasehold improvements * * The shorter of 5 years or the life of the lease. Additions are capitalized and maintenance and
repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in other income. Goodwill In accordance with ASC 350 Goodwill is not
amortized but evaluated for impairment annually or more often if indicators of a potential impairment are present. Intangible Assets In accordance with ASC 350 Goodwill and Other
Intangible Assets, indefinite-lived intangible assets are not amortized but are evaluated for impairment annually or more often
if indicators of a potential impairment are present. Indefinite-lived intangible assets consist of the Company’s domain name.
Finite-lived intangible assets include software and is amortized over a 3 to 5-year period. Patent and Patent Application Expenses Although the Company believes that its patent
and underlying technology will have continuing value, the amount of future benefits to be derived from the patent is uncertain.
Therefore, patent costs are expensed as incurred. Research and Development Research and development expenditures are charged
to expense as incurred. Research and development expense for the three months ended March 31, 2018 and 2017 are as follows:
2018 2017
Research and development expense $ - $ 737
Advertising Expense Advertising and promotional costs are expensed
as incurred. Advertising expense for the three months ended March 31, 2018 and 2017 are as follows:
2018 2017
Advertising expense $ 112 $ 9,852
Recent Accounting Pronouncements The Company has implemented all new accounting
pronouncements that are in effect as of the date of the issuance of these financial statements. The following pronouncements may
significantly impact future reporting of financial position and results of operations. Management is currently assessing implementation. The FASB has issued its new lease accounting
guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required
to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
● A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and
● A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
● Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
● The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments
in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January
1, 2019, for a calendar year entity). The FASB has issued Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for
employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Derivative Liability The Company accounts for derivative instruments
in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities,
including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives
on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the
derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated
are based on the exposures hedged. At March 31, 2018 and December 31, 2017, the Company did not have any derivative instruments
that were designated as hedges. Beneficial Conversion Feature For conventional convertible debt where the
rate of conversion is below market value, the Company records a “beneficial conversion feature” (“BCF”)
and related debt discount. When the Company records a BCF, the relative
fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is
amortized to interest expense over the life of the debt. Reclassification Certain expense items have been reclassified
in the statement of operations for the three months ended March 31, 2017, to conform to the reporting format adopted for the three
months ended March 31, 2018. | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of
Operations and Organization Indoor Harvest Corp. (the “Company,”)
is a Texas corporation formed on November 23, 2011. Our principal executive office is located at 5300 East Freeway Suite A, Houston,
Texas 77020. On August 3, 2017, we formed Alamo Acquisition, LLC, a wholly owned Texas limited liability company (“Alamo
Acquisition Sub”). On August 4, 2017, we consummated a reverse triangular merger (the “Alamo Merger”) pursuant
to which Alamo Acquisition Sub acquired all of the outstanding member interests of Alamo CBD, LLC. (“Alamo CBD”), a
Texas limited Liability Company. Upon closing of the Alamo Merger, the member interests (“Alamo Surviver Members”)
of Alamo CBD were exchanged for 7,584,008 shares of Indoor Harvest’s common stock, the parent company of Alamo Acquisition
Sub, and Alamo CBD continued as our surviving wholly-owned subsidiary, and Alamo Acquisition Sub ceased to exist From inception until August 4, 2017, the Company
provided full service, state of the art design-build, engineering, procurement and construction services to the indoor and vertical
farming industry. The Company provided production platforms, mechanical systems and complete custom designed build outs for both
Controlled Environment Agriculture (“CEA”) and Building Integrated Agriculture (“BIA”), for two unique
industries, produce and cannabis. In mid-2016, the Company began efforts to separate its produce and cannabis related operations
due to ongoing feedback from both clients and potential institutional investors. It was determined that the Company’s involvement
in the cannabis industry was creating conflicts for clients and potential institutional investors wishing to work with the Company
from the produce industry due to the public perception and political issues surrounding the cannabis industry. By late-2016, the
Company had decided to cease actively selling its products and services to the vertical farming industry and to focus on utilizing
the Company’s developed technology and methods for the cannabis industry. On August 4, 2017, the Company ceased actively
supporting business development of vertical farms for produce production. Basis of Presentation The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (“GAAP”). It is management’s opinion, however,
that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial
statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the
year. 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 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 include, but are not
limited to, the estimate of percentage of completion on construction contracts in progress at each reporting period which we rely
on as a primary basis of revenue recognition, estimated useful lives of equipment for purposes of depreciation and the valuation
of common shares issued for services, equipment and the liquidation of liabilities. Principles of Consolidation The consolidated financial statements include
the accounts of Indoor Harvest Corp. and its wholly-owned subsidiary, Alamo CBD. All significant inter-company accounts and transactions
have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid instruments
with a maturity of three months or less to be cash and cash equivalents. Accounts Receivable and Work in Progress Work in progress consists of costs recorded
and revenue earned on projects recognized on the percentage of completion method for work performed on contracts in progress at
September 30, 2017, and December 31, 2016. The Company records revenue based on contractual agreements entered into at the inception
of construction contracts. Amounts are payable from customers based on milestones established in each contract. Amounts are billed
at milestone completion and are reflected as accounts receivable when billed. Costs and estimated earnings are accumulated on projects
in process and compared to amounts billed based on the percentage of completion method of accounting (cost to cost). Costs incurred
in excess of amounts billed and related profit recognized are reflected as an asset on the balance sheet as costs and estimated
earnings in excess of billings. Unearned billings are reflected in the balance sheet as a liability as billings in excess of costs
and estimated earnings on projects in process (See Note 9). Inventories Inventory consists primarily of raw materials
and packaging materials and is valued at the lower of cost or market. Cost is determined using the weighted average method and
the average cost is recomputed after each inventory purchase or sale. Inventory is periodically reviewed to identify obsolete or
damaged inventory and impaired values. Inventory is comprised of raw materials such as steel for our framing systems and packaging
materials such as boxes and pallets. Revenue Recognition The Company recognizes revenue on arrangements
in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence
of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company
will generate revenue from the design and installation of the equipment and licensing of technology. Revenue from construction contracts are reported
under the percentage of completion method for financial statement purposes. The estimated revenue for each contract reflected in
the financial statements represent that percentage of estimated total revenue that costs incurred to date bear to estimated total
costs, based on the Company’s current estimates. With respect to contracts that extend over one or more accounting periods,
revisions in costs and revenue estimates during the work are reflected in the period the revisions become known. When current estimates
of total contract costs indicate a loss, provision is made for the entire estimated loss. The asset, “costs and estimated earnings
in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability,
“Estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized. Billing practices for these projects are governed
by the contract terms of each project based upon actual costs incurred, achievement of milestones, or pre-agreed schedules. Billings
do not necessarily correlate with revenue recognized under the percentage of completion method of accounting. Except for claims
and change orders that are in the process of being negotiated with customers, unbilled work is usually billed during normal billing
processes following achievement of the contractual requirements. Stock Based Compensation The Company recognizes stock-based compensation
in accordance with ASC 718-10, Stock Compensation. ASC 718-10 focuses on transactions in which an entity exchanges its equity instruments
for goods or services, with a primary focus in which an entity obtains employee services in stock-based payment transactions. ASC
718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the
grant date fair value of the award (with limited exceptions). Loss per Share Basic earnings per share amounts are calculated
based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is based
on the weighted average numbers of shares of common stock outstanding for the periods, including dilutive effects of stock options,
warrants granted and convertible preferred stock. Dilutive options and warrants that are issued during a period or that expire
or are canceled during a period are reflected in the computations for the time they were outstanding during the periods being reported.
Since Indoor Harvest has incurred losses for all periods, the impact of the common stock equivalents would be anti- dilutive and
therefore are not included in the calculation. Fair Value of Financial Instruments We adopted accounting guidance for financial
and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial
position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.
This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that
require or permit fair value measurements. This guidance does not apply to measurements related to share- based payments. This
guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value
of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The
guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The following is a brief description of those three levels:
● Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
● Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
● Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. Income Taxes The Company accounts for income taxes pursuant
to FASB ASC 740—Income Taxes, which requires recognition of deferred income tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the financial statements or tax returns. The Company provides for deferred
taxes on temporary differences between the financial statements and tax basis of assets using the enacted tax rates that are expected
to apply to taxable income when the temporary differences are expected to reverse. ASB ASC 740 establishes a more-likely-than-not
threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process
for measuring those tax positions that meet the recognition threshold of being ultimately sustained upon examination by the taxing
authorities. There are no uncertain tax positions taken by the Company on its tax returns. The Company files tax returns in the
U.S. and states in which it has operations and is subject to taxation. Tax years subsequent to 2008 remain open to examination
by U.S. federal and state tax jurisdictions. Tax years 2017, 2016, 2015, 2014, and 2013,
remain subject to examination by the IRS and respective states. On December 22, 2017, the U.S. government enacted
comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). We recognize
the impact of tax legislation in the period in which the law is enacted. In December 2017, the SEC staff issued Staff Accounting
Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information
available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the
changes in the Tax Reform Act. Consistent with that guidance, we recognized provisional amounts based upon our interpretation of
the tax laws and estimates which require significant judgments. The actual impact of these tax laws may differ from these provisional
amounts, possibly materially, due to, among other things, additional analysis, changes in our interpretations and assumptions,
additional guidance that may be issued by the government and actions we may take as a result of these enacted tax laws. Any adjustments
recorded to the provisional amounts will be included in income from operations as an adjustment to tax expense. Property and Equipment Property and equipment is recorded at cost
and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease
term for leasehold improvements, whichever is shorter. The estimated useful life by asset description is noted in the following
table:
Asset description Estimated Useful Life (Years)
Furniture and equipment 3 - 5
Tooling equipment 10
Leasehold improvements *
* The shorter of 5 years or the life of the lease. Additions are capitalized and maintenance and
repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in other income. Goodwill In accordance with ASC 350 Goodwill is not
amortized but evaluated for impairment annually or more often if indicators of a potential impairment are present. Intangible Assets In accordance with ASC 350 Goodwill and Other
Intangible Assets, indefinite-lived intangible assets are not amortized but are evaluated for impairment annually or more often
if indicators of a potential impairment are present. Indefinite-lived intangible assets consist of the Company’s domain name.
Finite-lived intangible assets include software and is amortized over a 3 to 5-year period. Patent and Patent Application
Expenses Although the Company believes that its patent
and underlying technology will have continuing value, the amount of future benefits to be derived from the patent is uncertain.
Therefore, patent costs are expensed as incurred. Research and Development Research and development expenditures are charged
to expense as incurred. Advertising Expense Advertising and promotional costs are expensed
as incurred. Reclassifications Certain expense items have been reclassified
in the statement of operations for the year ended December 31, 2016, to conform to the reporting format adopted for the year ended
December 31, 2017. Recent Accounting Pronouncements The Company has implemented all new accounting
pronouncements that are in effect as of the date of the issuance of these financial statements. The following pronouncements may
significantly impact future reporting of financial position and results of operations. Management is currently assessing implementation. The FASB has issued Accounting Standards Update
(ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, clarifying the definition of a business.
The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a
business. For public companies, the amendments are effective
for annual periods beginning after December 15, 2017, including interim periods within those periods. The FASB has issued its new lease accounting
guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required
to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
● A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and
● A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
● Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
● The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments
in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January
1, 2019, for a calendar year entity). The FASB has issued Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for
employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based
payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity
or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective
for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the
amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning
after December 15, 2018. Early adoption is permitted for any organization in any interim or annual period. The FASB has issued Accounting Standards Update
No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments
clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance.
The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements
for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the
amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January
1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. The effective date for nonpublic entities
is deferred by one year. Derivative Liability The Company accounts for derivative instruments
in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities,
including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives
on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the
derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated
are based on the exposures hedged. At December 31, 2017 and December 31, 2016, the Company did not have any derivative instruments
that were designated as hedges. Beneficial Conversion Feature For conventional convertible debt where the
rate of conversion is below market value, the Company records a “beneficial conversion feature” (“BCF”)
and related debt discount. When the Company records a BCF, the relative
fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is
amortized to interest expense over the life of the debt. |
