Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 25, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | INNERSCOPE HEARING TECHNOLOGIES, INC. | |
Entity Central Index Key | 1,609,139 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 62,312,857 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 23,385 | $ 84,720 |
Accounts receivable, net | 14,596 | 12,950 |
Accounts receivable from related party | 97,804 | 73,996 |
Prepaid assets | 86,918 | 101,110 |
Inventory | 28,734 | 5,959 |
Total current assets | 251,437 | 278,735 |
Domain name | 3,000 | 3,000 |
Property, furniture and fixtures and equipment, net of accumulated depreciation of $1,289 (2018) and $1,068 (2017) | 1,362 | 1,583 |
Investment in undivided interest in real estate | 1,222,598 | 1,224,903 |
Total assets | 1,478,397 | 1,508,221 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 222,004 | 161,919 |
Accounts payable to related party | 22,548 | 22,548 |
Notes payable - stockholder | 91,500 | 65,000 |
Advances payable, stockholder | 187,760 | 176,838 |
Current portion of convertible notes payable, net of discounts | 275,384 | 74,140 |
Current portion of note payable | 18,793 | 18,518 |
Note payable | 43,358 | |
Officer salaries payable | 95,192 | 47,248 |
Income tax payable | 33,682 | 33,682 |
Derivative liability | 724,289 | 540,965 |
Deferred revenue | 847,223 | 847,223 |
Total current liabilities | 2,561,733 | 1,988,081 |
Long term portion of note payable | 977,494 | 982,176 |
Long term portion of convertible note payable, net of discounts | 12,587 | |
Total liabilities | 3,539,227 | 2,982,844 |
Commitments and contingencies | ||
Stockholders' Deficit: | ||
Common stock, $0.0001 par value; 225,000,000 shares authorized; 61,763,406 and 61,539,334 shares issued and outstanding March 31, 2018, and December 31, 2017, respectively | 6,176 | 6,153 |
Common stock to be issued, $0.0001 par value, 266,401 and 102,564 shares March 31, 2018, and December 31, 2017, respectively | 27 | 10 |
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; no shares issued | ||
Additional paid-in capital | 417,922 | 331,227 |
Deferred stock compensation | (25,000) | |
Accumulated deficit | (2,484,955) | (1,787,012) |
Total stockholders' deficit | (2,060,830) | (1,474,623) |
Total liabilities and stockholders' deficit | $ 1,478,397 | $ 1,508,221 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation of property, furniture and fixtures and equipment | $ (1,289) | $ (1,068) |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 225,000,000 | 225,000,000 |
Common stock, shares issued | 61,763,406 | 61,539,334 |
Common stock, shares outstanding | 61,763,406 | 61,539,334 |
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 | $ 0.0001 |
Common stock to be issued, shares | 266,401 | 102,564 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | ||
Revenues, other | $ 27,281 | $ 139,460 |
Revenues, related party | 28,696 | 5,000 |
Total revenues | 55,977 | 144,460 |
Cost of sales | ||
Cost of sales, other | 24,781 | 15,392 |
Cost of sales, related | 14,083 | |
Total cost of sales | 38,864 | 15,392 |
Gross profit | 17,113 | 129,068 |
Operating Expenses: | ||
Compensation and benefits | 159,539 | 156,673 |
Advertising and promotion | 25,321 | |
Professional fees (including stock based fees of $50,690 for 2018) | 115,487 | 41,250 |
Consulting fees, stockholder | 60,000 | |
Rent, related party | 36,000 | 18,372 |
Investor relations | 52,641 | 5,314 |
Other general and administrative | 41,242 | 10,294 |
Total operating expenses | 430,230 | 291,903 |
Loss from operations | (413,116) | (162,835) |
Other Income (Expense): | ||
Derivative expense | (151,259) | |
Loss on investment in undivided interest in real estate | (2,305) | |
Gain on contract cancellations | 160,000 | |
Interest income, including $64 (2017) from officer | 112 | |
Interest expense and finance charges | (131,263) | (368) |
Total other income (expense), net | (284,827) | 159,744 |
Net loss | $ (697,943) | $ (3,091) |
Basic and diluted loss per share | $ (0.01) | $ 0 |
Weighted average number of common shares outstanding - Basic and diluted | 61,631,452 | 60,906,000 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Stock based fees included in professional fees | $ 50,690 | |
Officer portion of interest income | $ 64 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (697,943) | $ (3,091) |
Adjustments to reconcile net loss to net cash provided by (used in) operations: | ||
Loss on fair value of derivatives | 151,259 | |
Amortization of debt discounts | 110,266 | |
Depreciation | 221 | 221 |
Stock compensation expense | 50,690 | |
Loss on investment in undivided interest in real estate | 2,305 | |
Changes in operating assets and liabilities: | ||
Decrease (increase) in Interest receivable, related party | 82 | |
Decrease (increase) in Accounts receivable | (1,646) | (9,460) |
Decrease (increase) in Inventory | (22,775) | (2,910) |
Decrease (increase) in Deferred commissions, stockholder | (375,000) | |
Decrease (increase) in Prepaid assets | 24,951 | (44,755) |
Decrease (increase) in Accounts receivable, related party | (23,808) | |
Increase (decrease) in Accounts payable and accrued expenses | 60,085 | 38,211 |
Increase (decrease) in Commissions payable, stockholder | (96,000) | |
Increase (decrease) in Officer salaries payable | 47,944 | |
Increase (decrease) in Deferred revenue | 625,000 | |
Increase (decrease) in Due to related party | 10,922 | 9,500 |
Net cash provided by (used in) operating activities | (287,528) | 141,798 |
Cash flows from investing activities: | ||
Repayments of shareholder loans receivable | 2,563 | |
Net cash used in investing activities | 2,563 | |
Cash flows from financing activities: | ||
Proceeds from issuance of note payable | 32,600 | |
Proceeds from advances, shareholder | 27,500 | |
Proceeds from issuances of convertible notes payable | 210,000 | |
Repayments of note payable | (4,407) | |
Repayments of advances, shareholder | (1,000) | |
Repayments of principal of convertible note payable | (38,500) | |
Net cash provided by financing activities | 226,193 | |
Net increase (decrease) in cash and cash equivalents | (61,335) | 144,361 |
Cash and cash equivalents, Beginning of period | 84,720 | 493,514 |
Cash and cash equivalents, End of period | 23,385 | 637,875 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 5,707 | 368 |
Cash paid for income taxes | ||
Schedule of non-cash Investing or Financing Activity: | ||
Reclassification of derivative liabilities upon principal repayments of convertible notes | $ 61,044 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Mar. 31, 2018 | |
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. For the three months ended March 31 2017, the Company has recognized $100,000 of income for the one new store, opened in January 2017, and $160,000 in other income, net, for payments received for the Expansion Agreement pursuant to the cancellation. The client also paid an additional $30,000 for the cancellation of the Store Expansion Agreement and a marketing agreement. 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 | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING PROUNCEMENTS | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s financial statements and notes thereto included in the Annual Report for the year ended December 31, 2017, filed with the United States Securities and Exchange Commission (the “SEC”) on April 17, 2018. Interim results of operations for the three months ended March 31, 2018, and 2017, are not necessarily indicative of future results for the full year. Certain amounts from the 2017 period have been reclassified to conform to the presentation used in the current period. 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. 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 March 31, 2018, and December 31, 2017, management’s evaluation resulted in the establishment of an allowance for uncollectible receivables of $63,799. Advertising and Promotion The Company expenses advertising costs as incurred. Advertising expenses for the three months ended March 31, 2018 and 2017, was $25,321 and $-0-, respectively. Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three months ended March 31, 2018 and 2017, and accounts receivable balance as of March 31, 2018: Accounts March 31, Receivable 2018 2017 as of % % March 31, 2018 Customer A, related 51.3% — $ 97,804 Customer B 24.4% — — Customer C — 90.0% — 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. 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 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 march 31, 2018, and December 31, 2017: March 31, 2018 December 31, 2017 Computer equipment $ 2,651 $ 2,651 Accumulated depreciation (1,289 ) (1,068 ) Balance $ 1,362 $ 1,583 Depreciation expense of $221 was recorded for the three months ended March 31, 2018, and 2017. 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 three months ended March 31, 2018, the Company recognized a loss of $2,305. As of March 31, 2018, and December 31, 2017, the carrying value of the Company’s investment in undivided interest in real estate was $1,222,598 and $1,224,903, respectively (see Note 8). 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 March 31, 2018, and December 31, 2017, for each fair value hierarchy level: March 31, 2018 Derivative Total Level I $ — $ — Level II $ — $ — Level III $ 724,289 $ 724,289 December 31, 2017 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 has adopted ASU 2014-09, as amended effective January 1, 2018, and determined that there was no significant impact on its revenue recognition. The Company’s contracts with customers are generally on a purchase order basis and represent obligations that are satisfied at a point in time as defined in the new guidance. Accordingly, revenue for each project is recognized when each project is complete, and any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. For the three months ended March 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. 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 March 31, 2018, the Company’s outstanding convertible debt is convertible into approximately 18,095,361 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. As of March 31, 2017, the Company did not have any outstanding common stock equivalents or any other potentially dilutive securities. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our consolidated financial statements. With the exception of the new standard discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2018, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed on April 17, 2018, that are of significance or potential significance to the Company. |
GOING CONCERN AND MANAGEMENT'S
GOING CONCERN AND MANAGEMENT'S PLANS | 3 Months Ended |
Mar. 31, 2018 | |
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 $697,943 for the three months ended March 31, 2018. At March 31, 2018, the Company had a working capital deficit of $2,310,296, and an accumulated deficit of $2,484,955. 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, 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 12). 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, and in the three months ended March 31, 2018, has begun to market and sell products direct to consumers online. |
ADVANCES PAYABLE, SHAREHOLDERS
ADVANCES PAYABLE, SHAREHOLDERS | 3 Months Ended |
Mar. 31, 2018 | |
Advances Payable Shareholders | |
ADVANCES PAYABLE, SHAREHOLDERS | NOTE 4 – ADVANCES PAYABLE, SHAREHOLDERS Chief Executive Officer A summary of the activity for the three months ended March 31, 2018, and the year ended December 31, 2017, representing amounts paid by the Company’s CEO (stockholder) on behalf of the Company and amounts reimbursed is as follows. March 31, 2018 December 31, 2017 Beginning Balance $ 138,637 $ -0- Amounts paid on Company’s behalf 100,387 149,370 Reimbursements (87,385 ) (10,733 ) Ending Balance $ 151,639 $ 138,637 The ending balances as of March 31, 2018, and December 31, 2017, are included in Advances payable, stockholders on the condensed consolidated balance sheet included herein. Director A summary of the activity for the three months ended March 31, 2018, and the year ended December 31, 2017, representing amounts paid by the Company’s Chairman (stockholder) on behalf of the Company and amounts reimbursed is as follows. March 31, 2018 December 31, 2017 Beginning Balance $ 38,201 $ -0- Amounts paid on Company’s behalf 17,920 39,201 Reimbursements (20,000 ) (1,000 ) Ending Balance $ 36,121 $ 38,201 The ending balances as of March 31, 2018, and December 31, 2017, are included in Advances payable, stockholders on the condensed consolidated balance sheet included herein. |
NOTE PAYABLE, STOCKHOLDER AND N
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE | 3 Months Ended |
Mar. 31, 2018 | |
Payables and Accruals [Abstract] | |
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE | NOTE 5 – NOTE PAYABLE, STOCKHOLDER A summary of the activity for the three months ended March 31, 2018, and the year ended December 31, 2017, of amounts the Company’s CEO (stockholder) loaned the Company and amounts repaid is as follows: March 31, 2018 December 31, 2017 Beginning Balance $ 65,000 $ -0- Amounts loaned to the Company 27,500 65,000 Repaid (1,000 ) -0- Ending Balance $ 91,500 $ 65,000 The ending balance amount is due on demand, carries interest at 8% per annum and is included Notes payable, stockholder on the condensed consolidated balance sheet included herein. NOTE 6 – NOTE PAYABLE On February 27, 2018, the Company entered into a Business Loan Agreement (the “BLA”) for $43,358 with a third- party, whereby the Company received $32,600 on March 1, 2018. The BLA requires the Company to make the first six monthly payments of principal and interest of $4,102 per month, and then $3,124 for months seven thru twelve. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2018 | |
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. The note and interest were paid in full during the year ended December 31, 2017. The Company recorded interest income of $64 for the three months ended March 31, 2017. During the three months ended March 31, 2018 and the year ended December 31, 2017, our CEO (stockholder) paid expenses of the Company and accounts payable on behalf of the Company (see Note 4). As of March 31, 2018, and December 31, 2017, the Company owed the CEO $151,639 and $138,637, respectively, which is included in Advances payable, stockholders on the condensed consolidated balance sheet included herein. During the three months ended March 31, 2018, and the year ended December 31, 2017, our Chairman (stockholder) paid expenses of the Company and accounts payable on behalf of the Company (see Note 4). As of March 31, 2018, and December 31, 2017, the Company owed the Chairman $36,121 and $38,201, respectively, which is included in Advances payable, stockholders on the condensed 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 through December 31, 2016, the balance due to MFHC as of March 31, 2018, and December 31, 2017, was $22,548, which is included in Accounts payable, related party, on the condensed consolidated balance sheet included herein. 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 three months ended March 31, 2017, the Company expensed $1,500 related to this lease. Effective August 1, 2016, the Company agreed to compensation of $225,000 and $125,000 per year for the Company’s CEO and CFO, respectively. On November 15, 2016, the Company entered into employment agreements with its CEO and CFO, which includes their annual base salaries of $225,000 and $125,000, respectively. For the three months ended March 31, 2018, and 2017, the Company recorded expenses to its officers in the following amounts: Three months ended 2018 2017 CEO $ 56,250 $ 56,250 CFO 30,289 31,250 Total $ 86,538 $ 87,500 As of March 31, 2018, the Company owes the CEO and CFO $38,324 and $56,868, respectively, and as of December 31, 2017, the Company owed the CEO and CFO $4,327 and $40,385, respectively for accrued and 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 $15,000 and $5,000 of revenues for the three months ended March 31, 2018, and 2017, respectively. Additionally, for the three months ended March 31, 2018, the Company invoiced LLC1 $12,421 for the Company’s production, printing and mailing services and $1,275 for sale of products. As of March 31, 2018, and December 31, 2017, LLC1 owes the Company $97,804 and $73,996, respectively. 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 three months ended March 31, 2018, In November 2016, the Company’s Chairman formed a California Limited Liability Company (“LLC2”), for the purpose of providing consulting services to the Company. The Company entered into an agreement with LLC2, and paid LLC2 $375,000 during the year ended December 31, 2016, for services performed and to be performed. Of the $375,000 amount paid, $241,667 was recognized as consulting fees- stockholder for the year ended December 31, 2016, and the remaining $133,334 was recorded as deferred commissions- stockholder as of December 31, 2016. For the three months ended March 31, 2017, the Company paid the LLC an additional $771,000 and expensed $300,000 ($60,000 as commissions and $240,000 as other expense) for services performed. As of December 31, 2017, the deferred commissions-stockholder is $-0-, as the Company wrote off $508,334 during the remainder of 2017, due to uncertainty of future services being provided, based on the Complaint filed on May 26, 2017. 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 three months ended March 31, 2018, a net loss of $2,305 is included in “Other income (expense), net”. As of March 31, 2018, the carrying value of our investment in undivided interest in real estate was $1,222,598. The unaudited condensed balance sheet as of March 31, 2018 and the unaudited condensed statement of operation for the three months ended March 31, 2018, for the real property is as follows: Current assets: Cash and cash equivalents $ 5,626 Accounts receivable, net 3,000 Prepaid expenses and other current assets 56,255 Total current assets 64,480 Land and Building, net 2,386,956 Other assets, net 55,693 Total assets $ 2,505,529 Current portion of mortgage payable $ 38,353 Other current liabilities 38,448 Total current liabilities 76,801 Mortgage payable, long-term 1,994,886 Total liabilities 2,071,687 Total equity 433,842 Total liabilities and equity $ 2,505,529 Rental income $ 63,211 Expenses: Property taxes 6,646 Depreciation and amortization 11,446 Insurance 2,033 Repairs and maintenance 5,349 Other 10,087 Interest expense 32,355 Total expenses 67,916 Net loss $ (4,705 ) |
NOTE PAYABLE - UNDIVIDED INTERE
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | 3 Months Ended |
Mar. 31, 2018 | |
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 an initial interest rate of 6% per annum, adjustable to the Prime interest rate plus 2%, 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 March 31, 2018, the current and long-term portion of the SBA Note is $18,793 and $977,494, respectively. Future principal payments for the Company’s portion are: Twelve months ending March 31, Amount 2019 $ 18,793 2020 19,795 2021 21,173 2022 23,865 2023 25,195 Thereafter 887,466 Total $ 996,287 |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2018 | |
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 three months ended March 31, 2018, amortization of the debt discount of $12,994 was charged to interest expense. The Company also recorded a discount for debt issuance costs of $3,000 and has amortized $967 to interest expense for the three months ended March 31, 2018. As of March 31, 2018, and December 31, 2017, the note balance is $48,000, with a carrying value on March 31, 2018, of $32,157, net of unamortized discounts of $15,843. 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 three months ended March 31, 2018, amortization of the debt discount of $66,668 was charged to interest expense. The Company also recorded an original issue discount and debt issue discount of $49,000 and amortized $13,067 to interest expense for the three months ended March 31, 2018. During the three months ended March 31, 2018, the Company made principal payments of $38,500 and as of March 31, 2018, and December 31, 2017, the note balance is $242,300 and $280,800, respectively, with a carrying value as of March 31, 2018, of $72,568, net of unamortized discounts of $169,732. 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 three months ended March 31, 2018, amortization of the debt discount of $3,302 was charged to interest expense. As of March 31, 2018, and December 31, 2017, the note balance is $50,000, with a carrying value as of March 31, 2018, of $40,498, net of unamortized discounts of $9,502. On February 1, 2018, 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 $35,000. Principal and interest is due and payable February 1, 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 (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 $9,554, and an initial derivative liability of $9,554. For the three months ended March 31, 2018, amortization of the debt discount of $1,592 was charged to interest expense. As of March 31, 2018, the note balance is $35,000, with a carrying value of $27,038, net of unamortized discounts of $7,962. On February 8, 2018, 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 February 8, 2018. Pursuant to the Purchase Agreement, the investor purchased a 12% Convertible Promissory Note (the “Note”), dated February 8, 2018, in the principal amount of $58,300. On February 8, 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 8, 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 seventy-five percent (75%), representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $50,000, an initial derivative liability of $65,525 and an initial derivative expense of $15,525. For the three months ended March 31, 2018, amortization of the debt discount of $8,912 was charged to interest expense. The Company also recorded a debt issue discount of $8,300 and has amortized $1,480 to interest expense for the three months ended March 31, 2018. As of March 31, 2018, the note balance is $58,300, with a carrying value of $10,392, net of unamortized discounts of $47,908. On March 2, 2018, 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 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 (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 $13,399, and an initial derivative liability of $3,399. For the three months ended March 31, 2018, amortization of the debt discount of $1,117 was charged to interest expense. As of March 31, 2018, the note balance is $50,000, with a carrying value of $37,718, net of unamortized discounts of $12,282. On March 26, 2018, 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 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 (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 $13,420, and an initial derivative liability of $13,420. For the three months ended March 31, 2018, amortization of the debt discount of $112 was charged to interest expense. As of March 31, 2018, the note balance is $50,000, with a carrying value of $36,692, net of unamortized discounts of $13,308. On March 27, 2018, 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 $25,000. 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 (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 $6,736, and an initial derivative liability of $6,736. For the three months ended March 31, 2018, amortization of The following is a roll-forward of the Company’s convertible notes and related discounts for the three months ended March 31, 2018: Convertible notes $ 558,600 Unamortized note discounts (283,216 ) Balance at March 31, 2018 $ 275,834 The following is a summary of the Company’s convertible notes and related discounts as of March 31, 2018: Principal Balance Debt Discounts Total Balance at January 1, 2018 $ 378,800 $ (292,073 ) $ 86,727 New issuances 218,300 (101,409 ) 116,891 Cash payments (38,500 ) — (38,500 ) Amortization — 110,266 110,266 Balance at March 31, 2018 $ 558,600 $ (283,216 ) $ 275,384 |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 3 Months Ended |
Mar. 31, 2018 | |
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, March 31, 2018, and December 31, 2017, at $108,634, $724,289 and $540,965, respectively. The Company used the Monte Carlo simulation valuation model with the following assumptions for new notes issued during the three months ended March 31, 2018, risk-free interest rates from 1.82% to 2.10% and volatility of 303% to 308%, and as of March 31, 2018, risk-free interest rates from 1.93% to 2.09% and volatility of 313% to 518%. A summary of the activity related to derivative liabilities for the three months ended on March 31, 2018, is as follows: March 31, 2018 Beginning Balance $ 540,965 Initial Derivative Liability 108,634 Fair Value Change 135,734 Reclassification for principal payments (61,044 ) Ending Balance $ 724,289 Derivative liability expense of $151,259 for the three months ended March 31, 2018, consisted of the initial derivative expense of $15,525 and the above fair value change of $135,734. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12– COMMITMENTS AND CONTINGENCIES Lease Agreements 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: For the twelve months ending March 31, Amount 2019 $ 144,000 2020 144,000 2021 144,000 2022 72,000 Total $ 504,000 Rent expense for the three months ended March 31, 2018, and 2017 was $36,000 (related party and $18,372 ($1,500 related party), respectively. 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. For the three months ended March 31, 2017, the Company has received and recognized $160,000 in other income, net, for payments received for the cancellation of the Expansion Agreement. 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 condensed consolidated balance sheets presented herein. 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. For the three months ended March 31, 2018, the Company recorded $15,000 of consulting expense and recorded $7,778 of stock-based compensation expense (pursuant to the terms of the MSA) from the issuance of 111,111 shares of common stock. The Company also recorded 266,401 shares of common stock to be issued as of March 31, 2018, and recorded stock- based compensation expense of $17,184 (pursuant to the terms of the MSA). Lastly, on February 27, 2018, the Company issued 102,564 shares of common stock that were previously recorded as common stock to be issued.as of December 31, 2017. 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. The parties have also sent each other written discovery requests and have served written responses to the same. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 13 – STOCKHOLDERS’ EQUITY Common Stock The Company has 225,000,000 authorized shares of $0.0001 common stock. As of March 31, 2018, and December 31, 2017, there are 61,763,406 and 61,539,334, respectively, shares of common stock outstanding. On February 23, 2018, the Company issued 111,111 shares of common stock to a consultant. The shares were valued at $7,778, based on the market price of the common stock on January 31, 2018, the date the Company agreed to issue the shares. On February 23, 2018, the Company issued 10,397 shares of common stock to an employee. The shares were valued at $728, based on the market price of the common stock on January 31, 2018, the date the Company agreed to issue the shares. On February 27, 2018, the Company issued 102,564 shares of common stock that were classified as common stock to be issued as of December 31, 2017. Common Stock to be issued On February 28, 2018, the Company recorded 133,067 shares of common stock to be issued to a marketing consultant (see Note 12) and recorded $8,117 of stock-based compensation expense (based on the market price of the common stock on that date). On March 31, 2018, the Company recorded 133,333 shares of common stock to be issued to the same marketing consultant and recorded $9,067 of stock-based compensation expense (based on the market price of the common stock on that date). 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 | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | NOTE 14 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein. On April 8, 2018, the Company issued a convertible promissory note (the “Note”), with a face value of $95,450, maturing on July 8, 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 On April 18, 2018, the Company issued 549,451 shares of common stock in satisfaction of $10,000 of principal pursuant to a conversion notice received by the Company from a convertible debt holder. On May 11, 2018, the Company issued a convertible promissory note (the “Note”), with a face value of $100,000, maturing on May 11, 2019, and stated interest of 10% to a third-party investor. The note is convertible at any time after the funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 62% of the lowest trading price for the 20 days prior to conversion. The note was funded on May 16, 2018, when the Company received proceeds of $75,825, after disbursements to vendors and for the lender’s transaction costs, fees and expenses. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Summary Of Significant Accounting Principles | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be read in conjunction with a reading of the Company’s financial statements and notes thereto included in the Annual Report for the year ended December 31, 2017, filed with the United States Securities and Exchange Commission (the “SEC”) on April 17, 2018. Interim results of operations for the three months ended March 31, 2018, and 2017, are not necessarily indicative of future results for the full year. Certain amounts from the 2017 period have been reclassified to conform to the presentation used in the current period. |
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. 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 March 31, 2018, and December 31, 2017, management’s evaluation resulted in the establishment of an allowance for uncollectible receivables of $63,799. |
Advertising and Promotion | Advertising and Promotion The Company expenses advertising costs as incurred. Advertising expenses for the three months ended March 31, 2018 and 2017, was $25,321 and $-0-, respectively. |
Sales Concentration and Credit Risk | Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three months ended March 31, 2018 and 2017, and accounts receivable balance as of March 31, 2018: Accounts March 31, Receivable 2018 2017 as of % % March 31, 2018 Customer A, related 51.3% — $ 97,804 Customer B 24.4% — — Customer C — 90.0% — |
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. |
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 march 31, 2018, and December 31, 2017: March 31, 2018 December 31, 2017 Computer equipment $ 2,651 $ 2,651 Accumulated depreciation (1,289 ) (1,068 ) Balance $ 1,362 $ 1,583 Depreciation expense of $221 was recorded for the three months ended March 31, 2018, and 2017. |
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 three months ended March 31, 2018, the Company recognized a loss of $2,305. As of March 31, 2018, and December 31, 2017, the carrying value of the Company’s investment in undivided interest in real estate was $1,222,598 and $1,224,903, respectively (see Note 8). |
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 March 31, 2018, and December 31, 2017, for each fair value hierarchy level: March 31, 2018 Derivative Total Level I $ — $ — Level II $ — $ — Level III $ 724,289 $ 724,289 December 31, 2017 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 has adopted ASU 2014-09, as amended effective January 1, 2018, and determined that there was no significant impact on its revenue recognition. The Company’s contracts with customers are generally on a purchase order basis and represent obligations that are satisfied at a point in time as defined in the new guidance. Accordingly, revenue for each project is recognized when each project is complete, and any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. For the three months ended March 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. |
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 March 31, 2018, the Company’s outstanding convertible debt is convertible into approximately 18,095,361 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. As of March 31, 2017, the Company did not have any outstanding common stock equivalents or any other potentially dilutive securities. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our consolidated financial statements. With the exception of the new standard discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2018, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed on April 17, 2018, that are of significance or potential significance to the Company. |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary Of Significant Accounting Prouncements Tables Abstract | |
Concentration of customer revenues and accounts receivable balance | Accounts March 31, Receivable 2018 2017 as of % % March 31, 2018 Customer A, related 51.3% — $ 97,804 Customer B 24.4% — — Customer C — 90.0% — |
Property and equipment | March 31, 2018 December 31, 2017 Computer equipment $ 2,651 $ 2,651 Accumulated depreciation (1,289 ) (1,068 ) Balance $ 1,362 $ 1,583 |
Financial instruments measured at fair value on a recurring basis | March 31, 2018 Derivative Total Level I $ — $ — Level II $ — $ — Level III $ 724,289 $ 724,289 December 31, 2017 Level I $ — $ — Level II $ — $ — Level III $ 540,965 $ 540,965 |
ADVANCES PAYABLE, SHAREHOLDERS
ADVANCES PAYABLE, SHAREHOLDERS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Advances Payable Shareholders | |
Advances from shareholders | Chief Executive Officer March 31, 2018 December 31, 2017 Beginning Balance $ 138,637 $ -0- Amounts paid on Company’s behalf 100,387 149,370 Reimbursements (87,385 ) (10,733 ) Ending Balance $ 151,639 $ 138,637 Director March 31, 2018 December 31, 2017 Beginning Balance $ 38,201 $ -0- Amounts paid on Company’s behalf 17,920 39,201 Reimbursements (20,000 ) (1,000 ) Ending Balance $ 36,121 $ 38,201 |
NOTE PAYABLE, STOCKHOLDER AND23
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Note Payable Stockholder And Note Payable | |
Amounts loaned by stockholder | March 31, 2018 December 31, 2017 Beginning Balance $ 65,000 $ -0- Amounts loaned to the Company 27,500 65,000 Repaid (1,000 ) -0- Ending Balance $ 91,500 $ 65,000 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Expenses to officers | Three months ended 2018 2017 CEO $ 56,250 $ 56,250 CFO 30,289 31,250 Total $ 86,538 $ 87,500 |
INVESTMENT IN UNDIVIDED INTER25
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Investment In Undivided Interest In Real Estate | |
Condensed balance sheet and condensed statement of operations for the real property | Current assets: Cash and cash equivalents $ 5,626 Accounts receivable, net 3,000 Prepaid expenses and other current assets 56,255 Total current assets 64,480 Land and Building, net 2,386,956 Other assets, net 55,693 Total assets $ 2,505,529 Current portion of mortgage payable $ 38,353 Other current liabilities 38,448 Total current liabilities 76,801 Mortgage payable, long-term 1,994,886 Total liabilities 2,071,687 Total equity 433,842 Total liabilities and equity $ 2,505,529 Rental income $ 63,211 Expenses: Property taxes 6,646 Depreciation and amortization 11,446 Insurance 2,033 Repairs and maintenance 5,349 Other 10,087 Interest expense 32,355 Total expenses 67,916 Net loss $ (4,705 ) |
NOTE PAYABLE - UNDIVIDED INTE26
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Future principal payments for Company's portion of SBA Note | Twelve months ending March 31, Amount 2019 $ 18,793 2020 19,795 2021 21,173 2022 23,865 2023 25,195 Thereafter 887,466 Total $ 996,287 |
CONVERTIBLE NOTES PAYABLE (Tabl
CONVERTIBLE NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Roll-forward of Company's convertible notes and related discounts | Convertible notes $ 558,600 Unamortized note discounts (283,216 ) Balance at March 31, 2018 $ 275,834 |
Summary of convertible notes payable balance | Principal Balance Debt Discounts Total Balance at January 1, 2018 $ 378,800 $ (292,073 ) $ 86,727 New issuances 218,300 (101,409 ) 116,891 Cash payments (38,500 ) — (38,500 ) Amortization — 110,266 110,266 Balance at March 31, 2018 $ 558,600 $ (283,216 ) $ 275,384 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Notes to Financial Statements | |
Summary of activity related to derivative liabilities | March 31, 2018 Beginning Balance $ 540,965 Initial Derivative Liability 108,634 Fair Value Change 135,734 Reclassification for principal payments (61,044 ) Ending Balance $ 724,289 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments And Contingencies | |
Future principal payments for Company's portion of lease agreements | For the twelve months ending March 31, Amount 2019 $ 144,000 2020 144,000 2021 144,000 2022 72,000 Total $ 504,000 |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | 3 Months Ended | 48 Months Ended | ||
Mar. 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 | 160,000 | |||
Additional payment received for cancellation of Store Expansion Agreement and marketing agreement | ||||
Income recognized | $ 30,000 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Concentration of customer revenues and accounts receivable balance (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Customer A, related | ||
Revenue concentration | 51.30% | |
Accounts receivable balance | $ 97,804 | |
Customer B | ||
Revenue concentration | 24.40% | |
Accounts receivable balance | ||
Customer C | ||
Revenue concentration | 90.00% | |
Accounts receivable balance |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Property and equipment (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Summary Of Significant Accounting Principles - Property And Equipment | ||
Computer equipment | $ 2,651 | $ 2,651 |
Accumulated depreciation | (1,289) | (1,068) |
Balance | $ 1,362 | $ 1,583 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Financial instruments measured at fair value on a recurring basis (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Derivative liability | $ 724,289 | $ 540,965 |
Level I | ||
Derivative liability | ||
Level II | ||
Derivative liability | ||
Level III | ||
Derivative liability | $ 724,289 | $ 540,965 |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Summary Of Significant Accounting Principles Details Narrative Abstract | |||
Allowance for uncollectible receivables | $ 63,799 | $ 63,799 | |
Advertising expenses | 25,321 | ||
Payments for intangible assets, domain name | (3,000) | ||
Depreciation expense | (211) | $ (211) | |
Allocated portion of net income (loss) from investment in undivided interest in real estate | (2,305) | ||
Carrying value of equity method investment | $ 1,222,598 | $ 1,224,903 | |
Antidilutive shares excluded from computation of earnings per share | 18,095,361 |
GOING CONCERN AND MANAGEMENT'35
GOING CONCERN AND MANAGEMENT'S PLANS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Going Concern And Managements Plans | ||
Net losses from continuing operations | $ (697,943) | |
Working capital deficit | (2,310,296) | |
Accumulated deficit | $ (2,484,955) | $ (1,787,012) |
ADVANCES PAYABLE, SHAREHOLDER36
ADVANCES PAYABLE, SHAREHOLDERS - Advances from shareholders (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Chief Executive Officer | ||
Beginning Balance | $ 138,637 | |
Amounts paid on Company's behalf | 100,387 | 149,370 |
Reimbursements | (87,385) | (10,733) |
Ending Balance | 151,639 | 138,637 |
Director | ||
Beginning Balance | 38,201 | |
Amounts paid on Company's behalf | 17,920 | 39,201 |
Reimbursements | (20,000) | (1,000) |
Ending Balance | $ 36,121 | $ 38,201 |
NOTE PAYABLE, STOCKHOLDER AND37
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE - Amounts loaned by stockholder (Details) - Chief Executive Officer - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Beginning Balance | $ 65,000 | |
Amounts loaned to the Company | 27,500 | 65,000 |
Repaid | (1,000) | |
Ending Balance | $ 91,500 | $ 65,000 |
NOTE PAYABLE, STOCKHOLDER AND38
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE (Details Narrative) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Payables and Accruals [Abstract] | |
Business Loan Agreement with third party, principal amount | $ 43,358 |
Business Loan Agreement, proceeds received | 32,600 |
Required monthly payments of principal and interest, first six months | 4,102 |
Required monthly payments of principal and interest, second six months | $ 3,124 |
RELATED PARTY TRANSACTIONS - Ex
RELATED PARTY TRANSACTIONS - Expenses to officers (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Expenses recorded to officers | $ 86,538 | $ 87,500 |
Chief Executive Officer | ||
Expenses recorded to officers | 56,250 | 56,250 |
Chief Financial Officer | ||
Expenses recorded to officers | $ 30,289 | $ 31,250 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Aug. 11, 2016 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2013 |
Loans to President | $ 20,500 | ||||||
Interest income recorded | $ 64 | ||||||
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 | $ 22,548 | ||||
LLC1 Marketing Agreement per store monthly service revenue | 2,500 | ||||||
Revenues from LLC1 Marketing Agreement | 15,000 | 5,000 | |||||
Amounts invoiced to LLC1 for Company's production, printing and mailing services | 12,421 | ||||||
Amounts invoiced to LLC1 for Company's sale of products | 1,275 | ||||||
Amounts owed to Company by LLC1 | 97,804 | 73,996 | |||||
Expenses related to LLC1 lease | 36,000 | ||||||
Amounts paid to LLC2 by Company for consulting services | 771,000 | 375,000 | |||||
Amounts expensed by LLC2 for services performed | 300,000 | 241,667 | |||||
Amounts recorded as deferred commissions - stockholder | $ 133,334 | ||||||
Write-off of remainder due to Company due to uncertainty of future services being provided | 508,334 | 508,334 | |||||
MFHC (1) | |||||||
Rent expenses | 1,500 | 1,500 | |||||
Monthly rent per sublease agreement with MFHC | $ 1,500 | ||||||
Chief Executive Officer | |||||||
Officer compensation, annual base salary | 225,000 | ||||||
Officer compensation, unpaid wages owed | 38,324 | 4,327 | |||||
Chief Financial Officer | |||||||
Officer compensation, annual base salary | $ 125,000 | ||||||
Officer compensation, unpaid wages owed | $ 56,868 | $ 40,385 |
INVESTMENT IN UNDIVIDED INTER41
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE - Condensed balance sheet and condensed statement of operations for the real property (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Current assets: | |
Cash and cash equivalents | $ 5,626 |
Accounts receivable, net | 3,000 |
Prepaid expenses and other current assets | 56,255 |
Total current assets | 64,480 |
Land and Building, net | 2,386,956 |
Other assets, net | 55,693 |
Total assets | 2,505,529 |
Current portion of mortgage payable | 38,353 |
Other current liabilities | 38,448 |
Total current liabilities | 76,801 |
Mortgage payable, long-term | 1,994,886 |
Total liabilities | 2,071,687 |
Total equity | 433,842 |
Total liabilities and equity | 2,505,529 |
Rental income | 63,211 |
Expenses: | |
Property taxes | 6,646 |
Depreciation and amortization | 11,446 |
Insurance | 2,033 |
Repairs and maintenance | 5,349 |
Other | 10,087 |
Interest expense | 32,355 |
Total expenses | 67,916 |
Net loss | $ (4,705) |
INVESTMENT IN UNDIVIDED INTER42
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | May 09, 2017 | |
Real Estate [Abstract] | ||||
Purchase price of building | $ 2,420,000 | |||
Amount paid at closing | $ 2,501,783 | |||
Cash delivered at closing | 209,971 | |||
Note amount on which Company is co-borrower | 2,057,000 | |||
Amount of note Company has agreed to pay | $ 1,007,930 | |||
Net income (loss) from equity method investment | (2,305) | |||
Carrying value of equity method investment | $ 1,222,598 | $ 1,224,903 |
NOTE PAYABLE - UNDIVIDED INTE43
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE - Future principal payments for Company's portion of SBA Note (Details) | Mar. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
2,019 | $ 18,793 |
2,020 | 19,795 |
2,021 | 21,173 |
2,022 | 23,865 |
2,023 | 25,195 |
Thereafter | 887,466 |
Total | $ 996,287 |
NOTE PAYABLE - UNDIVIDED INTE44
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
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 | 18,793 |
Long term portion of SBA Note | $ 977,494 |
CONVERTIBLE NOTES PAYABLE - Rol
CONVERTIBLE NOTES PAYABLE - Roll-forward of Company's convertible notes and related discounts (Details) - Total | Mar. 31, 2018USD ($) |
Convertible notes | $ 558,600 |
Unamortized note discounts | (283,216) |
Ending balance | $ 275,834 |
CONVERTIBLE NOTES PAYABLE - Sum
CONVERTIBLE NOTES PAYABLE - Summary of convertible notes payable balance (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Principal Balance | |
Beginning balance | $ 378,800 |
New issuances | 218,300 |
Cash payments | (38,500) |
Amortization | |
Ending balance | 558,600 |
Debt Discounts | |
Beginning balance | (292,073) |
New issuances | (101,409) |
Cash payments | |
Amortization | 110,266 |
Ending balance | (283,216) |
Total | |
Beginning balance | 86,727 |
New issuances | 116,891 |
Cash payments | (38,500) |
Amortization | 110,266 |
Ending balance | $ 275,384 |
CONVERTIBLE NOTES PAYABLE (Deta
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 3 Months Ended | |||||||||
Mar. 31, 2018 | Mar. 27, 2018 | Mar. 26, 2018 | Mar. 02, 2018 | Feb. 08, 2018 | Feb. 01, 2018 | 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 | 12,994 | |||||||||
Debt issue discount recorded | 3,000 | |||||||||
Debt issue discount amortized to interest expense | 967 | |||||||||
Note balance | 48,000 | |||||||||
Carrying value | 32,157 | |||||||||
Unamortized discounts | 15,843 | |||||||||
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 | 66,668 | |||||||||
Original issue discount recorded | 49,000 | |||||||||
Debt issue discount recorded | 49,000 | |||||||||
Debt issue discount amortized to interest expense | 13,067 | |||||||||
Principal payments made | (38,500) | |||||||||
Note balance | 242,300 | $ 280,800 | ||||||||
Carrying value | 72,568 | |||||||||
Unamortized discounts | 169,732 | |||||||||
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 liability | 13,207 | |||||||||
Amortization of debt discount | 3,302 | |||||||||
Note balance | 50,000 | |||||||||
Carrying value | 40,498 | |||||||||
Unamortized discounts | $ 9,502 | |||||||||
Convertible Notes Payable (4) | ||||||||||
Principal amount | $ 35,000 | |||||||||
Interest rate | 10.00% | |||||||||
Due date | Feb. 1, 2019 | |||||||||
Initial debt discount | $ 9,554 | |||||||||
Initial derivative liability | 9,554 | |||||||||
Amortization of debt discount | 1,592 | |||||||||
Note balance | 35,000 | |||||||||
Carrying value | 27,038 | |||||||||
Unamortized discounts | 7,962 | |||||||||
Convertible Notes Payable (5) | ||||||||||
Principal amount | $ 58,300 | |||||||||
Interest rate | 12.00% | |||||||||
Net proceeds received | $ 50,000 | |||||||||
Transaction costs, fees, and expenses | $ 8,300 | |||||||||
Due date | Nov. 8, 2018 | |||||||||
Initial debt discount | $ 50,000 | |||||||||
Initial derivative expense | 15,525 | |||||||||
Initial derivative liability | 65,525 | |||||||||
Amortization of debt discount | 8,912 | |||||||||
Debt issue discount recorded | 8,300 | |||||||||
Debt issue discount amortized to interest expense | 1,480 | |||||||||
Note balance | 58,300 | |||||||||
Carrying value | 10,392 | |||||||||
Unamortized discounts | $ 47,908 | |||||||||
Convertible Notes Payable (6) | ||||||||||
Principal amount | $ 50,000 | |||||||||
Interest rate | 10.00% | |||||||||
Due date | Mar. 2, 2019 | |||||||||
Initial debt discount | $ 13,399 | |||||||||
Initial derivative liability | 3,399 | |||||||||
Amortization of debt discount | 1,117 | |||||||||
Note balance | 50,000 | |||||||||
Carrying value | 37,718 | |||||||||
Unamortized discounts | $ 12,282 | |||||||||
Convertible Notes Payable (7) | ||||||||||
Principal amount | $ 50,000 | |||||||||
Interest rate | 10.00% | |||||||||
Due date | Mar. 26, 2019 | |||||||||
Initial debt discount | $ 13,420 | |||||||||
Initial derivative liability | 13,420 | |||||||||
Amortization of debt discount | 112 | |||||||||
Note balance | 50,000 | |||||||||
Carrying value | 36,692 | |||||||||
Unamortized discounts | $ 13,308 | |||||||||
Convertible Notes Payable (8) | ||||||||||
Principal amount | $ 25,000 | |||||||||
Interest rate | 10.00% | |||||||||
Due date | Mar. 27, 2019 | |||||||||
Initial debt discount | $ 6,736 | |||||||||
Initial derivative liability | 6,736 | |||||||||
Amortization of debt discount | 56 | |||||||||
Note balance | 25,000 | |||||||||
Carrying value | 18,320 | |||||||||
Unamortized discounts | $ 6,680 |
DERIVATIVE LIABILITIES - Summar
DERIVATIVE LIABILITIES - Summary of activity related to derivative liabilities (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Notes to Financial Statements | |
Beginning Balance | $ 540,965 |
Initial Derivative Liability | 108,634 |
Fair Value Change | 135,734 |
Reclassification for principal payments | (61,044) |
Ending Balance | $ 724,289 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details Narrative) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Risk free interest rate as of March 31, 2018, minimum | 1.93% |
Risk free interest rate as of March 31, 2018, maximum | 2.09% |
Volatility as of March 31, 2018, minimum | 313.00% |
Volatility as of March 31, 2018, maximum | 518.00% |
Derivative liability expense | $ 151,259 |
Initial derivative expense | 15,525 |
Fair value change | $ 135,734 |
Minimum | |
Risk free interest rate | 1.82% |
Volatility | 303.00% |
Maximum | |
Risk free interest rate | 2.10% |
Volatility | 308.00% |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Future principal payments for Company's portion of lease agreements (Details) | Mar. 31, 2018USD ($) |
Commitments And Contingencies - Future Principal Payments For Companys Portion Of Lease Agreements | |
2,019 | $ 144,000 |
2,020 | 144,000 |
2,021 | 144,000 |
2,022 | 72,000 |
Total | $ 504,000 |
COMMITMENTS AND CONTINGENCIES51
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 4 Months Ended | 10 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2018 | |
Lease Agreements | ||||
Monthly lease amount | $ 12,000 | |||
Rent expense | $ 36,000 | $ 18,372 | ||
Marketing Services Agreement (MSA) | ||||
Consulting Agreements | ||||
Monthly compensation expense | $ 5,000 | |||
Monthly stock compensation, value | 5,000 | |||
Consulting expense recorded | 15,000 | |||
Stock-based compensation expense from issuance of common shares | $ 7,778 | |||
Common stock issued, shares | 111,111 | |||
Common stock to be issued | 266,401 | |||
Stock-based compensation expense | $ 17,184 | |||
Common stock issued previously recorded as to be issued | 102,564 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) | 3 Months Ended |
Mar. 31, 2018USD ($)shares | |
Issued to consultant (1) | |
Common stock issued, shares | 111,111 |
Common stock issued, value | $ | $ 7,778 |
Issued to consultant (2) | |
Common stock issued, shares | 10,397 |
Common stock issued, value | $ | $ 728 |
Previously classified as to be issued | |
Common stock issued, shares | 102,564 |
To be issued to marketing consultant (1) | |
Common stock to be issued, shares | 133,067 |
Stock compensation expense recorded | $ | $ 8,117 |
To be issued to marketing consultant (2) | |
Common stock to be issued, shares | 133,333 |
Stock compensation expense recorded | $ | $ 9,067 |
SUBSEQUENT EVENT (Details Narra
SUBSEQUENT EVENT (Details Narrative) - USD ($) | May 16, 2018 | Apr. 19, 2018 | Apr. 11, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | May 11, 2018 | Apr. 08, 2018 |
Convertible promissory note, proceeds received | $ 210,000 | ||||||
Common stock issued in satisfaction of conversion of convertible debt principal, shares | 549,451 | ||||||
Common stock issued in satisfaction of conversion of convertible debt principal, amount | $ 10,000 | ||||||
Convertible Note (1) | |||||||
Convertible promissory note, principal amount | $ 95,450 | ||||||
Convertible promissory note, interest rate | 10.00% | ||||||
Convertible promissory note, proceeds received | $ 75,000 | ||||||
Convertible promissory note, due date | Jul. 8, 2019 | ||||||
Daily ACH payments required | $ 375 | ||||||
Convertible Note (2) | |||||||
Convertible promissory note, principal amount | $ 100,000 | ||||||
Convertible promissory note, interest rate | 19.00% | ||||||
Convertible promissory note, proceeds received | $ 75,825 | ||||||
Convertible promissory note, due date | May 11, 2019 |