Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 18, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Innerscope Advertising Agency, Inc. | |
Entity Central Index Key | 1,609,139 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 61,539,334 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 66,382 | $ 493,514 |
Accounts receivable, net | 70,810 | |
Deferred commissions, stockholder | 133,334 | |
Prepaid assets | 40,580 | 6,223 |
Inventory | 6,731 | 2,321 |
Notes and interest receivable, current portion, officer | 12,934 | 10,396 |
Total current assets | 197,437 | 645,788 |
Intangible assets | 3,000 | |
Property, furniture and fixtures and equipment, net of accumulated depreciation of $626 (2017) and $184 (2016) | 2,025 | 2,467 |
Notes and interest receivable, long term portion, officer | 2,563 | 7,688 |
Investment in undivided interest in real estate | 1,221,306 | |
Total assets | 1,426,330 | 655,943 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 85,036 | 42,939 |
Accounts payable to related party | 4,441 | 13,048 |
Current portion of note payable | 17,970 | |
Commissions payable - stockholder | 96,000 | |
Officer salaries payable | 6,731 | 6,731 |
Income tax payable | 33,682 | 38,482 |
Deferred revenue | 847,223 | 222,223 |
Total current liabilities | 995,083 | 419,423 |
Long term portion of note payable | 989,960 | |
Total liabilities | 1,985,043 | 419,423 |
Commitments and contingencies | ||
Stockholders' Equity (Deficit): | ||
Common stock, $0.0001 par value; 225,000,000 shares authorized; 61,539,334 and 60,906,000 shares issued and outstanding June 30, 2017 and December 31, 2016, respectively | 6,153 | 6,090 |
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; no shares issued | ||
Additional paid-in capital | 294,047 | 104,110 |
Deferred stock compensation | (75,000) | |
Retained earnings (accumulated deficit) | (783,913) | 126,320 |
Total stockholders' equity | (558,713) | 236,520 |
Total liabilities and stockholders' equity (deficit) | $ 1,426,330 | $ 655,943 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation of property, furniture and fixtures and equipment | $ (405) | $ (184) |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 225,000,000 | 225,000,000 |
Common stock, shares issued | 61,539,334 | 60,906,000 |
Common stock, shares outstanding | 61,539,334 | 60,906,000 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenues: | ||||
Revenues, other | $ 109,208 | $ 248,668 | ||
Revenues, related party | 31,942 | 430,245 | 36,942 | 622,245 |
Total revenues | 141,150 | 430,245 | 285,610 | 622,245 |
Cost of sales | ||||
Cost of sales, other | 119,112 | 134,504 | ||
Cost of sales, related | 15,815 | 250,758 | 15,815 | 261,906 |
Total cost of sales | 134,927 | 250,758 | 150,319 | 261,906 |
Gross profit | 6,223 | 179,487 | 135,291 | 360,339 |
Operating Expenses: | ||||
Compensation and benefits | 166,594 | 143,288 | 323,267 | 292,341 |
Professional fees (including stock based fees of $115,000 for the three and six months ended June 30, 2017) | 179,646 | 40,035 | 220,896 | 64,949 |
Consulting fees, stockholder | 60,000 | |||
Rent, related party 2016 | 21,005 | 8,526 | 39,377 | 24,078 |
Other general and administrative | 32,651 | 5,990 | 48,259 | 7,911 |
Total operating expenses | 399,896 | 197,840 | 691,799 | 389,279 |
Loss from operations | (393,673) | (18,352) | (556,508) | (28,940) |
Other Income (Expense): | ||||
Loss on investment in undivided interest in real estate | (3,945) | (3,945) | ||
Write off of deferred commissions (see note 2) | (508,334) | (508,334) | ||
Gain on contract cancellation | 160,000 | |||
Interest income, including $58 and 122 for the three and six months ended June 30, 2017, respectively, and $77 and $154 for the three and six months ended June 30, 2016, respectively | 80 | 77 | 192 | 154 |
Interest expense and finance charges | (1,270) | (517) | (1,638) | (517) |
Total other expense, net | (513,469) | (441) | (353,725) | (363) |
Net loss | $ (907,142) | $ (18,793) | $ (910,233) | $ (29,303) |
Basic and diluted loss per share | $ (0.01) | $ 0 | $ (0.01) | $ 0 |
Weighted average number of common shares outstanding - Basic and diluted | 61,511,927 | 60,906,000 | 61,208,963 | 60,906,000 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement [Abstract] | ||||
Stock based fees included in professional fees | $ 115,000 | $ 115,000 | ||
Officer portion of interest income | $ 58 | $ 77 | $ 122 | $ 154 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (910,233) | $ (29,303) |
Adjustments to reconcile net loss to net cash used in operations: | ||
Depreciation | 442 | |
Stock compensation expense | 115,000 | |
Loss on investment in undivided interest in real estate | 3,945 | |
Security deposit used for rent payment | 7,026 | |
Changes in operating assets and liabilities: | ||
Decrease (increase) in Interest receivable, related party | 24 | (154) |
Decrease (increase) in Accounts receivable | (70,810) | |
Decrease (increase) in Inventory | (4,410) | (2,922) |
Decrease (increase) in Deferred Commissions, stockholder | 133,334 | |
Decrease (increase) in Prepaid assets | (34,357) | |
Decrease (increase) in Other receivables | (24,758) | |
Decrease (increase) in Due from related party | (64,366) | |
Increase (decrease) in Accounts payable and accrued expenses | 37,298 | 73,175 |
Increase (decrease) in Commissions payable, stockholder | (96,000) | |
Increase (decrease) in Deferred revenue | 625,000 | |
Increase (decrease) in Due to related party | (8,607) | |
Net cash used in operating activities | (209,374) | (41,303) |
Cash flows from investing activities: | ||
Purchase of intangible asset | (3,000) | |
Repayments of shareholder loans receivable | 2,563 | |
Investment in undivided interest in real estate | (217,321) | |
Net cash used in investing activities | (217,758) | |
Net decrease in cash and cash equivalents | (427,132) | (41,303) |
Cash and cash equivalents, Beginning of period | 493,514 | 67,841 |
Cash and cash equivalents, End of period | 66,382 | 26,538 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 1,638 | 8,521 |
Cash paid for income taxes | 24,758 | |
Schedule of non-cash Investing or Financing Activity: | ||
Issuance of note payable for investment in undivided interest in real estate | $ 1,007,930 |
ORGANIZATION
ORGANIZATION | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | NOTE 1 - ORGANIZATION Business InnerScope Advertising Agency, Inc. (“Company”, “Innerscope” or “ISAA”) is a Nevada Corporation incorporated on June 15, 2012, with its principal place of business in Roseville, California. ISAA was formed to provide advertising and marketing services to retail establishments in the hearing device industry. On June 20, 2012, ISAA entered into an Acquisition and Plan of Share Exchange with InnerScope Advertising Agency, LLC (“ILLC”), a commonly owned entity, whereby ISAA acquired 100% of ILLC. On November 1, 2013, ISAA entered into an Acquisition and Plan of Share Exchange with Intela-Hear, LLC (“Intela-Hear”), a commonly owned entity, whereby ISAA acquired 100% of the outstanding equity of Intela-Hear in exchange for 27,000,000 shares of the Company’s common stock. This resulted in Intela-Hear becoming a wholly-owned subsidiary of the Company. ISAA provides a comprehensive range of services (including consulting services), grouped into four fundamental disciplines: advertising/marketing, customer relationship management, public relations and specialty communications. The Company serves the retail hearing aid dispensing community through generating traffic and consumer interest for hearing aid dispensing practices and providing consulting services to hearing aid dispensaries. For the three and six months ended June 30, 2017, approximately 22.6% and 11.5%, respectively, of revenues were from a related party and for the three and six months ended June 30, 2016, 100% of the Company’s revenue was generated from a related party. On August 5, 2016, the Company and the related party agreed to cancel their Marketing Agreement as a result of the sale by the related party of substantially all of their assets (see note 5). On August 5, 2016, the Company along with Mark Moore (“Mark”, the Company’s chairman), Matthew Moore (“Matthew”, the Company’s Chief Executive Officer) and Kim Moore (“Kim”, the Company’s Chief Financial Officer) entered into a Store Expansion Consulting Agreement (the “Expansion Agreement”). Mark, Matthew and Kim are herein referred to collectively as the Moores. Pursuant to the Expansion Agreement, the Company and the Moores were responsible for all physical plant and marketing details for new store openings during the initial term of six-months. The Expansion Agreement was cancelled on January 6, 2017. The Company’s client has decided to do their own marketing in-house and eliminate this out-sourced contract, and has decided to open only one location and delay the opening of any other new stores. Also on August 5, 2016, the Company and the Moores entered into a Consulting Agreement (the “Consulting Agreement”) with the same party as the store Expansion Agreement. Under the Consulting Agreement, including the Non-Compete provision covering a ten mile radius of any retail store, the Company and the Moores will provide unlimited licensing of the Intela-Hear brand name, exclusive access to the Aware Aural Rehab Program within 10 miles of retail stores, exclusive territory of all services within 10 miles of retail stores and 40 hours per month of various consulting services. The Consulting Agreement continues until January 31, 2019, unless terminated for cause, as defined in the Consulting Agreement. On May 26, 2017, the Company and the Moores were named as Defendants in an action filed in the Superior Court of Florida in and for the County of Miami-Dade that includes a demand that all monies paid pursuant to the Consulting Agreement be returned. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING PROUNCEMENTS | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included in Form 10-K filed with the SEC on March 31, 2017. Interim results of operations for the three and six months ended June 30, 2017 and 2016 are not necessarily indicative of future results for the full year. Certain amounts from the 2016 period have been reclassified to conform to the presentation used in the current period. The condensed consolidated financial statements of the Company include the consolidated accounts of Innerscope and its’ wholly owned subsidiaries ILLC and Intela-Hear, a California limited liability company. All intercompany accounts and transactions have been eliminated in consolidation. Emerging Growth Companies The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Significant estimates relied upon in preparing these financial statements include collectability of notes receivable from an officer, and through July 31, 2016, the allocation of our President’s compensation to the Company. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. Cash and cash equivalent balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail. Accounts receivable The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of June 30, 2017, management’s evaluation did not require any allowance for uncollectible receivables. Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three and six months ended June 30, 2017 and 2016, and accounts receivable balance as of June 30, 2017: Accounts June 30, 2017 June 30, 2016 Receivable 3 months 6 months 3 months 6 months as of % % % % June 30, 2017 Customer A 11.5 % — — — $ 8,125 Customer B 10.3 % — — — 7,515 Customer C 32.1 % 14.0 % 14.0 % 0.0 % 38,299 Customer D, related 22.6 % 11.5 % 11.5 % 100.0 % 31,942 Customer E — 40.3 % — — — Deferred Commission and Commission Payable, Stockholder The Company records deferred commission when cash has been paid, but the related services have not been provided by the party (stockholder). Commission expense will be recognized when the services are provided. As of December 31, 2016, the Company had advanced $133,334, and in January an additional $375,000. For the three and six months ended June 30, 2017, the Company expensed $508,334 (included in other expenses in the Condensed Consolidated Statements of Operations), due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017 (see Note 8). Inventory Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts. Notes Receivable, Officer The Company records notes receivable when a recipient has issued a note to the Company in exchange for cash. The Company records as a current asset, any portion of the note that is due in the subsequent twelve (12) months for the date of the balance sheet, and any payments due in excess of twelve months of the balance sheet are classified as long term. As of June 30, 2017, $12,934 (includes $121 of interest due) is due by June 30, 2018 and $2,563 is due after June 30, 2018. The Company received a payment of $2,629 of principal and interest on July 5, 2017. Intangible Assets Costs for intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the consolidated balance sheet. Capitalized costs are amortized over three years. During the six months ended June 30, 2017, the Company purchased the domain name www.innd.com from a third party for $3,000. The Company will begin amortizing the capitalized cost beginning July 1, 2017 for a three-year period. Property and Equipment Property and equipment are stated at cost and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment are as follows: Computer equipment 3 years The Company's property and equipment consisted of the following at June 30, 2017 and December 31, 2016: June 30, December 31, Computer equipment $ 2,650 $ 2,650 Accumulated depreciation (625 ) (183 ) Balance $ 2,025 $ 2,467 Depreciation expense of $221 and $442 was recorded for the three and six months ended June 30, 2017, respectively. Investment in Undivided Interest in Real Estate The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. Our allocated portion of the net loss for the three and six months ended June 30, 2017, was $3,945. As of June 30, 2017, the carrying value of our equity method investment in this privately-held company was $1,221,306 (see Note 6). Revenue Recognition The Company recognizes revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the period in which the services are performed. In addition to the revenue recognized for the delivery of services and product, for the six months ended June 30, 2017, the Company received and recognized $100,000 of revenue related to the Store Expansion agreement, and $30,000 of income from the cancellation of the Marketing and Store Expansion Agreements. Deferred Revenue The Company records deferred revenues from the Consulting Agreement when cash has been received, but the related services have not been provided. Revenue will be recognized when the services are provided and the terms of the agreement have been fulfilled. As of June 30, 2017, the Company has deferred revenue of $847,223 related to the Consulting Agreement. On May 26, 2017, the Company and the Moores were named as Defendants in an action filed in the Circuit Court of the 11 th the Company has not recognized any revenue in 2017 from the Consulting Agreement. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash, notes and interest receivable, officer and accounts payable and amount due to a related party (MFHC). The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows. Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed, nor paid, any interest or penalties. Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. Earnings (Loss) Per Share The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of June 30, 2017 and 2016, the Company did not have any outstanding common stock equivalents or any other potentially dilutive securities. Recent Accounting Pronouncements Recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements. |
GOING CONCERN AND MANAGEMENT'S
GOING CONCERN AND MANAGEMENT'S PLANS | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN AND MANAGEMENT'S PLANS | NOTE 3 – GOING CONCERN AND MANAGEMENT’S PLANS These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplates continuation of the Company as a going concern, which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has experienced net losses from continuing operations of $393,673, and $556,508 for the three and six months ended June 30, 2017, respectively. At June 30, 2017, the Company had a working capital deficit of $271,433, and an accumulated deficit of $275,579. These factors raise substantial doubt about the Company’s ability to continue as a going concern and to operate in the normal course of business. Through August 5, 2016, the Company was dependent on the Marketing Agreement with MFHC, (the Company and MFHC agreed to cancel the Marketing Agreement which generated 100% of the Company’s revenues for the three and six months ended June 30, 2016, as a result of the sale by MFHC of substantially all of their assets) and is now dependent on the sale of our services to third parties and the Consulting Agreement. On May 2, 2017, the Company received a demand that all monies paid pursuant to the Consulting Agreement be returned on the basis that an injunction entered against related parties prevented the performance of the Consulting Agreement by the Company. On May 26, 2017, the Company and the Moores were named as Defendants in an action filed in the Circuit Court of the 11 th Management’s Plans The Company’s plans include the realization of the Consulting Agreement to provide the Company with working capital. The Company’s plans also include setting up an alliance (the “Alliance”). On April 2, 2013, The Company executed a 10 Year Supply Agreement with GN Hearing Care Corporation, DBA as GN Resound (“GN Resound”), one of the world’s leading manufacturers of hearing devices. This supply agreement enables the Company to offer hearing aids to independent hearing aid practitioners at a discount to the regular wholesale price, while still permitting the Company to profit from said sale between the independent hearing aid practitioners and GN Resound. Alliance members will then be able to sell those hearing devices, whether private label or GN Resound branded, manufactured and shipped by GN ReSound under the Alliance program to their clients. |
NOTE RECEIVABLE, OFFICER
NOTE RECEIVABLE, OFFICER | 6 Months Ended |
Jun. 30, 2017 | |
Receivables [Abstract] | |
NOTE RECEIVABLE, OFFICER | NOTE 4 – NOTE RECEIVABLE, OFFICER On April 1, and June 25, 2013, in exchange for two notes receivable, the Company loaned the President of the Company $10,000 and $10,500, respectively. The terms of the notes include an interest rate of 1.5% per annum and the notes, as amended are due on their fifth year anniversary, with quarterly payment beginning October 1, 2016. Interest income, related party of $58 and $122 was recorded for the three and six months ended June 30, 2017, respectively, and $77 and $154 for the three and six months ended June 30, 2016, respectively. As of June 30, 2017, and December 31, 2016, notes and interest receivable, related party, was $15,497 and $18,084, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 5 – RELATED PARTY TRANSACTIONS The Company loaned the President $20,500 during the year ended December 31, 2013 (see Note 4). The Company recorded interest income of $58 and $122 for the three and six months ended June 30, 2017, respectively, and $77 and $154 for the three and six months ended June 30, 2016. Pursuant to a Marketing Agreement (cancelled August 5, 2016), the Company provided marketing programs to promote and sell hearing aid instruments and related devices to Moore Family Hearing Company (“MFHC”). MFHC owned and operated retail hearing aid stores. Based on common control of MFHC and the Company, all transactions with MFHC are classified as related party transactions. On August 8, 2016, in consideration of $128,000 (the “Cancellation Fee”), MFHC and the Company agreed to cancel the Marketing Agreement as a result of the sale by MFHC of substantially all of their assets (see Note 6). On August 11, 2016, MFHC paid $229,622 to the Company (inclusive of the balance owed as of June 30, 2016, the Cancellation Fee and other related party activity). Pursuant to the Marketing Agreement, beginning in January 2014, the monthly fee was increased from $2,500 to $3,200 per retail location. For the three and six months ended June 30, 2016, there were 20 stores resulting in revenue of $192,000. The Company has offset the accounts receivable owed from MFHC for expenses of the Company that have been paid by MFHC. As a result of these payments in addition to MFHC’s payments to the Company during the year ended December 31, 2016, the balance due to MFHC as of June 30, 2017 and December 31, 2016 was $4,441 and $13,048, respectively. On April 1, 2013, the Company entered into a five-year sublease agreement with MFHC to sublease approximately 729 square feet of office space for $1,500 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services provided to MFHC. For the six months ended June 30, 2017, the Company expenses $1,500 and for the three and six months ended June 30, 2016, the Company expensed $4,500 and $9,000, respectively, related to this lease. On February 1, 2016, the Company entered into a one-year sublease agreement with MFHC to sublease approximately 2,119 square feet of office space for $4,026 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services provided to MFHC. Effective April 30, 2016, MFHC released the Company from the sublease. For the three and six months ended June 30, 2016, the Company expensed $4,026 and $12,078, respectively, related to this lease. Prior to August 1, 2016, the Company’s President was being compensated from MFHC, as he also held a position with MFHC. During that time the Company estimated the portion of the President’s salary that should be allocated to the Company, and subsequent to August 1, 2016, the Company agreed to compensation of $225,000 per year. Effective August 1, 2016, the Company agreed to compensate our Chief Financial Officer $125,000 per annum. On November 15, 2016, the Company entered into an employment agreement with our CEO and CFO, which includes an annual base salary of $225,000 and $125,000, respectively. The Company has expensed $56,250 and $112,500 for the President, for the three and six months ended June 30, 2017, respectively and $31,250 and $62,500, respectively, of expense for the CFO. For the three and six months ended June 30, 2016, the Company expenses $13,125 and $23,291, respectively, for the allocation of the President’s salary. In September 2016, the officers and directors of the Company formed a California Limited Liability Company (“LLC1”), for the purpose of acquiring commercial real estate and other business activities. On December 24, 2016, LLC1 acquired two retail stores from the buyer of the MFHC stores. On March 1, 2017, the Company entered into a twelve month Marketing Agreement with each of the stores to provide telemarketing and design and marketing services for $2,500 per month per store, resulting in $15,000 and $20,000 of revenues for the three and six months ended June 30, 2017, respectively. Additionally, for the three and six months ended June 30, 2017, the Company invoiced LLC1 $16,942 for the Company’s production, printing and mailing services. In November 2016, the Company’s Chairman formed a California Limited Liability Company (“LLC2”), for the purpose of providing consulting services to the Company. The Company entered into an agreement with LLC2 and paid LLC2, $375,000 during the year ended December 31, 2016 for services performed and to be performed. Of the $375,000 amount paid, $241,667 was recognized as consulting fees- stockholder for the year ended December 31, 2016, and the remaining $133,334 was recorded as deferred commissions- stockholder as of December 31, 2016. For the six months ended June 30, 2017, the Company paid LLC2 an additional $771,000 ($96,000 of which reduced previous amounts owed) and expensed $808,334 ($60,000 as commissions for services performed and $748,334 as other expense). As of June 30, 2017, the deferred commissions-stockholder is $-0-. On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party (see Note 6). |
INVESTMENT IN UNDIVIDED INTERES
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | 6 Months Ended |
Jun. 30, 2017 | |
Real Estate [Abstract] | |
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | NOTE 6– INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company paid for their building interest by delivering cash at closing of $209,971, and being a co-borrower on a note in the amount of $2,057,000, of which the Company has agreed with LLC1 to pay $1,007,930 (see Note 7). The Company accounted for the investment using the equity method. The allocated portion of net loss in an equity method investment in a privately-held, related party, company for the three and six months ended June 30, 2017, was $3,945, which we recorded in “Interest and other income (expense), net” on the condensed consolidated statements of operations. As of June 30, 2017, the carrying value of our equity method investment in this privately held company was $1,221,306. |
NOTE PAYABLE - UNDIVIDED INTERE
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | NOTE 7– NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party. The Company and LLC1 have agreed that the Company purchased and owns 49% of the building and LLC1 purchased and owns 51% of the building. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 including, fees, insurance, interest and real estate taxes. The Company is a co-borrower on a $2,057,000 Small Business Administration Note (the “SBA Note”). The SBA Note carries a 25 year term, with a 6% per annum interest rate and is secured by a first position Deed of Trust and business assets located at the property. The Company has recorded a liability of $1,007,930 for its portion of the SBA Note, with the offset being to Investment in undivided interest in real estate on the balance sheet presented herein. As of June 30, 2017, the current and long term portion of the SBA Note is $17,970 and $989,960, respectively. Future principal payments for the Company’s portion are: Year Amount 2017 $ 8,768 2018 18,518 2019 19,660 2020 20,708 2021 22,150 Thereafter 1,967,196 Total $ 2,057,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8– COMMITMENTS AND CONTINGENCIES Lease Agreements On April 1, 2013, the Company entered into a five-year sublease agreement with MFHC to sublease approximately 729 square feet of office space for $1,500 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services provided to MFHC. On February 1, 2014, the Company entered into a two-year sublease agreement for approximately 2,119 square feet of office space in Roseville, CA, for $3,000 per month. On February 1, 2017, the Company and MFHC terminated any remaining subleases with MFHC and the Company agreed to a month-to-month lease directly with the landlord for $8,436 per month. Consulting Agreements Effective June 20, 2012, the Company entered into an eighteen month Business Consulting Agreement (the “BCA”). Pursuant to the BCA, the consultant is to assist the Company in becoming a “public” company and the Company agreed to a monthly compensation of $2,500 and the issuance of the amount of shares equal to 4.9% of the outstanding shares of the Company at all times until the completion of the transaction. The Company has issued the consultant 2,940,000 shares of common stock. The Company continues to use the services of the consultant on a month-to-month basis at the rate of $2,500 per month. For the three and six months ended June 30, 2017 and 2016, the Company has recorded expenses of $7,500 and $15,000, respectively, in professional fees. On August 5, 2016, the Company along with Mark Moore (“Mark”, the Company’s chairman), Matthew Moore (“Matthew”, the Company’s Chief Executive Officer) and Kim Moore (“Kim”, the Company’s Chief Financial Officer) entered into a Store Expansion Consulting Agreement (the “Expansion Agreement”) Mark, Matthew and Kim are herein referred to collectively as the Moores. Pursuant to the Expansion Agreement, the Company and the Moores will be responsible for all physical plant and marketing details for new store openings during the initial term of six-months. The Expansion Agreement was cancelled on January 6, 2017. The Company’s client has decided to do their own marketing in-house and eliminate this out-sourced contract, and has decided to delay the opening of any new stores. Also on August 5, 2016, the Company and the Moores entered into a Consulting Agreement (the “Consulting Agreement”) with the same party as the store Expansion Agreement. Under the Consulting Agreement, including the Non-Compete provision covering a ten mile radius of any retail store, the Company and the Moores will provide unlimited licensing of the Intela-Hear brand name, exclusive access to the Aware Aural Rehab Program within 10 miles of retail stores, exclusive territory of all services within 10 miles of retail stores and 40 hours per month of various consulting services. The Consulting Agreement continues until January 31, 2019, unless terminated for cause, as defined in the Consulting Agreement. On May 2, 2017, the Company received a demand letter threatening litigation unless all monies paid pursuant to the Consulting Agreement are returned. On May 26, 2017, a complaint (the “Complaint”) was filed against the Company and the Moores, which includes a request for rescission of the Consulting Agreement. The Company believes the Complaint by the third party is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated. However, effective January 1, 2017, the Company has not recognized revenue from the Consulting Agreement. Effective August 5, 2016, the Company entered into a Marketing Agreement (the “Marketing Agreement”). Pursuant to the Marketing Agreement, the Company will provide marketing concepts and designs to promote its’ products and use the Company’s advertising services for an initial six month period. Pursuant to the Marketing Agreement and the current structure, the Company will receive $50,000 per month. On January 6, 2017, the Marketing Agreement was cancelled. On November 17, 2016, the Company entered into an Agreement with a Limited Liability Company, whose sole member is the Company’s Chairman. Pursuant to the Agreement, consulting services are to be provided to the Company related to the physical plant and marketing of new store openings for hearing aid dispensaries as well as the marketing and general operations of hearing aid dispensary business. For the six months ended June 30, 2017, the Company paid LLC2 an additional $771,000 ($96,000 of which reduced previous amounts owed) and expensed $808,334 ($60,000 as commissions for services performed and $748,334 as other expense). A summary of the activity for the six months ended June 30, 2017 is as follows: Deferred commissions-stockholder 2017 Beginning balance $ 133,334 Payments made 771,000 Reduction of commissions owed (96,000 ) Commission expense recorded (60,000 ) Other expense recorded (748,334 ) Ending balance $ — On April 3, 2017, the Company entered into a one (1) year Financial Consulting Agreement (the “FC Agreement”), with a Consultant (the “FC Consultant”). Pursuant to the FC Agreement, the FC Consultant will assist the Company in its’ public company filing requirements. The Company has agreed to compensate the FC Consultant $4,500 per month and to issue 333,334 shares of restricted common stock of the Company. The Company valued the shares at $0.30 per share (the market price of the common stock on the date of the agreement) and will amortize the cost over the one year life of the agreement, accordingly, the Company recorded stock compensation expense of $25,000 for the six months ended June 30, 2017, and $75,000 as deferred stock compensation (in the equity section of the balance sheet herein) that will be amortized over the remaining term of the agreement. Under certain circumstances the monthly fee can be reduced to $3,500 after the first six months of the FC Agreement. The FC Consultant was previously providing services for the Company. For the three and six months ended June 30, 2017, the Company paid the FC Consultant $13,500 and $27,000 respectively, and for the three and six months ended June 30, 2016, the Company paid the FC Consultant $11,250 and $22,500, respectively. On April 7, 2017, the Company entered into a Consulting and Representation Agreement (the “CR Agreement”), with a consultant (the “CR Consultant”). Pursuant to the CR Agreement the CR Consultant will assist the Company to broaden its visibility to the investing public. The Company has agreed to compensate the CR Consultant $700 per month and to issue 300,000 restricted shares of the Company’s common stock to the CR Consultant. The Company valued the shares at $0.30 per share (the market price of the common stock on the date of the agreement) and recorded stock compensation expense of $90,000 for the six months ended June 30, 2017. The initial term was for fifteen (15) days with an automatic extension for one hundred seventy (170) days. Legal Matters On May 26, 2017, Helix Hearing Care (California), Inc. a California corporation (“Helix”), and the Moores, th Innerscope and the Moores filed their Answer and Affirmative Defenses to the Complaint on June 27, 2017. On the same date, Innerscope, the Moores and MFHC filed a counterclaim for specific performance and three counts of breach of contract. The plaintiff has filed a motion to dismiss the counterclaim, as well as an answer. A hearing date has not yet been set as of the date of this filing. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2017 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 9 – STOCKHOLDERS’ EQUITY Common Stock The Company has 225,000,000 authorized shares of $0.0001 common stock. As of June 30, 2017, there are 61,539,334 shares of common stock outstanding. On April 3, 2017, the Company issued 333,334 shares of restricted common stock to a consultant. The Company valued the shares at $0.30 per share (the market price of the common stock on the date of the agreement) and will amortize the cost over the one year life of the agreement, accordingly, the Company recorded stock compensation expense of $25,000 for the six months ended June 30, 2017, and $75,000 as deferred stock compensation (in the equity section of the balance sheet herein) that will be amortized over the remaining term of the agreement. On April 7, 2017, the Company issued 300,000 shares of restricted common stock to a consultant. The Company valued the shares at $0.30 per share (the market price of the common stock on the date of the agreement) and recorded stock compensation expense of $90,000 for the six months ended June 30, 2017. Preferred Stock The Company has 25,000,000 authorized shares of $0.0001 preferred stock. As of June 30, 2017 and December 31, 2016 there were no shares of preferred stock issued and outstanding. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | NOTE 10 -- SUBSEQUENT EVENT On August 18, 2017, the Company signed a Letter of Intent (the “LOI”) to acquire all of the outstanding equity interests (the “Stock”) of AUDserv, Inc. (“AUDserve”), a Delaware corporation and any and all of its affiliates and/or subsidiaries. This transaction has not yet occurred and is subject to the execution of a fully executed agreement. AUDserv operates three divisions, predominantly in the business-to-business sector, including a highly scalable SaaS (Software as a service) based practice management platform, and key infrastructure. The LOI contemplates a future executed agreement calling for the Company to acquire the AUDserv Stock in exchange for Company stock worth $1,000,000 at the date of closing, or a minimum of 2,898,550 shares of common stock, subject to an increase in th number of shares based on the market price at the closing. Among the conditions of a contemplated closing is that the Company is required to pay all debts and payables of AUDserve at the time of closing, unless other agreements are reached with such creditors, with the Company providing sufficient evidence to the satisfaction of the creditors. This LOI contemplates a closing date no later than October 30, 2017, and if such closing does not occur by said date, the parties are released from their obligations under the LOI. The closing is subject to the Company performing due diligence satisfactory to the Company. |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Summary Of Significant Accounting Principles Policies | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included in Form 10-K filed with the SEC on March 31, 2017. Interim results of operations for the three and six months ended June 30, 2017 and 2016 are not necessarily indicative of future results for the full year. Certain amounts from the 2016 period have been reclassified to conform to the presentation used in the current period. The condensed consolidated financial statements of the Company include the consolidated accounts of Innerscope and its’ wholly owned subsidiaries ILLC and Intela-Hear, a California limited liability company. All intercompany accounts and transactions have been eliminated in consolidation. |
Emerging Growth Companies | Emerging Growth Companies The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Significant estimates relied upon in preparing these financial statements include collectability of notes receivable from an officer, and through July 31, 2016, the allocation of our President’s compensation to the Company. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. Cash and cash equivalent balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail. |
Accounts receivable | Accounts receivable The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of June 30, 2017, management’s evaluation did not require any allowance for uncollectible receivables. |
Sales Concentration and Credit Risk | Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three and six months ended June 30, 2017 and 2016, and accounts receivable balance as of June 30, 2017: Accounts June 30, 2017 June 30, 2016 Receivable 3 months 6 months 3 months 6 months as of % % % % June 30, 2017 Customer A 11.5 % — — — $ 8,125 Customer B 10.3 % — — — 7,515 Customer C 32.1 % 14.0 % 14.0 % 0.0 % 38,299 Customer D, related 22.6 % 11.5 % 11.5 % 100.0 % 31,942 Customer E — 40.3 % — — — |
Deferred Commission and Commission Payable, Stockholder | Deferred Commission and Commission Payable, Stockholder The Company records deferred commission when cash has been paid, but the related services have not been provided by the party (stockholder). Commission expense will be recognized when the services are provided. As of December 31, 2016, the Company had advanced $133,334, and in January an additional $375,000. For the three and six months ended June 30, 2017, the Company expensed $508,334 (included in other expenses in the Condensed Consolidated Statements of Operations), due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017 (see Note 8). |
Inventory | Inventory Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts. |
Notes Receivable, Officer | Notes Receivable, Officer The Company records notes receivable when a recipient has issued a note to the Company in exchange for cash. The Company records as a current asset, any portion of the note that is due in the subsequent twelve (12) months for the date of the balance sheet, and any payments due in excess of twelve months of the balance sheet are classified as long term. As of June 30, 2017, $12,934 (includes $121 of interest due) is due by June 30, 2018 and $2,563 is due after June 30, 2018. The Company received a payment of $2,629 of principal and interest on July 5, 2017. |
Intangible Assets | Intangible Assets Costs for intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the consolidated balance sheet. Capitalized costs are amortized over three years. During the six months ended June 30, 2017, the Company purchased the domain name www.innd.com from a third party for $3,000. The Company will begin amortizing the capitalized cost beginning July 1, 2017 for a three-year period. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment are as follows: Computer equipment 3 years The Company's property and equipment consisted of the following at June 30, 2017 and December 31, 2016: June 30, December 31, Computer equipment $ 2,650 $ 2,650 Accumulated depreciation (625 ) (183 ) Balance $ 2,025 $ 2,467 Depreciation expense of $221 and $442 was recorded for the three and six months ended June 30, 2017, respectively. |
Investment in Undivided Interest in Real Estate | Investment in Undivided Interest in Real Estate The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. Our allocated portion of the net loss for the three and six months ended June 30, 2017, was $3,945. As of June 30, 2017, the carrying value of our equity method investment in this privately-held company was $1,221,306 (see Note 6). |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the period in which the services are performed. In addition to the revenue recognized for the delivery of services and product, for the six months ended June 30, 2017, the Company received and recognized $100,000 of revenue related to the Store Expansion agreement, and $30,000 of income from the cancellation of the Marketing and Store Expansion Agreements. |
Deferred Revenue | Deferred Revenue The Company records deferred revenues from the Consulting Agreement when cash has been received, but the related services have not been provided. Revenue will be recognized when the services are provided and the terms of the agreement have been fulfilled. As of June 30, 2017, the Company has deferred revenue of $847,223 related to the Consulting Agreement. On May 26, 2017, the Company and the Moores were named as Defendants in an action filed in the Circuit Court of the 11 th the Company has not recognized any revenue in 2017 from the Consulting Agreement. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash, notes and interest receivable, officer and accounts payable and amount due to a related party (MFHC). The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed, nor paid, any interest or penalties. Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of June 30, 2017 and 2016, the Company did not have any outstanding common stock equivalents or any other potentially dilutive securities. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Summary Of Significant Accounting Principles Tables | |
Concentration of customer revenues and accounts receivable balance | Accounts June 30, 2017 June 30, 2016 Receivable 3 months 6 months 3 months 6 months as of % % % % June 30, 2017 Customer A 11.5 % — — — $ 8,125 Customer B 10.3 % — — — 7,515 Customer C 32.1 % 14.0 % 14.0 % 0.0 % 38,299 Customer D, related 22.6 % 11.5 % 11.5 % 100.0 % 31,942 Customer E — 40.3 % — — — |
Property and equipment | June 30, December 31, Computer equipment $ 2,650 $ 2,650 Accumulated depreciation (625 ) (183 ) Balance $ 2,025 $ 2,467 |
NOTE PAYABLE - UNDIVIDED INTE19
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Future principal payments for Company's portion of SBA Note | Year Amount 2017 $ 8,768 2018 18,518 2019 19,660 2020 20,708 2021 22,150 Thereafter 1,967,196 Total $ 2,057,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Commitments And Contingencies Tables | |
Summary of activity on deferred commissions - stockholder | Deferred commissions-stockholder 2017 Beginning balance $ 133,334 Payments made 771,000 Reduction of commissions owed (96,000 ) Commission expense recorded (60,000 ) Other expense recorded (748,334 ) Ending balance $ — |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | 6 Months Ended | 48 Months Ended | ||
Jun. 30, 2017 | Nov. 01, 2017 | Nov. 01, 2013 | Jun. 20, 2012 | |
ILLC acquisition | ||||
Ownership or equity interest acquired | 100.00% | |||
Intela-Hear acquisition | ||||
Ownership or equity interest acquired | 100.00% | |||
Shares exchanged for Intela-Hear acquisition | 27,000,000 | |||
Income from one new store | ||||
Income recognized | $ 100,000 | |||
Payments received for Expansion Agreement pursuant to cancellation | ||||
Income recognized | 400,000 | |||
Additional payment received for cancellation of Store Expansion Agreement and marketing agreement | ||||
Income recognized | $ 30,000 |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Concentration of customer revenues and accounts receivable balance (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Customer A | ||||
Revenue concentration | 11.50% | |||
Accounts receivable balance | $ 8,125 | $ 8,125 | ||
Customer B | ||||
Revenue concentration | 10.30% | |||
Accounts receivable balance | $ 7,515 | $ 7,515 | ||
Customer C | ||||
Revenue concentration | 32.10% | 14.00% | 14.00% | 0.00% |
Accounts receivable balance | $ 38,299 | $ 38,299 | ||
Customer D, related | ||||
Revenue concentration | 22.60% | 11.50% | 11.50% | 100.00% |
Accounts receivable balance | $ 31,942 | $ 31,942 | ||
Customer E | ||||
Revenue concentration | 40.30% | |||
Accounts receivable balance |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Property and equipment (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Summary Of Significant Accounting Principles - Property And Equipment Details | ||
Computer equipment | $ 2,650 | $ 2,650 |
Accumulated depreciation | (625) | (183) |
Balance | $ 2,025 | $ 2,467 |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Details Narrative) - USD ($) | Jul. 05, 2017 | Jan. 31, 2017 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 |
Summary Of Significant Accounting Principles Details Narrative | ||||||
Advances to related parties for commissions | $ 133,334 | |||||
Additional advances related to commissions | $ 375,000 | |||||
Expenses for commissions included in other expenses | $ 508,334 | $ 508,334 | ||||
Amounts due on note receivable by June 30, 2018, officer | 12,834 | 12,834 | ||||
Amounts due on note receivable after June 30, 2018, officer | 2,563 | 2,563 | ||||
Interest due included in notes receivable | 121 | 121 | ||||
Proceeds received on principal and interest on notes receivable, officer | $ 2,629 | |||||
Payments for intangible assets, domain name | (3,000) | |||||
Depreciation expense | (221) | (442) | ||||
Allocated portion of net loss from investment in undivided interest in real estate | (3,945) | (3,945) | ||||
Carrying value of equity method investment | 1,221,306 | 1,221,306 | ||||
Deferred revenue related to Consulting Agreement | $ 847,223 | $ 847,223 |
GOING CONCERN AND MANAGEMENT'25
GOING CONCERN AND MANAGEMENT'S PLANS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Going Concern And Managements Plans Details Narrative | ||||
Net losses from continuing operations | $ (393,673) | $ (18,352) | $ (556,508) | $ (28,940) |
Working capital deficit | (271,433) | (271,433) | ||
Accumulated deficit | $ (275,579) | $ (275,579) |
NOTE RECEIVABLE, OFFICER (Detai
NOTE RECEIVABLE, OFFICER (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2013 | Jun. 25, 2013 | Apr. 02, 2013 | |
Note Receivable Officer Details Narrative | |||||||
Loans to officer in exchange for two notes receivable | $ 20,500 | $ 10,500 | $ 10,000 | ||||
Interest rate per annum | 1.50% | 1.50% | |||||
Interest income, related party | $ 58 | $ 77 | $ 122 | $ 154 | |||
Notes and interest receivable, related party | $ 18,084 | $ 15,497 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Aug. 11, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Apr. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | Dec. 31, 2013 | Jun. 25, 2013 | Apr. 02, 2013 |
Loans to President | $ 20,500 | $ 10,500 | $ 10,000 | ||||||||||
Interest income recorded | $ 58 | $ 77 | $ 122 | $ 154 | |||||||||
Marketing Agreement Cancellation Fee paid by MFHC to Company, included in total amounts paid | $ 128,000 | ||||||||||||
Total amounts paid by MFHC to Company | $ 229,622 | ||||||||||||
Monthly fee from retail location | 3,200 | 3,200 | |||||||||||
Revenue from stores | 192,000 | 192,000 | |||||||||||
Balance due to MFHC per Marketing Agreement | 13,048 | $ 13,048 | 13,048 | $ 13,048 | $ 13,048 | $ 4,441 | |||||||
LLC1 Marketing Agreement per store monthly service revenue | $ 2,500 | ||||||||||||
Revenues from LLC1 Marketing Agreement | 15,000 | 20,000 | |||||||||||
Amounts invoiced to LLC1 for Company's production, printing and mailing services | 16,942 | 16,942 | |||||||||||
Amounts paid to LLC2 by Company for consulting services | $ 375,000 | ||||||||||||
Amounts paid recognized as consulting fees - stockholder | $ 241,667 | ||||||||||||
MFHC (1) | |||||||||||||
Rent expenses | 1,500 | 4,500 | 1,500 | 9,000 | |||||||||
Monthly rent per sublease agreement with MFHC | $ 1,500 | ||||||||||||
MFHC (2) | |||||||||||||
Rent expenses | 4,026 | 12,078 | |||||||||||
Monthly rent per sublease agreement with MFHC | $ 4,026 | ||||||||||||
President | |||||||||||||
Officer compensation, annual base salary | 225,000 | ||||||||||||
Officer compensation expenses | 56,250 | $ 112,500 | 13,125 | $ 23,291 | |||||||||
CFO | |||||||||||||
Officer compensation, annual base salary | $ 125,000 | ||||||||||||
Officer compensation expenses | $ 31,250 | $ 62,500 |
INVESTMENT IN UNDIVIDED INTER28
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | May 09, 2017 | |
Real Estate [Abstract] | ||
Purchase price of building | $ 2,420,000 | |
Amount paid at closing | $ 2,501,783 | |
Cash delivered at closing | $ 209,971 | |
Note amount on which Company is co-borrower | 2,057,000 | |
Amount of note Company has agreed to pay | $ 1,007,930 |
NOTE PAYABLE - UNDIVIDED INTE29
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE - Future principal payments for Company's portion of SBA Note (Details) | Jun. 30, 2017USD ($) |
Debt Disclosure [Abstract] | |
2,017 | $ 8,768 |
2,018 | 18,518 |
2,019 | 19,660 |
2,020 | 20,708 |
2,021 | 22,150 |
Thereafter | 1,967,196 |
Total | $ 2,057,000 |
NOTE PAYABLE - UNDIVIDED INTE30
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Debt Disclosure [Abstract] | |
Note term | 25 years |
Interest per annum | 6.00% |
Current portion of SBA Note | $ 17,970 |
Long term portion of SBA Note | $ 989,960 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Summary of activity on deferred commissions - stockholder (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Commitments And Contingencies - Summary Of Activity On Deferred Commissions - Stockholder Details | ||
Beginning balance | $ 133,334 | |
Payments made | 771,000 | |
Reduction of commissions owed | (96,000) | |
Commission expense recorded | (60,000) | |
Other expense recorded | (748,334) | |
Ending balance |
COMMITMENTS AND CONTINGENCIES32
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 5 Months Ended | 6 Months Ended | 10 Months Ended | 36 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jan. 31, 2014 | Jan. 31, 2017 | |
Lease Agreements | |||||||
Monthly lease amount | $ 8,436 | $ 1,500 | $ 3,000 | ||||
Business Consulting Agreement (BCA) | |||||||
Consulting Agreements | |||||||
Monthly compensation expense | $ 2,500 | ||||||
Common stock issued to consultant, shares | 2,940,000 | ||||||
Professional fees recorded | $ 7,500 | $ 7,500 | $ 15,000 | $ 15,000 | |||
Agreement with Limited Liability Company (LLC2) | |||||||
Consulting Agreements | |||||||
Amounts expensed per agreement with LLC2 | 808,334 | ||||||
Financial Consulting Agreement (FC Agreement) | |||||||
Consulting Agreements | |||||||
Monthly compensation expense | $ 4,500 | ||||||
Common stock issued to consultant, shares | 333,334 | ||||||
Common stock issued to consultant, value per share | $ .30 | ||||||
Consulting fees paid | $ 13,500 | $ 11,250 | $ 27,000 | $ 22,500 | |||
Consulting and Representation Agreement (CR Agreement) | |||||||
Consulting Agreements | |||||||
Monthly compensation expense | $ 700 | ||||||
Common stock issued to consultant, shares | 300,000 | ||||||
Common stock issued to consultant, value per share | $ .30 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | Apr. 07, 2017 | Apr. 03, 2017 | Jun. 30, 2017 |
Issued to consultant (1) | |||
Restricted common stock issued to consultant, shares | 333,334 | ||
Restricted common stock issued to consultant, value per share | $ 0.30 | ||
Stock compensation expense recorded | $ 25,000 | ||
Deferred stock compensation recorded | 75,000 | ||
Issued to consultant (2) | |||
Restricted common stock issued to consultant, shares | 300,000 | ||
Restricted common stock issued to consultant, value per share | $ 0.30 | ||
Stock compensation expense recorded | $ 90,000 |
SUBSEQUENT EVENT (Details Narra
SUBSEQUENT EVENT (Details Narrative) | 2 Months Ended |
Oct. 30, 2017USD ($)shares | |
Subsequent Events [Abstract] | |
Company stock to be exchanged in AUDserve acquisition, minimum shares | shares | 2,898,550 |
Company stock to be exchanged in AUDserve acquisition, value | $ | $ 1,000,000 |