Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Apr. 13, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | INNERSCOPE HEARING TECHNOLOGIES, INC. | ||
Entity Central Index Key | 1,609,139 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 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 Public Float | $ 1,746,940 | ||
Entity Common Stock, Shares Outstanding | 61,763,406 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 84,720 | $ 493,514 |
Accounts receivable, net | 12,950 | |
Accounts receivable from related party | 73,996 | |
Deferred commissions, stockholder | 133,334 | |
Prepaid assets | 101,110 | 6,223 |
Inventory | 5,959 | 2,321 |
Notes and interest receivable, current portion, officer | 10,396 | |
Total current assets | 278,735 | 645,788 |
Domain name | 3,000 | |
Property, furniture and fixtures and equipment, net of accumulated depreciation of $1,068 (2017) and $184 (2016) | 1,583 | 2,467 |
Notes and interest receivable, long term portion, officer | 7,688 | |
Investment in undivided interest in real estate | 1,224,903 | |
Total assets | 1,508,221 | 655,943 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 161,919 | 42,939 |
Accounts payable to related party | 22,548 | 13,048 |
Notes payable - stockholder | 65,000 | |
Advances payable, stockholder | 176,838 | |
Current portion of convertible notes payable, net of discounts | 74,140 | |
Current portion of note payable | 18,518 | |
Commissions payable - stockholder | 96,000 | |
Officer salaries payable | 47,248 | 6,731 |
Income tax payable | 33,682 | 38,482 |
Derivative liability | 540,965 | |
Deferred revenue | 847,223 | 222,223 |
Total current liabilities | 1,988,081 | 419,423 |
Long term portion of note payable | 982,176 | |
Long term portion of convertible note payable, net of discounts | 12,587 | |
Total liabilities | 2,982,844 | 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 December 31, 2017 and December 31, 2016, respectively | 6,153 | 6,090 |
Common stock to be issued, $0.0001 par value, 102,564 shares | 10 | |
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; no shares issued | ||
Additional paid-in capital | 331,227 | 104,110 |
Deferred stock compensation | (25,000) | |
Retained earnings (accumulated deficit) | (1,787,012) | 126,320 |
Total stockholders' equity | (1,474,623) | 236,520 |
Total liabilities and stockholders' equity (deficit) | $ 1,508,221 | $ 655,943 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation of property, furniture and fixtures and equipment | $ (1,068) | $ (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 | ||
Common stock to be issued, par value | $ 0.0001 | |
Common stock to be issued, shares | 102,564 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues: | ||
Revenues, other | $ 384,177 | $ 917,020 |
Revenues, related party | 86,449 | 980,668 |
Total revenues | 470,626 | 1,897,688 |
Cost of sales | ||
Cost of sales, other | 256,918 | |
Cost of sales, related | 36,303 | 776,607 |
Total cost of sales | 293,221 | 776,607 |
Gross profit | 177,405 | 1,121,081 |
Operating Expenses: | ||
Compensation and benefits | 645,723 | 612,114 |
Bad debt expense | 63,799 | 1,144 |
Professional fees (including stock based fees of $173,974 for 2017) | 391,177 | 136,828 |
Consulting fees, stockholder | 60,000 | 241,666 |
Rent, related party | 111,377 | 33,078 |
Other general and administrative | 131,821 | 51,624 |
Total operating expenses | 1,403,897 | 1,076,454 |
Income (loss) from operations | (1,226,492) | 44,627 |
Other Income (Expense): | ||
Other income | 5,533 | |
Derivative expense | (265,674) | |
Loss on investment in undivided interest in real estate | (1,378) | |
Write off of deferred commissions (see note 2) | (508,334) | |
Gain on contract cancellations | 160,000 | 64,000 |
Interest income, including $228 (2017) and $299 (2016) from officer | 300 | 317 |
Interest expense and finance charges | (77,287) | (2,148) |
Total other income (expense) | (686,840) | 62,169 |
Income (loss) before income taxes | (1,913,332) | 106,796 |
Income tax provision | 37,052 | |
Net income (loss) | $ (1,913,332) | $ 69,744 |
Basic and diluted income (loss) per share | $ (0.03) | $ 0 |
Weighted average number of common shares outstanding - Basic and diluted | 61,320,706 | 60,906,000 |
CONSOLIDATED STATEMENTS OF OPE5
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Stock based fees included in professional fees | $ 173,974 | |
Officer portion of interest income | $ 228 | $ 299 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Common Stock | Common stock to be issued | Deferred stock Compensation | Additional Paid-in Capital | Retained Earnings (deficit) | Total |
Beginning balance, shares at Dec. 31, 2015 | 60,906,000 | |||||
Beginning balance, amount at Dec. 31, 2015 | $ 6,090 | $ 104,110 | $ 56,576 | $ 166,776 | ||
Net income/loss | 69,744 | 69,744 | ||||
Ending balance, shares at Dec. 31, 2016 | 60,906,000 | |||||
Ending balance, amount at Dec. 31, 2016 | $ 6,090 | 104,110 | 126,320 | 236,520 | ||
Common stock issued for services, shares | 633,334 | |||||
Common stock issued for services, amount | $ 63 | (100,000) | 189,937 | 90,000 | ||
Reclassification of derivative liabilities upon payment of convertible debt | 28,215 | 28,215 | ||||
Stock based compensation, shares | 102,564 | |||||
Stock based compensation, amount | $ 10 | 75,000 | 8,965 | 83,975 | ||
Net income/loss | (1,913,332) | (1,913,332) | ||||
Ending balance, shares at Dec. 31, 2017 | 61,539,334 | 102,564 | ||||
Ending balance, amount at Dec. 31, 2017 | $ 6,153 | $ 10 | $ (25,000) | $ 331,227 | $ (1,787,012) | $ (1,474,623) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (1,913,332) | $ 69,744 |
Adjustments to reconcile net (loss) to net cash provided by (used in) operations: | ||
Loss on fair value of derivatives | 265,674 | |
Amortization of debt discounts | 63,434 | |
Depreciation | 884 | 184 |
Stock compensation expense | 173,974 | |
Loss on investment in undivided interest in real estate | 1,378 | |
Security deposit used for rent payment | 7,026 | |
Changes in operating assets and liabilities: | ||
Decrease (increase) in Interest receivable, related party | 146 | 665 |
Decrease (increase) in Accounts receivable | (12,950) | |
Decrease (increase) in Inventory | (3,638) | (2,321) |
Decrease (increase) in Deferred commissions, stockholder | 133,334 | (133,334) |
Decrease (increase) in Prepaid assets | (94,887) | (6,223) |
Decrease (increase) in Other receivables | ||
Decrease (increase) in Due from related party | (73,996) | 99,496 |
Increase (decrease) in Accounts payable and accrued expenses | 114,179 | 52,524 |
Increase (decrease) in Commissions payable, stockholder | (96,000) | 96,000 |
Increase (decrease) in Officer salaries payable | 40,517 | 6,731 |
Increase (decrease) in Deferred revenue | 625,000 | 222,223 |
Increase (decrease) in Due to related party | 186,338 | 13,048 |
Net cash provided by (used in) operating activities | (589,945) | 425,761 |
Cash flows from investing activities: | ||
Purchase of intangible asset | (3,000) | |
Purchase of office and computer equipment | (2,651) | |
Repayments of shareholder loans receivable | 17,938 | 2,563 |
Investment in undivided interest in real estate | (218,351) | |
Net cash used in investing activities | (203,413) | (88) |
Cash flows from financing activities: | ||
Proceeds from advances, shareholder | 65,000 | |
Proceeds from issuances of convertible notes payable | 345,000 | |
Payment of note payable | (7,236) | |
Payments of principal of convertible note payable | (18,200) | |
Net cash provided by financing activities | 384,564 | |
Net increase (decrease) in cash and cash equivalents | (408,795) | 425,673 |
Cash and cash equivalents, Beginning of period | 493,514 | 67,841 |
Cash and cash equivalents, End of period | 84,720 | 493,514 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 4,521 | 2,148 |
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 | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | NOTE 1 - ORGANIZATION Business InnerScope Hearing Technologies, Inc. (“Company”, “InnerScope”) is a Nevada Corporation incorporated on June 15, 2012, with its principal place of business in Roseville, California. The Company was originally named InnerScope Advertising Agency, Inc. and was formed to provide advertising and marketing services to retail establishments in the hearing device industry. On August 25, 2017, the Company changed its name to InnerScope Hearing Technologies, Inc. to better reflect the Company’s current direction as a technology driven company with a scalable business to business (B2B) solution and business to consumer (and B2C) solution. Recently, the Company began offering its own line of “Hearable”, and “Wearable” Personal Sound Amplifier Products (PSAPs). On June 20, 2012, the Company entered into an Acquisition and Plan of Share Exchange with InnerScope Advertising Agency, LLC (“ILLC”), a commonly owned entity, whereby the Company acquired 100% of ILLC. On November 1, 2013, the Company entered into an Acquisition and Plan of Share Exchange with Intela-Hear, LLC (“Intela-Hear”), a commonly owned entity, whereby the Company 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. On August 5, 2016, the Company along with Mark Moore (“Mark”, the Company’s Chairman of the Board), 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”) with a third party (the “Client”). 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 the Client’s new store openings during the initial term of six-months. The Expansion Agreement was cancelled on January 6, 2017. The Client has decided to do their own marketing in-house and eliminate this out-sourced contract and 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 Client 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 were to 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 up to 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 in an action filed by the Client, that included a demand that all monies paid pursuant to the Consulting Agreement be returned. The Company believes the claim is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated (See Note 12). |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | 12 Months Ended |
Dec. 31, 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 consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"). The consolidated financial statements of the Company include the consolidated accounts of InnerScope and its’ wholly owned subsidiaries ILLC and Intela-Hear. 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 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 December 31, 2017, management’s evaluation resulted in the establishment of an allowance for uncollectible receivables of $63,799. 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 years ended December 31, 2017 and 2016, and accounts receivable balance as of December 31, 2017: Accounts December 31, Receivable 2017 2016 as of % % December 31, 2017 Customer A 16.4 % — $ 63,799 Customer B 14.8 % — 4,000 Customer C, related 18.3 % 48.3 % 81,193 Customer D 27.6 % 51.7 % — 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 2017, an additional $375,000 was advanced. For the year ended December 31, 2017, the Company expensed $508,334 (included in other expenses in the Consolidated Statements of Operations), due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017 (see Note 7 and 12). 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. Interest income, related party of $228 and $299 was recorded for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, and 2016, notes and interest receivable, related party was $-0- and $18,063, respectively. Principal amounts due in the next 12 months of the balance sheet date are shown as a current asset and amounts due after 12 months are shown as a long-term asset. The Company received payments of $18,311 of principal and interest during the year ended December 31, 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. During the year ended December 31, 2017, the Company purchased the domain name www.innd.com 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 December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Computer equipment $ 2,651 $ 2,651 Accumulated depreciation (1,068 ) (184 ) Balance $ 1,583 $ 2,467 Depreciation expense of $884 and $184 was recorded for the years ended December 31, 2017, and 2016, 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. For the year ended December 31, 2017, the Company recognized a loss of $1,378. As of December 31, 2017, the carrying value of the Company’s investment in undivided interest in real estate was $1,224,903 (see Note 6). Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: · Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. · Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2017, for each fair value hierarchy level: December 31, 2017 Derivative Liability Total Level I $ — $ — Level II $ — $ — Level III $ 540,965 $ 540,965 Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. 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, or when the delivery of services and product occur. For the year ended December 31, 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 December 31, 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 in an action filed that included a demand that all monies paid pursuant to the Consulting Agreement be returned. The Company believes the claim is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated (See Note 12). The Company has not recognized any revenue in 2017 from the Consulting Agreement as a result of this litigation. 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) 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 December 31, 2017, the Company’s outstanding convertible debt is convertible into approximately 10,043,445 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. As of December 31, 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 | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN AND MANAGEMENT'S PLANS | NOTE 3 – GOING CONCERN AND MANAGEMENT’S PLANS The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company experienced a net loss of $1,913,332 for the year ended December 31, 2017. At December 31, 2017, the Company had a working capital deficit of $1,709,346, and an accumulated deficit of $1,787,012. 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. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. 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 approximately 48.3%, of the Company’s revenues for the year ended December 31, 2016, as a result of the sale by MFHC of substantially all of their assets) and is now dependent on the sale of our products and services to third parties. On May 2, 2017, the Company received a demand that all monies paid pursuant to the Consulting Agreement be returned. On May 26, 2017, the Company and the Moores were named in an action filed that includes a demand that all monies paid pursuant to the Consulting Agreement be returned. The Company believes the claim is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated (See Note 8). The Company has filed a countersuit for breach of contract, demanding that all monies owed to it, pursuant to the Consulting Agreement, be paid, together with interest thereon. Management’s Plans The Company has begun to implement an industry encompassing revenue strategy, including the current revenue model to other major sectors of the global hearing industry. The Company plans include generating revenues from 7 separate revenue streams. Each stream will generate revenue and be poised for growth, increasing the Company’s market penetration. |
NOTE RECEIVABLE, OFFICER
NOTE RECEIVABLE, OFFICER | 12 Months Ended |
Dec. 31, 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 $228 and $299 was recorded for the years ended December 31, 2017, and 2016, respectively. The note and interest were paid in full during the year ended December 31, 2017. As of December 31, 2017, and 2016, notes and interest receivable, related party was $-0- and $18,084, respectively. |
ADVANCES PAYABLE, SHAREHOLDERS
ADVANCES PAYABLE, SHAREHOLDERS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
ADVANCES PAYABLE, SHAREHOLDERS | NOTE 5 – ADVANCES PAYABLE, SHAREHOLDERS Chief Executive Officer During the year ended December 31, 2017, our CEO (stockholder) paid expenses of the Company and accounts payable on behalf of the Company of $149,370. During the year ended December 31, 2017, the Company reimbursed the CEO $10,733 of the amount advanced. As of December 31, 2017, the Company owed the President $138,637, which is included in Advances payable, stockholders on the consolidated balance sheet included herein. Chief Financial Officer During the year ended December 31, 2017, our Chief Financial Officer (stockholder) made, in the aggregate, advances to the Company of $14,500. These advances were due on demand and were paid back during the year ended December 31, 2017. Director During the year ended December 31, 2017, our Chairman (stockholder) paid expenses of the Company and accounts payable on behalf of the Company of $39,201. During the year ended December 31, 2017, the Company reimbursed the Chairman $1,000. As of December 31, 2017, the Company owed the Chairman $38,201, which is included in Advances payable, stockholders on the consolidated balance sheet included herein. |
NOTE PAYABLE, STOCKHOLDER
NOTE PAYABLE, STOCKHOLDER | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
NOTE PAYABLE, STOCKHOLDER | NOTE 6 – NOTE PAYABLE, STOCKHOLDER On December 29, 2017, our CEO (stockholder) loaned the Company $65,000. The note is due on demand and carries interest at 8% per annum. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 7 – RELATED PARTY TRANSACTIONS The Company loaned the CEO $20,500 during the year ended December 31, 2013 (see Note 4). The Company recorded interest income of $228 and $299 for the years ended December 31, 2017, and 2016, respectively. The note and interest were paid in full during the year ended December 31, 2017. During the year ended December 31, 2017, our Chief Financial Officer (stockholder) made, in the aggregate, advances to the Company of $14,500. These advances were paid back during the year ended December 31, 2017. During the year ended December 31, 2017, our CEO (stockholder) paid expenses of the Company and accounts payable on behalf of the Company of $149,370. During the year ended December 31, 2017, the Company reimbursed the CEO $10,733. As of December 31, 2017, the Company owed the CEO $138,637, which is included in Advances payable, stockholders on the consolidated balance sheet included herein. During the year ended December 31, 2017, our Chairman (stockholder) paid expenses of the Company and accounts payable on behalf of the Company of $39,201. During the year ended December 31, 2017, the Company reimbursed the Chairman $1,000. As of December 31, 2017, the Company owed the Chairman $38,201, which is included in Advances payable, stockholders on the consolidated balance sheet included herein. 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. 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 year ended December 31, 2016 (through August 5, 2016), there were 20 stores resulting in revenue of $458,667. 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 December 31, 2017 and 2016, was $22,548 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 year ended December 31, 2017, and 2016, the Company expensed $1,500 and $13,500, 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 year ended December 31, 2016, the Company expensed $12,078 related to this lease. Prior to August 1, 2016, the Company’s CEO 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 employment agreements with its CEO and CFO, which includes annual base salaries of $225,000 and $125,000, respectively. The Company expensed $225,000 and $124,519 for the CEO and CFO, for the year ended December 31, 2017, respectively, and $117,522 and $52,885, respectively, of expense for the CEO and CFO, respectively, for the year ended December 31, 2016. As of December 31, 2017, the Company owes the CEO and CFO $4,327 and $40,385, respectively for accrued and unpaid wages. The Company has also recorded payroll tax liability of $2,536 for the unpaid wages. These amounts are included in Officer salaries payable on the balance sheets included herein. 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 $50,000 of revenues for the year ended December 31, 2017. Additionally, for the year ended December 31, 2017, the Company invoiced LLC1 $36,499, for the Company’s production, printing and mailing services. As of December 31, 2017, LLC1 owes the Company $73,996. On May 9, 2017, the Company and LLC1 purchased certain real property from an unaffiliated party (see Note 8). On June 14, 2017, the Company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000. For the year ended December 31, 2017, the Company expensed $64,499 related to this lease and is included in Rent, related party, on the consolidated statement of operations, included herein. 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. During the year ended December 31, 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) due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017. As of December 31, 2017, the deferred commissions-stockholder is $-0- (see Note 12). 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 8). |
INVESTMENT IN UNDIVIDED INTERES
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | 12 Months Ended |
Dec. 31, 2017 | |
Real Estate [Abstract] | |
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | NOTE 8– 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. The allocated portion of the results in an equity method investment in a privately-held, related party, company are included in the Company’s consolidated statements of operations. For the year ended December 31, 2017, a net loss of $1,378 is included in “Other income (expense), net”. As of December 31, 2017, the carrying value of our investment in undivided interest in real estate was $1,224,903. The condensed balance sheet as of December 31, 2017 and the condensed statement of operation for the year ended December 31, 2017 for the real property is as follows: Current assets: Cash and cash equivalents $ 8,331 Accounts receivable, net 2,711 Prepaid expenses and other current assets 37,471 Total current assets 48,512 Land and Building, net 2,397,848 Other assets, net 54,246 Total assets $ 2,500,606 Current portion of mortgage payable $ 37,792 Other current liabilities 19,828 Total current liabilities 57,620 Mortgage payable, long-term 2,004,440 Total liabilities 2,062,060 Total equity 438,546 Total liabilities and equity $ 2,500,606 Rental income $ 154,454 Expenses: Property taxes 16,752 Depreciation and amortization 27,229 Insurance 6,253 Repairs and maintenance 17,829 Other 15,083 Interest expense 74,120 Total expenses 157,266 Net loss $ (2,812 ) |
NOTE PAYABLE - UNDIVIDED INTERE
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | NOTE 9– 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 initially 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 December 31, 2017, the current and long-term portion of the SBA Note is $18,518 and $982,176, respectively. Future principal payments for the Company’s portion are: Year Amount 2018 $ 18,518 2019 19,660 2020 20,708 2021 22,150 2022 23,516 Thereafter 896,142 Total $ 1,000,694 |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTES PAYABLE | NOTE 10– CONVERTIBLE NOTES PAYABLE On October 11, 2017, the Company completed the closing of a private placement financing transaction (the “Transaction”) with a third-party investor, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated October 5, 2017. Pursuant to the Purchase Agreement, the investor purchased a 12% Convertible Promissory Note (the “Note”), dated October 5, 2017, in the principal amount of $48,000. On October 11, 2017, the Company received proceeds of $45,000 which excluded transaction costs, fees, and expenses of $3,000. Principal and interest is due and payable July 15, 2018, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at the average of the two lowest closing bid prices during the ten (10) prior trading days from which a notice of conversion is received by the Company multiplied by sixty-five percent (65%), representing a thirty-five percent (35%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $40,300, and an initial derivative liability of $40,300. For the year ended December 31, 2017, amortization of the debt discount of $12,561 was charged to interest expense. The Company also recorded a debt issue discount of $3,000 and has amortized $935 to interest expense for the year ended December 31, 2017. As of December 31, 2017, the note balance is $48,000, with a carrying value of $18,196, net of unamortized discounts of $29,804. On November 10, 2017, the Company issued a convertible promissory note (the “Note”), with a face value of $299,000, maturing on January 12, 2019, and stated interest of 10% to a third-party investor. The note is convertible at any time after ninety (90) days of the funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 65% of the lowest trading price for the 20 days prior to conversion. The note was funded on November 10, 2017, when the Company received proceeds of $250,000, after disbursements for the lender’s transaction costs, fees and expenses. The Note also requires daily payments of $700 per day via ACH through January 12, 2019, when all unpaid principal and interest is due. The embedded conversion feature included in the note resulted in an initial debt discount of $250,000, an initial derivative expense of $213,549 and an initial derivative liability of $463,549. For the year ended December 31, 2017, amortization of the debt discount of $41,417 was charged to interest expense. The Company also recorded an original issue discount and debt issue discount of $49,000 and has amortized $8,118 to interest expense for the year ended December 31, 2017. During the year ended December 31, 2017, the Company made principal payments of $18,200 and as of December 31, 2017, the note balance is $280,800 (of which $112,800 is classified as long- term liability), with a carrying value of $86,727 (of which $12,587 is classified as long-term liability), net of unamortized discounts of $249,465 (of which $100,213 is classified as long-term liability). On December 12, 2017, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest is due and payable December 12, 2018, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $13,207, and an initial derivative liability of $13,207. For the year ended December 31, 2017, amortization of the debt discount of $404 was charged to interest expense. As of December 31, 2017, the note balance is $50,000, with a carrying value of $37,197, net of unamortized discounts of $12,803. A summary of the convertible notes payable balance as of December 31, 2017, is as follows: Current portion Long-term portion Total Principal balance $ 266,000 $ 112,800 $ 378,800 Unamortized discount (191,860 ) (100,213 ) (292,073 ) Ending balance, net $ 74,140 $ 12,587 $ 86,727 The following is a roll-forward of the Company’s convertible notes and related discounts for the year ended December 31, 2017: Principal Balance Debt Discounts Total Balance at January 1, 2017 $ -0- $ -0- $ -0- New issuances 397,000 (355,507 ) 41,493 Cash payments (18,200 ) — (18,200 ) Amortization — 63,434 63,434 Balance at December 31, 2017 $ 378,800 $ (292,073 ) $ 86,727 |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
DERIVATIVE LIABILITIES | NOTE 11 – DERIVATIVE LIABILITIES The Company determined that the conversion features of the convertible notes represented embedded derivatives since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note, with any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the issue date. Such discounts are amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the derivative liabilities are recorded in other income or expenses in the condensed consolidated statements of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. See Note 10. The Company valued the derivative liabilities at issuance and December 31, 2017, at $517,056 and $540,965, respectively. The Company used the Monte Carlo simulation valuation model with the following assumptions as of December 31, 2017, risk-free interest rates from 1.53% to 1.76% and volatility of 303% to 355%. A summary of the activity related to derivative liabilities for the year ended on December 31, 2017, is as follows: December 31, 2017 Beginning Balance $ -0- Initial Derivative Liability 517,056 Fair Value Change 52,125 Reclassification for principal payments (28,216 ) Ending Balance $ 540,965 Derivative liability expense of $265,674 for the year ended December 31, 2017, consisted of the initial derivative expense of $213,549 and the above fair value change of $52,125. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12– 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. On June 14, 2017, the company entered into a five-year lease with LLC1 for approximately 6,944 square feet and a monthly rent of $12,000. Future principal payments for the Company’s portion are: Year Amount 2018 $ 144,000 2019 144,000 2020 144,000 2021 144,000 2022 66,000 Total $ 642,000 Consulting Agreements 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 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 were to 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 was to continue 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. The Company has filed a countersuit against this third party for breach of contract so that it may recover the amounts owed under the Consulting Agreement, however, effective January 1, 2017, the Company has not recognized revenue from the Consulting Agreement, and accordingly, $847,223 is classified as deferred revenue on the consolidated balance sheets presented herein. Effective August 5, 2016, the Company entered into a Marketing Agreement (the “Marketing Agreement”) with MFHC. 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 year ended December 31, 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) due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017. A summary of the activity for the year ended December 31, 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 $75,000 for the year ended December 31, 2017, and there remains a $25,000 balance of 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 years ended December 31, 2017, and 2016, the Company expensed fees to the FC Consultant of $54,000 and $47,300 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 year ended December 31, 2017. The initial term was for fifteen (15) days with an automatic extension for one hundred seventy (170) days. 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. AUDserv operates three divisions, predominantly in the business-to-business sector, including a highly scalable SaaS based practice management platform, and key infrastructure. The LOI contemplated 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 the 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. The LOI, as amended, contemplated a closing date no later than March 31, 2018, which did not occur and the parties have been released from their obligations under the LOI. Effective December 1, 2017, the Company entered into a one-year Marketing Services Agreement (the “MSA”). Pursuant to the terms of the MSA, the Company will receive consulting and advisory services regarding the implementation of marketing programs, including the design and creation of commercial websites and commercialization of products through social media or other marketing methods. The Company will pay consideration for the services of $5,000 cash and $5,000 of common stock each month. The Company will issue the number of shares of common stock equal to a twenty-five percent (25%) discount to the lowest closing price of the common stock for the five (5) last trading days of the common stock for that month. The Company recorded 102,564 shares of common stock to be issued as of December 31, 2017 and recorded $8,974 of stock-based compensation expense (based on the market price on the date of the agreement) for the year ended December 31, 2017. The shares were issued on February 27, 2018. On December 1, 2017, the Company entered into a three-month Consulting and Marketing Agreement (the “CMA”) with a third party. Pursuant to the terms of the CMA the Company will compensate the third-party $15,000 per month in consideration for consulting services related to development of business plans, corporate strategy and marketing. On December 8, 2017, the Company entered in a month to month contract regarding investor relation services with a third-party for $3,600 per month beginning January 1, 2018. Legal Matters On May 26, 2017, Helix Hearing Care (California), Inc. a California corporation (“Helix”), filed a complaint (the “Complaint”) against the InnerScope and the Moores, in the Circuit Court of the 11 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. On February 27, 2018, the Counterclaim was amended to include four claims for breach of contract, one claim for anticipatory breach of contract, one claim for negligent misrepresentation, and one claim for account stated. Helix’s response to the Amended Counterclaim is due on April 5, 2018. The written responses to Helix’s discovery is due on April 25, 2018. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 13 – STOCKHOLDERS’ EQUITY Common Stock The Company has 225,000,000 authorized shares of $0.0001 common stock. As of December 31, 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 $75,000 for the year ended December 31, 2017, and there remains a balance of $25,000 of 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 year ended December 31, 2017. Common Stock to be issued On December 31, 2017, the Company recorded 102,564 shares of common stock to be issued to a marketing consultant (see Note 12) and recorded $8,974 of stock-based compensation expense (based on the market price on the date of the agreement) for the year ended December 31, 2017. The shares were certificated on February 27, 2018. Preferred Stock The Company has 25,000,000 authorized shares of $0.0001 preferred stock. As of December 31, 2017, and 2016, there were no shares of preferred stock issued and outstanding. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | NOTE 14 – SUBSEQUENT EVENTS On February 5, 2018, the Company completed the closing of a private placement financing transaction whereby a third-party investor purchased a convertible note. The Convertible Note carries a 10% annual interest rate and is in the principal amount of $35,000. Principal and interest is due and payable February 5, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the Conversion Date, representing a twenty-five percent (25%) discount. On February 9, 2018, the Company completed the closing of a private placement financing transaction whereby a third-party investor, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated February 8, 2018. Pursuant to the Purchase Agreement, the investor purchased a 12% Convertible Promissory Note, dated February 8, 2017, in the principal amount of $58,300. On February 9, 2018, the Company received proceeds of $50,000 which excluded transaction costs, fees, and expenses of $8,300. Principal and interest is due and payable November 20, 2018, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at the average of the two lowest closing bid prices during the twenty (20) prior trading days from which a notice of conversion is received by the Company multiplied by seventy-five percent (75%), representing a twenty-five percent (25%) discount. On February 27, 2018, the Company entered into a Business Loan Agreement (the “BLA”) with a third- party, whereby the Company received $32,600 on March 1, 2018. The BLA requires the Company to make twelve monthly payments of principal and interest of $3,613 per month. On March 2, 2018, the Company completed the closing of a private placement financing transaction whereby a third-party investor purchased a convertible note. The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest is due and payable March 2, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the Conversion Date, representing a twenty-five percent (25%) discount. On March 7, 2018, the Company entered into an agreement with a third-party to provide financial, management consulting and advisory and due diligence related services. The one-month agreement required a non-refundable deposit of $9,500, which was paid in March, 2018. On March 26, 2018, the Company completed the closing of a private placement financing transaction whereby a third-party investor purchased a convertible note. The Convertible Note carries a 10% annual interest rate and is in the principal amount of $25,000. Principal and interest is due and payable March 26, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the Conversion Date, representing a twenty-five percent (25%) discount. On March 27, 2018, the Company completed the closing of a private placement financing transaction whereby a third-party investor purchased a convertible note. The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest is due and payable March 27, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the Conversion Date, representing a twenty-five percent (25%) discount. From January 1, 2018, through the date of this report, the Company’s CEO loaned the Company $27,500 and the Company repaid $1,000. As of the date of this report the outstanding loan balance to the Company’s CEO is $91,500. |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Summary Of Significant Accounting Principles Policies | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"). The consolidated financial statements of the Company include the consolidated accounts of InnerScope and its’ wholly owned subsidiaries ILLC and Intela-Hear. 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 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 December 31, 2017, management’s evaluation resulted in the establishment of an allowance for uncollectible receivables of $63,799. |
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 years ended December 31, 2017 and 2016, and accounts receivable balance as of December 31, 2017: Accounts December 31, Receivable 2017 2016 as of % % December 31, 2017 Customer A 16.4 % — $ 63,799 Customer B 14.8 % — 4,000 Customer C, related 18.3 % 48.3 % 81,193 Customer D 27.6 % 51.7 % — |
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 2017, an additional $375,000 was advanced. For the year ended December 31, 2017, the Company expensed $508,334 (included in other expenses in the Consolidated Statements of Operations), due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017 (see Note7 and 12). |
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. Interest income, related party of $228 and $299 was recorded for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, and 2016, notes and interest receivable, related party was $-0- and $18,063, respectively. Principal amounts due in the next 12 months of the balance sheet date are shown as a current asset and amounts due after 12 months are shown as a long-term asset. The Company received payments of $18,311 of principal and interest during the year ended December 31, 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. During the year ended December 31, 2017, the Company purchased the domain name www.innd.com from a third party for $3,000. |
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 December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Computer equipment $ 2,651 $ 2,651 Accumulated depreciation (1,068 ) (184 ) Balance $ 1,583 $ 2,467 Depreciation expense of $884 and $184 was recorded for the years ended December 31, 2017, and 2016, 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. For the year ended December 31, 2017, the Company recognized a loss of $1,378. As of December 31, 2017, the carrying value of the Company’s investment in undivided interest in real estate was $1,224,903 (see Note 6). |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: · Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. · Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2017, for each fair value hierarchy level: December 31, 2017 Derivative Liability Total Level I $ — $ — Level II $ — $ — Level III $ 540,965 $ 540,965 |
Embedded Conversion Feature | Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. |
Debt Issue Costs and Debt Discount | Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. |
Original Issue Discount | Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. |
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, or when the delivery of services and product occur. For the year ended December 31, 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 December 31, 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 in an action filed that included a demand that all monies paid pursuant to the Consulting Agreement be returned. The Company believes the claim is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated (See Note 12). The Company has not recognized any revenue in 2017 from the Consulting Agreement as a result of this litigation. |
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) 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 December 31, 2017, the Company’s outstanding convertible debt is convertible into approximately 10,043,445 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. As of December 31, 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 ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary Of Significant Accounting Principles Tables | |
Concentration of customer revenues and accounts receivable balance | Accounts December 31, Receivable 2017 2016 as of % % December 31, 2017 Customer A 16.4 % — $ 63,799 Customer B 14.8 % — 4,000 Customer C, related 18.3 % 48.3 % 81,193 Customer D 27.6 % 51.7 % — |
Property and equipment | December 31, 2017 December 31, 2016 Computer equipment $ 2,651 $ 2,651 Accumulated depreciation (1,068 ) (184 ) Balance $ 1,583 $ 2,467 |
Financial instruments measured at fair value on a recurring basis | December 31, 2017 Derivative Liability Total Level I $ — $ — Level II $ — $ — Level III $ 540,965 $ 540,965 |
INVESTMENT IN UNDIVIDED INTER24
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Investment In Undivided Interest In Real Estate Tables | |
Condensed balance sheet and condensed statement of operations for the real property | Current assets: Cash and cash equivalents $ 8,331 Accounts receivable, net 2,711 Prepaid expenses and other current assets 37,471 Total current assets 48,512 Land and Building, net 2,397,848 Other assets, net 54,246 Total assets $ 2,500,606 Current portion of mortgage payable $ 37,792 Other current liabilities 19,828 Total current liabilities 57,620 Mortgage payable, long-term 2,004,440 Total liabilities 2,062,060 Total equity 438,546 Total liabilities and equity $ 2,500,606 Rental income $ 154,454 Expenses: Property taxes 16,752 Depreciation and amortization 27,229 Insurance 6,253 Repairs and maintenance 17,829 Other 15,083 Interest expense 74,120 Total expenses 157,266 Net loss $ (2,812 ) |
NOTE PAYABLE - UNDIVIDED INTE25
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Future principal payments for Company's portion of SBA Note | Year Amount 2018 $ 18,518 2019 19,660 2020 20,708 2021 22,150 2022 23,516 Thereafter 896,142 Total $ 1,000,694 |
CONVERTIBLE NOTES PAYABLE (Tabl
CONVERTIBLE NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Summary of convertible notes payable balance | Current portion Long-term portion Total Principal balance $ 266,000 $ 112,800 $ 378,800 Unamortized discount (191,860 ) (100,213 ) (292,073 ) Ending balance, net $ 74,140 $ 12,587 $ 86,727 |
Roll-forward of Company's convertible notes and related discounts | Principal Balance Debt Discounts Total Balance at January 1, 2017 $ -0- $ -0- $ -0- New issuances 397,000 (355,507 ) 41,493 Cash payments (18,200 ) — (18,200 ) Amortization — 63,434 63,434 Balance at December 31, 2017 $ 378,800 $ (292,073 ) $ 86,727 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Summary of activity related to derivative liabilities | December 31, 2017 Beginning Balance $ -0- Initial Derivative Liability 517,056 Fair Value Change 52,125 Reclassification for principal payments (28,216 ) Ending Balance $ 540,965 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies Tables | |
Future principal payments for Company's portion of lease agreements | Year Amount 2018 $ 144,000 2019 144,000 2020 144,000 2021 144,000 2022 66,000 Total $ 642,000 |
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 ($) | 12 Months Ended | 48 Months Ended | ||
Dec. 31, 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 ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Concentration of customer revenues and accounts receivable balance (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Customer A | ||
Revenue concentration | 16.40% | |
Accounts receivable balance | $ 63,799 | |
Customer B | ||
Revenue concentration | 14.80% | |
Accounts receivable balance | $ 4,000 | |
Customer C, related | ||
Revenue concentration | 18.30% | 48.30% |
Accounts receivable balance | $ 81,193 | |
Customer D | ||
Revenue concentration | 27.60% | 51.70% |
Accounts receivable balance |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Property and equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Summary Of Significant Accounting Principles - Property And Equipment Details | ||
Computer equipment | $ 2,651 | $ 2,651 |
Accumulated depreciation | (1,068) | (184) |
Balance | $ 1,583 | $ 2,467 |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Financial instruments measured at fair value on a recurring basis (Details) | Dec. 31, 2017USD ($) |
Derivative liability | $ 540,965 |
Level I | |
Derivative liability | |
Level II | |
Derivative liability | |
Level III | |
Derivative liability | $ 540,965 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Summary Of Significant Accounting Principles Details Narrative | |||
Allowance for uncollectible receivables | $ 63,799 | $ 1,144 | |
Advances to related parties for commissions | 133,334 | ||
Additional advances related to commissions | $ 375,000 | ||
Expenses for commissions included in other expenses | 508,334 | ||
Notes and interest receivable, related party | 18,063 | ||
Proceeds received on principal and interest on notes receivable, officer | 18,311 | ||
Payments for intangible assets, domain name | (3,000) | ||
Depreciation expense | (884) | $ (184) | |
Allocated portion of net income (loss) from investment in undivided interest in real estate | (1,378) | ||
Carrying value of equity method investment | 1,224,903 | ||
Deferred revenue related to Consulting Agreement | $ 847,223 | ||
Antidilutive shares excluded from computation of earnings per share | 10,043,445 |
GOING CONCERN AND MANAGEMENT'34
GOING CONCERN AND MANAGEMENT'S PLANS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Going Concern And Managements Plans Details Narrative | ||
Net losses from continuing operations | $ (1,913,332) | $ 106,796 |
Working capital deficit | (1,709,346) | |
Accumulated deficit | $ (1,787,012) | $ 126,320 |
NOTE RECEIVABLE, OFFICER (Detai
NOTE RECEIVABLE, OFFICER (Details Narrative) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 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 | $ 228 | $ 299 | |||
Notes and interest receivable, related party | $ 18,084 | $ 0 |
ADVANCES PAYABLE, SHAREHOLDERS
ADVANCES PAYABLE, SHAREHOLDERS (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Chief Executive Officer | |
Repayments of amounts advanced | $ 10,733 |
Expenses and accounts payable paid on behalf of company | 149,370 |
Due to stockholder, included in Advances payable, stockholder | 138,637 |
CFO | |
Repayments of amounts advanced | 14,500 |
Advances from stockholder | 14,500 |
Chairman | |
Repayments of amounts advanced | 1,000 |
Expenses and accounts payable paid on behalf of company | 39,201 |
Due to stockholder, included in Advances payable, stockholder | $ 38,201 |
NOTE PAYABLE, STOCKHOLDER (Deta
NOTE PAYABLE, STOCKHOLDER (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Payables and Accruals [Abstract] | |
Loans from officer, due on demand | $ 65,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Aug. 11, 2016 | Apr. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2013 | Jun. 25, 2013 | Apr. 02, 2013 |
Loans to President | $ 20,500 | $ 10,500 | $ 10,000 | |||||||
Interest income recorded | $ 228 | $ 299 | ||||||||
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 | |||||||||
Revenue from stores | 458,667 | |||||||||
Balance due to MFHC per Marketing Agreement | $ 22,548 | 22,548 | 13,048 | $ 22,548 | $ 22,548 | |||||
Accrued payroll taxes owed | 2,536 | 2,536 | 2,536 | 2,536 | ||||||
LLC1 Marketing Agreement per store monthly service revenue | $ 2,500 | |||||||||
Revenues from LLC1 Marketing Agreement | 35,000 | |||||||||
Amounts invoiced to LLC1 for Company's production, printing and mailing services | 27,890 | |||||||||
Expenses related to LLC1 lease | 40,499 | |||||||||
Amounts paid to LLC2 by Company for consulting services | 375,000 | 771,000 | ||||||||
Amounts paid recognized as consulting fees - stockholder | 241,667 | 808,334 | ||||||||
Amounts recorded as deferred commissions - stockholder | $ 133,334 | |||||||||
MFHC (1) | ||||||||||
Rent expenses | 1,500 | 13,500 | ||||||||
Monthly rent per sublease agreement with MFHC | $ 1,500 | |||||||||
MFHC (2) | ||||||||||
Rent expenses | 12,078 | |||||||||
Monthly rent per sublease agreement with MFHC | $ 4,026 | |||||||||
President | ||||||||||
Officer compensation, annual base salary | 225,000 | |||||||||
Officer compensation expenses | 225,000 | 124,519 | ||||||||
Officer compensation, unpaid wages owed | 4,327 | |||||||||
CFO | ||||||||||
Officer compensation, annual base salary | $ 125,000 | |||||||||
Officer compensation expenses | 117,522 | $ 52,885 | ||||||||
Officer compensation, unpaid wages owed | $ 40,385 |
INVESTMENT IN UNDIVIDED INTER39
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE - Condensed balance sheet and condensed statement of operations for the real property (Details) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Current assets: | |
Cash and cash equivalents | $ 8,331 |
Accounts receivable, net | 2,711 |
Prepaid expenses and other current assets | 37,471 |
Total current assets | 48,512 |
Land and Building, net | 2,397,848 |
Other assets, net | 54,246 |
Total assets | 2,500,606 |
Current portion of mortgage payable | 37,792 |
Other current liabilities | 19,828 |
Total current liabilities | 57,620 |
Mortgage payable, long-term | 2,004,440 |
Total liabilities | 2,062,060 |
Total equity | 438,546 |
Total liabilities and equity | 2,500,606 |
Rental income | 154,454 |
Expenses: | |
Property taxes | 16,752 |
Depreciation and amortization | 27,229 |
Insurance | 6,253 |
Repairs and maintenance | 17,829 |
Other | 15,083 |
Interest expense | 74,120 |
Total expenses | 157,266 |
Net loss | $ (2,812) |
INVESTMENT IN UNDIVIDED INTER40
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | 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 | ||
Net income (loss) from equity method investment | (1,378) | ||
Carrying value of equity method investment | $ 1,224,903 |
NOTE PAYABLE - UNDIVIDED INTE41
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE - Future principal payments for Company's portion of SBA Note (Details) | Dec. 31, 2017USD ($) |
Debt Disclosure [Abstract] | |
2,018 | $ 18,518 |
2,019 | 19,660 |
2,020 | 20,708 |
2,021 | 22,150 |
2,022 | 23,516 |
Thereafter | 896,142 |
Total | $ 1,000,694 |
NOTE PAYABLE - UNDIVIDED INTE42
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Debt Disclosure [Abstract] | |
Note term | 25 years |
Interest per annum | 6.00% |
Initial liability recorded for SBA Note | $ 1,007,930 |
Current portion of SBA Note | 18,518 |
Long term portion of SBA Note | $ 982,176 |
CONVERTIBLE NOTES PAYABLE - Sum
CONVERTIBLE NOTES PAYABLE - Summary of convertible notes payable balance (Details) | Dec. 31, 2017USD ($) |
Current portion | |
Principal balance | $ 266,000 |
Unamortized discount | (191,860) |
Ending balance, net | 74,140 |
Long-term portion | |
Principal balance | 112,800 |
Unamortized discount | (100,213) |
Ending balance, net | 12,587 |
Total | |
Principal balance | 378,800 |
Unamortized discount | (292,073) |
Ending balance, net | $ 86,727 |
CONVERTIBLE NOTES PAYABLE - Rol
CONVERTIBLE NOTES PAYABLE - Roll-forward of Company's convertible notes and related discounts (Details) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Principal Balance | |
Beginning balance | |
New issuances | 397,000 |
Cash payments | (18,200) |
Amortization | |
Ending balance | 378,800 |
Debt Discounts | |
Beginning balance | |
New issuances | (355,507) |
Cash payments | |
Amortization | 63,434 |
Ending balance | (292,073) |
Total | |
Beginning balance | |
New issuances | 41,493 |
Cash payments | (18,200) |
Amortization | 63,434 |
Ending balance | $ 86,727 |
CONVERTIBLE NOTES PAYABLE (Deta
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 12, 2017 | Nov. 10, 2017 | Oct. 11, 2017 | |
Convertible Notes Payable (1) | ||||
Principal amount | $ 48,000 | |||
Interest rate | 12.00% | |||
Net proceeds received | $ 45,000 | |||
Transaction costs, fees, and expenses | $ 3,000 | |||
Due date | Jul. 15, 2018 | |||
Initial debt discount | $ 40,300 | |||
Initial derivative liability | 40,300 | |||
Amortization of debt discount | 12,561 | |||
Debt issue discount recorded | 3,000 | |||
Debt issue discount amortized to interest expense | 935 | |||
Note balance | 48,000 | |||
Carrying value | 18,196 | |||
Unamortized discounts | 29,804 | |||
Convertible Notes Payable (2) | ||||
Principal amount | $ 299,000 | |||
Interest rate | 10.00% | |||
Net proceeds received | $ 250,000 | |||
Due date | Jan. 12, 2019 | |||
Initial debt discount | $ 250,000 | |||
Initial derivative expense | 213,549 | |||
Initial derivative liability | 463,549 | |||
Amortization of debt discount | 41,417 | |||
Original issue discount recorded | 49,000 | |||
Debt issue discount recorded | 49,000 | |||
Debt issue discount amortized to interest expense | 8,118 | |||
Principal payments made | (18,200) | |||
Note balance | 280,800 | |||
Carrying value | 86,727 | |||
Unamortized discounts | 249,465 | |||
Daily ACH payments requried until note is fully satisfied | $ 700 | |||
Convertible Notes Payable (3) | ||||
Principal amount | $ 50,000 | |||
Interest rate | 10.00% | |||
Due date | Dec. 12, 2018 | |||
Initial debt discount | $ 13,207 | |||
Initial derivative expense | 13,207 | |||
Debt issue discount amortized to interest expense | 404 | |||
Note balance | 50,000 | |||
Carrying value | 37,197 | |||
Unamortized discounts | $ 12,803 |
DERIVATIVE LIABILITIES - Summar
DERIVATIVE LIABILITIES - Summary of activity related to derivative liabilities (Details) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Notes to Financial Statements | |
Beginning Balance | |
Initial Derivative Liability | 517,056 |
Fair Value Change | 52,125 |
Reclassification for principal payments | (28,216) |
Ending Balance | $ 540,965 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Derivative liability expense | $ 265,674 |
Initial derivative expense | 213,549 |
Fair value change | $ 52,125 |
Minimum | |
Risk free interest rate | 1.53% |
Volatility | 303.00% |
Maximum | |
Risk free interest rate | 1.76% |
Volatility | 355.00% |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Future principal payments for Company's portion of lease agreements (Details) | Dec. 31, 2017USD ($) |
Commitments And Contingencies - Future Principal Payments For Companys Portion Of Lease Agreements Details | |
2,018 | $ 144,000 |
2,019 | 144,000 |
2,020 | 144,000 |
2,021 | 144,000 |
2,022 | 66,000 |
Total | $ 642,000 |
COMMITMENTS AND CONTINGENCIES49
COMMITMENTS AND CONTINGENCIES - Summary of activity on deferred commissions - stockholder (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 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) | $ 96,000 |
Commission expense recorded | (60,000) | |
Other expense recorded | (748,334) | |
Ending balance | $ 133,334 |
COMMITMENTS AND CONTINGENCIES50
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Aug. 18, 2017 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2017 | Jan. 31, 2014 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 31, 2017 |
Lease Agreements | |||||||||
Monthly lease amount | $ 12,000 | $ 1,500 | $ 8,436 | $ 3,000 | |||||
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, shares | 333,334 | ||||||||
Common stock issued, value per share | $ .30 | ||||||||
Consulting fees paid | $ 54,000 | $ 47,300 | |||||||
Stock-based compensation expense | $ 75,000 | ||||||||
Consulting and Representation Agreement (CR Agreement) | |||||||||
Consulting Agreements | |||||||||
Monthly compensation expense | $ 700 | ||||||||
Common stock issued, shares | 300,000 | ||||||||
Common stock issued, value per share | $ .30 | ||||||||
Stock-based compensation expense | $ 90,000 | ||||||||
LOI with AUDserve | |||||||||
Consulting Agreements | |||||||||
Company stock to be exchanged in AUDserve acquisition, minimum shares | 2,898,550 | ||||||||
Company stock to be exchanged in AUDserve acquisition, value | $ 1,000,000 | ||||||||
Marketing Services Agreement (MSA) | |||||||||
Consulting Agreements | |||||||||
Monthly compensation expense | $ 5,000 | ||||||||
Common stock issued, shares | 5,000 | ||||||||
Common stock to be issued | 102,564 | ||||||||
Stock-based compensation expense | $ 8,974 | ||||||||
Consulting and Marketing Agreement (CMA) | |||||||||
Consulting Agreements | |||||||||
Monthly compensation expense | $ 15,000 | ||||||||
Contract Regarding Investor Relation Services | |||||||||
Consulting Agreements | |||||||||
Monthly compensation expense | $ 3,600 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | Apr. 07, 2017 | Apr. 03, 2017 | Sep. 30, 2017 | Dec. 31, 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 | $ 75,000 | ||
Deferred stock compensation recorded | 25,000 | |||
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) - USD ($) | 1 Months Ended | 2 Months Ended | 3 Months Ended | |||||
Apr. 13, 2018 | Apr. 13, 2018 | Apr. 13, 2018 | Mar. 27, 2018 | Mar. 26, 2018 | Mar. 02, 2018 | Feb. 09, 2018 | Feb. 05, 2018 | |
Amounts received from loan | $ 32,600 | $ 27,500 | ||||||
Amounts repaid to related party | 1,000 | |||||||
Total loan balance due to related party | $ 91,500 | |||||||
Monthly principal and interest payments for loan repayment | $ 3,613 | |||||||
Deposit for agreement | $ 9,500 | |||||||
Convertible Note (1) | ||||||||
Convertible promissory note, principal amount | $ 35,000 | |||||||
Convertible promissory note, interest rate | 10.00% | |||||||
Convertible promissory note, due date | Feb. 5, 2019 | |||||||
Convertible Note (2) | ||||||||
Convertible promissory note, principal amount | $ 58,300 | |||||||
Convertible promissory note, interest rate | 12.00% | |||||||
Convertible promissory note, proceeds received | $ 50,000 | |||||||
Convertible promissory note, transaction costs, fees and expenses | $ 8,300 | |||||||
Convertible promissory note, due date | Nov. 20, 2018 | |||||||
Convertible Note (3) | ||||||||
Convertible promissory note, principal amount | $ 50,000 | |||||||
Convertible promissory note, interest rate | 10.00% | |||||||
Convertible promissory note, due date | Mar. 2, 2019 | |||||||
Convertible Note (4) | ||||||||
Convertible promissory note, principal amount | $ 25,000 | |||||||
Convertible promissory note, interest rate | 10.00% | |||||||
Convertible promissory note, due date | Mar. 26, 2019 | |||||||
Convertible Note (5) | ||||||||
Convertible promissory note, principal amount | $ 50,000 | |||||||
Convertible promissory note, interest rate | 10.00% | |||||||
Convertible promissory note, due date | Mar. 27, 2019 |