Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 28, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | INNERSCOPE HEARING TECHNOLOGIES, INC. | |
Entity Central Index Key | 0001609139 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Entity Incorporation, State or Country Code | NV | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 333-209341 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Interactive Data Current | Yes | |
Is Entity Emerging Growth Company? | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 197,577,017 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash | $ 5,017 | $ 87,826 |
Accounts receivable, allowance for doubtful accounts $18,383 | 22,568 | 6,112 |
Accounts receivable from related party | 283,064 | 203,325 |
Employee advances | 59,721 | 40,942 |
Prepaid expenses | 107,503 | 167,992 |
Inventory | 118,331 | 91,510 |
Total current assets | 596,204 | 597,707 |
Security deposits | 34,537 | 11,056 |
Domain name | 3,000 | 3,000 |
Intangible assets, net of accumulated amortization of $80,420 (2019) and $2,168 (2018) | 932,588 | 1,010,840 |
Property and equipment, net of accumulated depreciation of $12,587 (2019) and $4,705 (2018) | 81,833 | 43,450 |
Operating leases right-of-use assets, net | 1,302,184 | |
Investment in undivided interest in real estate | 1,231,779 | 1,226,963 |
Total assets | 4,182,125 | 2,893,014 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,092,778 | 1,233,653 |
Accounts payable to related party | 22,548 | 22,548 |
Notes payable - stockholder | 95,800 | 95,800 |
Advances payable, stockholders | 63,642 | 57,526 |
Convertible notes payable, net of discounts | 958,827 | 151,166 |
Current portion of notes payable, net of deferred loan fees | 28,721 | 29,270 |
Current portion of note payable - undivided interest in real estate | 20,096 | 19,660 |
Customer deposits | 71,409 | 56,698 |
Officer salaries payable | 156,201 | 188,942 |
Income taxes payable | 23,998 | 23,998 |
Derivative liabilities | 3,082,068 | 1,807,404 |
Operating lease liabilities, current portion | 323,209 | |
Total current liabilities | 5,939,297 | 3,686,665 |
Long term portion of note payable- undivided interest in real estate | 956,542 | 964,847 |
Operating lease liabilities, less current portion | 994,739 | |
Total liabilities | 7,890,578 | 4,651,512 |
Commitments and contingencies | ||
Stockholders' Deficit: | ||
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; Series A preferred stock, par value $0.0001, 9,510,000 shares authorized and -0- shares issued and outstanding; Series B preferred stock, par value $0.0001, 900,000 shares authorized and issued and outstanding | 90 | 90 |
Common stock, $0.0001 par value; 490,000,000 shares authorized; 161,826,468 (2019) and 120,425,344 (2018) shares issued and outstanding, respectively | 16,182 | 12,042 |
Common stock to be issued, $0.0001 par value, 2,881,316 (2019) and 6,373,848 (2018) shares, respectively | 288 | 637 |
Additional paid-in capital | 6,397,967 | 4,836,557 |
Deferred stock compensation | (242,402) | (235,694) |
Accumulated deficit | (9,880,578) | (6,372,129) |
Total stockholders' deficit | (3,708,453) | (1,758,498) |
Total liabilities and stockholders' deficit | $ 4,182,125 | $ 2,893,014 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Accumulated depreciation of property, furniture and fixtures and equipment | $ (12,587) | $ (4,705) |
Allowance for doubtful accounts of accounts receivable | (18,383) | (18,383) |
Accumulated amortization of intangible assets | $ (80,420) | $ (2,168) |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 490,000,000 | 225,000,000 |
Common stock, shares issued | 161,826,468 | 120,425,344 |
Common stock, shares outstanding | 161,826,468 | 120,425,344 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 900,000 | 900,000 |
Preferred stock, shares outstanding | 900,000 | 900,000 |
Common stock to be issued, shares | 2,881,316 | 6,373,848 |
Series A Preferred Stock | ||
Preferred stock, shares authorized | 9,150,000 | 9,150,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Series B Preferred Stock | ||
Preferred stock, shares authorized | 900,000 | 900,000 |
Preferred stock, shares issued | 900,000 | 900,000 |
Preferred stock, shares outstanding | 900,000 | 900,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues: | ||||
Revenues | $ 219,673 | $ 26,691 | $ 391,202 | $ 53,972 |
Revenues, related party | 23,323 | 15,000 | 52,019 | |
Total revenues | 219,673 | 50,014 | 406,202 | 105,991 |
Cost of sales | ||||
Cost of sales | 99,463 | 24,477 | 181,827 | 49,258 |
Cost of sales, related | 7,325 | 21,408 | ||
Total cost of sales | 99,463 | 31,802 | 181,827 | 70,666 |
Gross profit | 120,210 | 18,212 | 224,375 | 35,325 |
Operating Expenses: | ||||
Compensation and benefits (including stock- based fees of $35,917 and $50,000 for the three and six months ended June 30, 2019 and $772,600 for the three and six months ended June 30, 2018) | 435,086 | 925,767 | 798,823 | 1,085,306 |
Advertising and promotion | 143,800 | 66,007 | 311,584 | 91,328 |
Professional fees (including stock- based fees of $197,876 and $308,292 for three and six months ended June 30, 2019 and $21,327 and $64,240 for three and six months ended June 30, 2018) | 239,923 | 115,419 | 377,317 | 230,906 |
Rent (including related party of $36,000 for three months ended June 30, 2019 and 2018 and $72,000 for six months ended June 30, 2019 and 2018 | 98,133 | 36,000 | 194,062 | 72,000 |
Investor relations | 89,528 | 23,778 | 164,776 | 76,419 |
Other general and administrative | 132,487 | 6,073 | 269,126 | 47,316 |
Total operating expenses | 1,138,958 | 1,173,044 | 2,115,689 | 1,603,274 |
Loss from operations | (1,018,748) | (1,154,832) | (1,891,314) | (1,567,949) |
Other Expense: | ||||
Derivative (income) expense | 235,478 | (518,711) | (342,360) | (669,970) |
Gain on investment in undivided interest in real estate | 5,856 | 3,046 | 4,816 | 741 |
Gain (loss) on debt extinguishment | 459 | (44,393) | ||
Interest expense and finance charges | (728,456) | (182,528) | (1,235,198) | (313,792) |
Total other expense, net | (486,664) | (698,193) | (1,617,135) | (983,020) |
Net loss | $ (1,505,411) | $ (1,853,025) | $ (3,508,449) | $ (2,550,969) |
Basic and diluted loss per share | $ (0.01) | $ (0.03) | $ (0.02) | $ (0.04) |
Weighted average number of common shares outstanding Basic and diluted | 155,732,524 | 57,711,814 | 145,156,477 | 59,761,633 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Stock-based fees included in compensation and benefits | $ 35,917 | $ 772,600 | $ 50,000 | $ 772,600 |
Stock based fees included in professional fees | 197,876 | 21,327 | 308,292 | 64,240 |
Rent expense, related party | $ 36,000 | $ 36,000 | $ 72,000 | $ 72,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) | Series A Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock To Be Issued | Additional Paid-in Capital | Deferred Stock Compensation | Retained Deficit | Total |
Beginning balance, shares at Dec. 31, 2017 | 61,539,334 | 102,564 | ||||||
Beginning balance, amount at Dec. 31, 2017 | $ 6,153 | $ 10 | $ 331,227 | $ (25,000) | $ (1,787,012) | $ (1,474,623) | ||
Stock based compensation, shares | 224,072 | 266,401 | ||||||
Stock based compensation, amount | $ 23 | $ 27 | 25,640 | 25,000 | 50,690 | |||
Stock issued from common stock to be issued, shares | (102,564) | |||||||
Stock issued from common stock to be issued, amount | $ (10) | 10 | ||||||
Reclassification of derivative liabilities upon payment of convertible debt | 61,044 | 61,044 | ||||||
Net loss | (697,945) | (697,945) | ||||||
Ending balance, shares at Mar. 31, 2018 | 61,763,406 | 266,401 | ||||||
Ending balance, amount at Mar. 31, 2018 | $ 6,176 | $ 27 | 417,921 | (2,484,957) | (2,060,834) | |||
Beginning balance, shares at Dec. 31, 2017 | 61,539,334 | 102,564 | ||||||
Beginning balance, amount at Dec. 31, 2017 | $ 6,153 | $ 10 | 331,227 | (25,000) | (1,787,012) | (1,474,623) | ||
Common stock to be issued for settlement of accounts payable, amount | ||||||||
Net loss | (2,550,969) | |||||||
Ending balance, shares at Jun. 30, 2018 | 9,510,000 | 900,000 | 48,956,945 | 814,020 | ||||
Ending balance, amount at Jun. 30, 2018 | $ 951 | $ 90 | $ 4,896 | $ 81 | 1,501,129 | (4,337,982) | (2,830,837) | |
Beginning balance, shares at Mar. 31, 2018 | 61,763,406 | 266,401 | ||||||
Beginning balance, amount at Mar. 31, 2018 | $ 6,176 | $ 27 | 417,921 | (2,484,957) | (2,060,834) | |||
Stock based compensation, shares | 547,619 | |||||||
Stock based compensation, amount | $ 55 | 13,495 | 13,550 | |||||
Issuance of Series B preferred stock, shares | 900,000 | |||||||
Issuance of Series B preferred stock, amount | $ 90 | 817,510 | 817,600 | |||||
Common stock issued or to be issued for convertible notes, shares | 6,213,539 | |||||||
Common stock issued or to be issued for convertible notes, amount | $ 621 | 68,749 | 69,370 | |||||
Common stock shares cancelled in exchange for Series A preferred stock, shares | 9,510,000 | (19,020,000) | ||||||
Common stock shares cancelled in exchange for Series A preferred stock, amount | $ 951 | $ (1,902) | 951 | |||||
Reclassification of derivative liabilities upon payment of convertible debt | 182,502 | 182,502 | ||||||
Net loss | (1,853,025) | (1,853,025) | ||||||
Ending balance, shares at Jun. 30, 2018 | 9,510,000 | 900,000 | 48,956,945 | 814,020 | ||||
Ending balance, amount at Jun. 30, 2018 | $ 951 | $ 90 | $ 4,896 | $ 81 | 1,501,129 | (4,337,982) | (2,830,837) | |
Beginning balance, shares at Dec. 31, 2018 | 900,000 | 120,425,344 | 6,373,848 | |||||
Beginning balance, amount at Dec. 31, 2018 | $ 90 | $ 12,042 | $ 637 | 4,836,556 | (235,694) | (6,372,129) | (1,758,498) | |
Stock based compensation, shares | 870,826 | 113,637 | ||||||
Stock based compensation, amount | $ 87 | $ 11 | 26,485 | 97,917 | 124,499 | |||
Stock issued from common stock to be issued, shares | 3,550,893 | (3,550,893) | ||||||
Stock issued from common stock to be issued, amount | $ 355 | $ (355) | ||||||
Common stock issued for convertible notes and accrued interest, shares | 24,741,320 | |||||||
Common stock issued for convertible notes and accrued interest, amount | $ 2,474 | 282,792 | 285,266 | |||||
Common stock to be issued for settlement of accounts payable, shares | 625,000 | |||||||
Common stock to be issued for settlement of accounts payable, amount | $ 63 | 40,563 | 40,624 | |||||
Reclassification of derivative liabilities upon payment of convertible debt | 580,908 | 580,908 | ||||||
Net loss | (2,003,038) | (2,003,038) | ||||||
Ending balance, shares at Mar. 31, 2019 | 900,000 | 149,588,383 | 3,561,592 | |||||
Ending balance, amount at Mar. 31, 2019 | $ 90 | $ 14,958 | $ 356 | 5,767,304 | (137,777) | (8,375,167) | (2,730,236) | |
Beginning balance, shares at Dec. 31, 2018 | 900,000 | 120,425,344 | 6,373,848 | |||||
Beginning balance, amount at Dec. 31, 2018 | $ 90 | $ 12,042 | $ 637 | 4,836,556 | (235,694) | (6,372,129) | (1,758,498) | |
Common stock to be issued for settlement of accounts payable, amount | 389,738 | |||||||
Net loss | (3,508,449) | |||||||
Ending balance, shares at Jun. 30, 2019 | 900,000 | 161,826,468 | 2,881,316 | |||||
Ending balance, amount at Jun. 30, 2019 | $ 90 | $ 16,182 | $ 288 | 6,397,967 | (242,402) | (9,880,578) | (3,708,453) | |
Beginning balance, shares at Mar. 31, 2019 | 900,000 | 149,588,383 | 3,561,592 | |||||
Beginning balance, amount at Mar. 31, 2019 | $ 90 | $ 14,958 | $ 356 | 5,767,304 | (137,777) | (8,375,167) | (2,730,236) | |
Stock based compensation, shares | 4,780,303 | 355,008 | ||||||
Stock based compensation, amount | $ 478 | $ 36 | 337,902 | (270,500) | 67,915 | |||
Amortization of deferred stock compensation | 165,875 | 165,875 | ||||||
Stock issued from common stock to be issued, shares | 410,284 | (410,284) | ||||||
Stock issued from common stock to be issued, amount | $ 41 | $ (41) | ||||||
Common stock issued for settlement of accounts payable, shares | 625,000 | (625,000) | ||||||
Common stock issued for settlement of accounts payable, amount | $ 63 | $ (63) | ||||||
Common stock issued for convertible notes and accrued interest, shares | 6,422,498 | |||||||
Common stock issued for convertible notes and accrued interest, amount | $ 642 | 135,557 | 136,199 | |||||
Reclassification of derivative liabilities upon payment of convertible debt | 157,204 | 157,204 | ||||||
Net loss | (1,505,411) | (1,505,411) | ||||||
Ending balance, shares at Jun. 30, 2019 | 900,000 | 161,826,468 | 2,881,316 | |||||
Ending balance, amount at Jun. 30, 2019 | $ 90 | $ 16,182 | $ 288 | $ 6,397,967 | $ (242,402) | $ (9,880,578) | $ (3,708,453) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (3,508,449) | $ (2,550,969) |
Adjustments to reconcile net loss to net cash used in operations: | ||
Loss on fair value of derivatives | 342,360 | 669,970 |
Amortization of debt discounts | 2,500 | |
Depreciation and amortization | 212,492 | 442 |
Stock compensation expense | 358,292 | 836,840 |
Non cash interest expense | 2,500 | |
Gain on investment in undivided interest in real estate | (4,816) | (741) |
Loss on debt extinguishment | 44,393 | |
Changes in operating assets and liabilities: | ||
Decrease (increase) in Accounts receivable | (16,456) | (2,699) |
Decrease (increase) in Employee advances | (18,779) | |
Decrease (increase) in Inventory | (26,821) | (18,651) |
Decrease (increase) in Prepaid assets | 60,489 | 28,878 |
Decrease (increase) in Accounts receivable, related party | (79,739) | (15,076) |
Increase (decrease) in Accounts payable and accrued expenses | (100,162) | 109,181 |
Increase (decrease) in Officer salaries payable | (32,741) | 135,445 |
Increase (decrease) in Customer deposits | 14,711 | |
Increase (decrease) in Due to related party | (38,946) | |
Increase (decrease) in Operating lease liabilities | (110,586) | |
Net cash used in operating activities | (1,682,111) | (572,621) |
Cash flows from investing activities: | ||
Payment of security deposit | (23,481) | |
Purchase of office and computer equipment | (46,274) | |
Net cash used in investing activities | (69,755) | |
Cash flows from financing activities: | ||
Proceeds from issuance of note payable | 21,000 | 32,600 |
Advances to stockholder, net | 6,116 | 31,200 |
Proceeds from issuances of convertible notes payable, net of debt issuance costs | 1,678,725 | 592,250 |
Repayments of note payable | (36,784) | (20,671) |
Repayments of advances, stockholder | (6,000) | |
Repayments of principal of convertible note payable | (94,725) | |
Net cash provided by financing activities | 1,669,057 | 534,654 |
Net decrease in cash | (82,809) | (37,967) |
Cash, Beginning of period | 87,826 | 84,720 |
Cash, End of period | 5,017 | 46,753 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 11,256 | 16,284 |
Cash paid for income taxes | ||
Schedule of non-cash Investing or Financing Activity: | ||
Reclassification of derivative liabilities upon principal repayments of convertible notes | 738,112 | 243,546 |
Intangible assets in accounts payable | 536,000 | |
Conversion of notes payable and accrued interest in common stock | 389,738 | |
Common stock issued for settlement of accounts payable | 25,000 | |
Operating lease right-of-use assets and liabilities | $ 1,428,534 |
ORGANIZATION
ORGANIZATION | 6 Months Ended |
Jun. 30, 2019 | |
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 model, encompassing; business to business (B2B) solutions, direct to consumer (DTC) sales and marketing and business to consumer (and B2C) solutions. The Company is a manufacturer and a DTC distributor/retailer of FDA (Food and Drug Administration) registered hearing aids, personal sound amplifier products (“PSAP’s”), hearing related treatment therapies doctor-formulated dietary hearing supplements and proprietary CDB oil for treating tinnitus. The Company also owns and operates audiological and retail hearing device clinics and plans to continue to open and acquire additional clinics. As of the date of this filing, the Company owns nine retail hearing device clinics in California and manages two additional clinics that are owned by a related party. |
Asset Purchase Acquisition of K
Asset Purchase Acquisition of Kathy L Amos Audiology | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Asset Purchase Acquisition of Kathy L Amos Audiology | NOTE 2 – Asset Purchase Acquisition of Kathy L Amos Audiology Effective September 10, 2018, the Company acquired all of the assets and assumed certain liabilities of Kathy L Amos Audiology (“Amos Audiology”) in exchange for 340,352 shares of common stock (the “Acquisition”). Amos Audiology provides retail hearing aid sales and audiological services in the East Bay area of San Francisco. Based on the fair value of the common stock issued of $22,974 and the assumed liabilities of $33,049, the total purchase consideration was $56,023. The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the acquisition: Purchase Price Allocation Fair value of consideration for Acquisition $ 22,974 Liabilities assumed 33,049 Total purchase consideration $ 56,023 Tangible assets acquired $ 43,016 Intangible assets 13,007 $ 56,023 The total purchase price of $56,023 has been allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values as of the completion of the Acquisition. The fair value of Amos Audiology’s identifiable intangible assets was estimated primarily using the income approach which requires an estimate or forecast of all the expected future cash flows, either through the use of the relief-from-royalty method or the multi-period excess earnings method. The Company determined the identifiable intangible assets, consisting of a customer base and non-compete had fair values of $300 and $12,707, respectively. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | NOTE 3 – 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, 2018, filed with the United States Securities and Exchange Commission (the “SEC”) on April 16, 2019. Interim results of operations for the three and six months ended June 30, 2019, and 2018, are not necessarily indicative of future results for the full year. Certain amounts from the 2018 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 for certain accounting standards. 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 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. We held no cash equivalents as of June 30, 2019, and December 31, 2018. Cash 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 expense. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of June 30, 2019, and December 31, 2018, management’s evaluation required the establishment of an allowance for uncollectible receivables of $18,383. Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three and six months ended June 30, 2018. No customer accounted for more than ten percent (10%) of the Company’s revenues for the three and months ended June 30, 2019. Accounts Receivable June 30, 2018 as of 3 months 6 months June 30, % % 2019 Customer A, related 46.6 % 49.1 % $ 283,064 Customer B 27.0 % 25.6 % $ — Inventory Inventory is valued at the lower of cost or net realizable 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. As of June 30, 2019, and December 31, 2018, management’s analysis did not require any provisions to be recognized. 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 sheets. On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds Hearing, Inc., a Delaware corporation (“Zounds”), whereby, Zounds as the Subcontractor will provide design, technology, manufacturing and supply chain services to the Company (see Note 15) for a period of ten years. The Company will pay Zounds One Million ($1,000,000) for the right to use proprietary technology (the “Technology Access Fee”). As of December 31, 2018, the Company has capitalized the $1,000,000 Technology Access Fee as an intangible asset on the condensed consolidated balance sheets. The Technology Access Fee will be amortized over the term of the Agreement. The Company also acquired intangible assets from an asset purchase agreement (see Note 2). 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 Machinery and equipment 5 years Furniture and fixtures 5 years The Company's property and equipment consisted of the following at June 30, 2019, and December 31, 2018: June 30, December 31, Computer equipment $ 4,272 $ 2,651 Machinery and equipment 52,102 31,122 Furniture and fixtures 21,840 2,160 Leasehold improvements 16,206 12,222 Accumulated depreciation (12,587 ) (4,705 ) Balance $ 81,833 $ 43,450 Depreciation expense of $5,032 and $7,882 was recorded for the three and six months ended June 30, 2019, respectively, and $221 and $442, for the three and six months ended June 30, 2018, respectively. Investment in Undivided Interest in Real Estate The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. For the six months ended June 30, 2019 and 2018, the Company recognized a gain of $4,816 and $741, respectively. As of June 30, 2019, and December 31, 2018, the carrying value of the Company’s investment in undivided interest in real estate was $1,231,779 and $1,226,963 respectively (see Note 11). 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 June 30, 2019 and December 31, 2018, for each fair value hierarchy level: June 30, 2019 Derivative Liabilities Total Level I $ — $ — Level II $ — $ — Level III $ 3,082,068 $ 3,082,068 December 31, 2018 Level I $ — $ — Level II $ — $ — Level III $ 1,807,404 $ 1,807,404 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 w ould 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 Effective January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. 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, generally upon delivery or has services are provided. As of June 30, 2019, the Company had received $71,409 of customer deposits, that will be recognized as revenue after June 30, 2019, when the hearing aids are delivered to the customer. 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. Advertising and Marketing Expenses The Company expenses advertising and marketing costs as incurred. For the three and six months ended June 30, 2019, advertising and marketing expenses were $143,800 and $311,584, respectively, and for the three and six months ended June 30, 2018, advertising and marketing expenses were $66,007 and $91,328, respectively. Leases Effective January 1, 2019, the Company began accounting for leases under ASU 2016-02 (see Note 14). Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the condensed consolidated balance sheets. The Company leases an office space and several retail locations used to conduct our business. On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. Operating lease ROU assets represent the right to use the leased asset for the lease term 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 June 30, 2019, and 2018, the Company’s outstanding convertible debt is convertible into approximately 155,394,444 and 90,570,304 shares of common stock, subject to adjustment based on changes in the Company’s stock price, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. Recent Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-11 “Earnings Per Share (Topic 260)”. The amendments in the update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. The amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted. The Company adopted this pronouncement as of fiscal 2017. In June 2018, the FASB issued ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company does not anticipate this ASU having a material impact on the Company’s financial statements. In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements. Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
GOING CONCERN AND MANAGEMENT'S
GOING CONCERN AND MANAGEMENT'S PLANS | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN AND MANAGEMENT'S PLANS | NOTE 4 – GOING CONCERN AND MANAGEMENT’S PLANS The accompanying unaudited condensed 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 $3,508,499 for the six months ended June 30, 2019. At June 30, 2019, the Company had a working capital deficit of $5,343,093, and an accumulated deficit of $9,880,578. 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. Management’s Plans The Company continues to implement an industry encompassing revenue strategy, including the current revenue model to other major sectors of the global hearing industry. On September 10, 2018, the Company acquired all of the assets and assumed certain liabilities of Amos Audiology (see Note 2). This transaction is part of management’s plans to expand the Company’s retail clinic business by opening multiple clinics in the next 12 months. During the six months ended June 30, 2019, the Company opened 5 more retail clinics, and opened another clinic in July 2019. The Company currently owns and operates 9 clinics. |
INTANGIBLE ASSETS, NET (OTHER T
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) | NOTE 5 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) The Company’s intangible assets consist of a customer list and non-compete acquired from Amos Audiology (see Note 2) and a Technology Access Fee required to be paid by the Company in connection with a manufacturing design and marketing agreement executed with a supplier (see Note 13). The estimated useful lives of these intangible assets are as follows: Customer list 2 years Non-compete 2 years Technology access fee 10 years The Company's intangible assets consisted of the following at June 30, 2019, and December 31, 2018: June 30, December 31, Customer list $ 300 $ 300 Non-compete 12,708 12,708 Technology access fee 1,000,000 1,000,000 Amortization (80,420 ) (2,168 ) Balance $ 932,588 $ 1,010,840 The Company recognized $26,626 and $78,252 of amortization expense for the three and six months ended June 30, 2019, respectively. |
ADVANCES PAYABLE, SHAREHOLDERS
ADVANCES PAYABLE, SHAREHOLDERS | 6 Months Ended |
Jun. 30, 2019 | |
Advances Payable Shareholders | |
ADVANCES PAYABLE, SHAREHOLDERS | NOTE 6 – ADVANCES PAYABLE, STOCKHOLDER Chief Executive Officer A summary of the activity for the six months ended June 30, 2019, and the year ended December 31, 2018, representing amounts paid by the Company’s CEO (stockholder) on behalf of the Company and amounts reimbursed is as follows. June 30, 2019 December 31, 2018 Beginning Balance $ 57,526 $ 138,637 Amounts paid on Company’s behalf 367,831 589,524 Amount applied to accrued officer salaries 17,228 — Reimbursements (378,943 ) (625,635 ) Cancelled in exchange for Series B preferred stock — (45,000 ) Ending Balance $ 63,642 $ 57,526 The ending balances as of June 30, 2019, and December 31, 2018, are included in Advances payable, stockholder on the condensed consolidated balance sheets included herein. |
NOTE PAYABLE, STOCKHOLDER AND N
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE | NOTE 7 – NOTE PAYABLE, STOCKHOLDER A summary of the activity for the three months ended June 30, 2019, and the year ended December 31, 2018, of amounts the Company’s CEO (stockholder) loaned the Company and amounts repaid is as follows: June 30, December 31, Beginning Balance $ 95,800 $ 65,000 Amounts loaned to the Company — 36,800 Repaid — — Ending Balance $ 95,800 $ 95,800 The ending balance amount is due on demand, carries interest at 8% per annum and is included Notes payable, stockholder on the consolidated balance sheets included herein. NOTE 8 – NOTE PAYABLE On October 8, 2018, the Company entered into a Business Loan Agreement (the “October BLA”) for $47,215 with a third- party, whereby the Company received $35,500 on October 10, 2018. The October BLA requires the Company to make the first six monthly payments of principal and interest of $4,467 per month, and then $3,402 for months seven through twelve. The note carries a 33% interest rate and matures on October 28, 2019. As of June 30, 2019, and December 31, 2018, there was a balance of $17,010 and $38,280, respectively, on the October BLA, with carrying values of $13,641 and $29,270, respectively, net of unamortized discounts of $3,379 and $9,011, respectively. On February 4, 2019, the Company entered into a Business Loan Agreement (the “Feb 2019 BLA”) for $8,584 with a third- party, whereby the Company received $7,400 on February 5, 2019. The Feb 2019 BLA requires the Company to make the first two monthly payments of principal and interest of $1,640 per month, and then $1,326 for months three through six. The note carries a 16% interest rate and matures on August 4, 2019. As of June 30, 2019, there was a balance of $2,653, with a carrying value of $2,455, net of unamortized discounts of $198. On May 7, 2019, the Company entered into a Business Loan Agreement (the “May 2019 BLA”) for $18,088 with a third- party, whereby the Company received $13,600 on May 7, 2019. The May 2019 BLA requires the Company to make the first six monthly payments of principal and interest of $1,711 per month, and then $1,303 for months seven through twelve. The note carries a 33% interest rate and matures on May 7, 2020. As of June 30, 2019, there was a balance of $16,377, with a carrying value of $12,625, net of unamortized discounts of $3,752. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS During the six months ended June 30, 2019, and the year ended December 31, 2018, our CEO (stockholder) paid expenses and accounts payable on behalf of the Company (see Note 6). As of June 30, 2019, and December 31, 2018, the Company owed the CEO $63,642 and $57,526, respectively, which is included in Advances payable, stockholder on the condensed consolidated balance sheets 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. The Company has offset the accounts receivable owed from MFHC for these services with 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 June 30, 2019, and December 31, 2018, was $22,548, which is included in Accounts payable, related party, on the condensed consolidated balance sheets included herein. 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 and six months ended June 30, 2019, and 2018, the Company recorded expenses to its officers in the following amounts: Three months ended June 30, Six months ended June 30, Description 2019 2018 2019 2018 CEO $ 56,250 $ 56,250 $ 112,500 $ 112,500 CFO 31,250 31,251 62,500 61,540 Total $ 87,500 $ 87,501 $ 175,000 $ 174,040 As of June 30, 2019, and December 31, 2018, the Company in the aggregate owes the CEO and CFO $156,201 and $188,942, 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 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 and six months ended June 30, 2019, and 2018, the Company expensed $36,000 and $72,000, respectively, related to this lease and is included in Rent, on the condensed consolidated statement of operations, included herein. As of June 30, 2019, and December 31, 2018, the Company owed LLC1 $50,300 and $30,500, respectively, for unpaid rent. 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 10). |
INVESTMENT IN UNDIVIDED INTERES
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | 6 Months Ended |
Jun. 30, 2019 | |
Real Estate [Abstract] | |
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE | NOTE 10– 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 condensed consolidated statements of operations. For the three and six months ended June 30, 2019, a gain of $5,856 and $4,816, respectively, and a net gain of $3,046 and $741, for the three and six months ended June 30, 2018, respectively, is included in “Other income (expense), net”. As of June 30, 2019, and December 31, 2018, the carrying value of the Company’s investment in undivided interest in real estate was $1,231,779 and $1,226,963, respectively. The unaudited condensed balance sheets as of June 30, 2019, and December 31, 2018, and the statement of operations for the six months ended June 30, 2019, and 2018, for the real property is as follows: (Unaudited) (Unaudited) Current assets: June 30, 2019 December 31, 2018 Cash $ 380 $ 2,257 Due from InnerScope 50,300 30,500 Prepaid expenses and other current assets 63,530 72,931 Total current assets 114,210 105,958 Land and Building, net 2,332,502 2,354,282 Other Assets, net 49,634 53,323 Total assets $ 2,496,345 $ 2,513,563 Current portion of mortgage payable $ 41,022 $ 40,122 Other current liabilities 47,894 48,551 Total current liabilities 88,916 88,673 Mortgage payable, long-term 1,941,786 1,969,076 Security deposits 13,064 13,064 Total liabilities 2,043,766 2,070,813 Total equity 452,579 442,750 Total liabilities and equity $ 2,496,345 $ 2,513,563 2019 2018 Rental income $ 149,029 $ 63,211 Expenses: Property taxes 4,430 6,646 Depreciation and amortization 21,780 11,446 Insurance 14,130 2,033 Repairs and maintenance 13,916 3,549 Utilities and other 20,703 10,087 Interest expense 64,242 32,355 Total expenses 139,201 67,916 Net income (loss) $ 9,828 $ (4,705 ) |
NOTE PAYABLE - UNDIVIDED INTERE
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE | NOTE 11– 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 June 30, 2019, the current and long-term portion of the SBA Note is $20,096 and $956,542, respectively. Future principal payments for the Company’s portion are: Twelve months ending June 30, Amount 2020 $ 20,096 2021 21,495 2022 22,870 2023 24,228 2024 25,579 Thereafter 862,370 Total $ 976,638 |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTES PAYABLE | NOTE 12– CONVERTIBLE NOTES PAYABLE 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 was 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 $13,399. For the six months ended June 30, 2019, amortization of the debt discount of $2,233 was charged to interest expense. During the six months ended June 30, 2019, the investor converted $50,000 of principal and $2,514 of interest into 2,236,291 shares of common stock. As of June 30, 2019, and December 31, 2018, the note balance was $-0- and $50,000, respectively, with a carrying value of $47,767 at December 31, 2018, net of unamortized discounts of $2,333. 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 was 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 six months ended June 30, 2019, amortization of the debt discount of $1,628 was charged to interest expense. On April 29, 2019 the Note was sold to a third party investor (see below). As of June 30 2019, and December 31, 2018, the note balance is $-0- and $25,000, respectively, with a carrying value of $23,372, net of unamortized discount of $1,628 as of December 31, 2018. 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. The embedded conversion feature included in the note resulted in an initial debt discount of $95,000, an initial derivative expense of $60,635 and an initial derivative liability of $155,635. For the six months ended June 30, 2019, amortization of the debt discount of $17,020 was charged to interest expense. The Company also recorded a debt issue discount of $5,000 and amortized $895 to interest expense for the six months ended June 30, 2019. During the six months ended June 30, 2019, the investor converted $50,000 of principal and $3,564 of interest into 5,539,273 shares of common stock. As of June 30, 2019, and December 31, 2018, the note balance is $-0- and $50,000, respectively, with a December 31, 2018, carrying value of $32,085, net of unamortized discounts of $17,915. On May 23, 2018, the Company issued a convertible promissory note (the “Note”), with a face value of $60,000, with a maturity date of February 22, 2019, and stated interest of 12% 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 65% of the lowest trading price for the 20 days prior to conversion. The note was funded on May 30, 2018, when the Company received proceeds of $57,000, after the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $57,000, an initial derivative expense of $48,033 and an initial derivative liability of $105,033. For the three months ended June 30, 2019, amortization of the debt discount of $11,292 was charged to interest expense. The Company also recorded a debt issue discount of $3,000 and amortized $594 to interest expense for the six months ended June 30, 2019. During the six months ended June 30, 2019, the investor converted $51,275 of principal and $9,838 of interest into 7,909,037 shares of common stock. As of June 30, 2019, and December 31, 2018, the note balance was $-0- and $51,275, respectively, with a carrying value of $39,389, net of unamortized discounts of $11,886 at December 31, 2018. On October 23, 2018, an investor funded the $50,000 remaining of a convertible promissory note (the “Note”) issued on June 26, 2018, with an original face value of $92,000, maturing on September 26, 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. On October 23, 2018, the Company recorded a note balance of $50,000 when the Company received proceeds of $50,000. The embedded conversion feature included in the funding of October 23, 2018, resulted in an initial debt discount of $50,000, an initial derivative expense of $45,291 and an initial derivative liability of $95,291. For the six months ended June 30, 2019, amortization of the debt discount of $25,230 was charged to interest expense. During the six months ended June 30, 2019, the investor converted $50,000 of principal and $2,397 of interest into 2,495,107 shares of common stock. As of June 30, 2019, and December 31, 2018, the note balance is $-0- and $50,000, respectively, with a carrying value of $12,014, net of unamortized discounts of $37,986, at December 31, 2018. On November 2, 2018, the Company issued a convertible redeemable note with a face value of $280,500 and a back-end convertible redeemable note for $280,500 (the “Notes”), maturing on November 2, 2019, and a stated interest of 8% to a third-party investor. The notes are convertible at any time after funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The first note was funded on November 2, 2018, when the Company received proceeds of $255,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the first note resulted in an initial debt discount of $250,000, an initial derivative expense of $148,544 and an initial derivative liability of $398,544. For the six months ended June 30, 2019, amortization of the debt discount of $125,000 was charged to interest expense. The Company also recorded a debt issue discount of $30,500 and amortized $15,250 to interest expense for the six months ended June 30, 2019. During the six months ended June 30, 2019, the investor converted $87,400 of principal and $2,822 of interest into 7,837,442 shares of common stock. As of June 30, 2019, and December 31, 2018, the first note balance is $193,100 and $280,500, respectively, with a carrying value of $99,600 and $46,750, respectively, net of unamortized discounts of $93,500 and $233,750, respectively. On December 26, 2018, the investor partially funded $187,000 of the back-end note, when the Company received proceeds of $166,667, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the partial funding of the back-end note resulted in an initial debt discount of $166,667, an initial derivative expense of $100,081 and an initial derivative liability of $266,748. For the six months ended June 30, 2019, amortization of the debt discount of $97,803 was charged to interest expense. The Company also recorded a debt issue discount of $20,333 and amortized $11,932 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, and December 31, 2018, the partial back-end note balance is $187,000, with carrying values of $112,661 and $2,926, respectively, net of unamortized discounts of $74,339 and $184,074, respectively. On January 29, 2019, the investor funded $93,500, of and completing the back-end note, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the partial funding of the back-end note resulted in an initial debt discount of $75,000, an initial derivative expense of $63,924 and an initial derivative liability of $138,924. For the six months ended June 30, 2019, amortization of the debt discount of $41,178 was charged to interest expense. The Company also recorded a debt issue discount of $10,167 and amortized $5,582 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the second partial back-end note balance is $93,500, with carrying values of $55,093, net of unamortized discounts of $38,407. On December 4, 2018, the Company issued a convertible redeemable note (the “Note”) with a face value of $158,333 maturing on December 4, 2019, and a stated interest of 8% to a third-party investor. The note is convertible at any time after funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on December 4, 2018, when the Company received proceeds of $137,250, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $137,500, an initial derivative expense of $87,293 and an initial derivative liability of $224,793. For the six months ended June 30, 2019, amortization of the debt discount of $68,750 was charged to interest expense. The Company also recorded a debt issue discount of $20,833 and amortized $10,417 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, and December 31, 2018, the note balance is $158,333, with carrying values of $92,361 and $13,194, respectively, net of unamortized discounts of $65,972 and $145,139, respectively. On December 4, 2018, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $230,000 and two back-end convertible redeemable notes for $115,000 each. The notes mature on December 4, 2019, have a stated interest of 8% and each note is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on December 4, 2018, when the Company received proceeds of $210,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $210,000, an initial derivative expense of $108,922 and an initial derivative liability of $318,292. For the six months ended June 30, 2019, amortization of the debt discount of $105,000 was charged to interest expense. The Company also recorded a debt issue discount of $20,000 and amortized $10,000 to interest expense for the six months ended June 30, 2019. During the six months ended JUne 30, 2019, the investor converted $52,500 of principal and $1,167 of interest into 3,699,862 shares of common stock. As of June 30, 2019, and December 31, 2018, the initial note balance is $177,500 and $230,000, respectively, with carrying values of $81,667 and $19,167, respectively, net of unamortized discounts of $95,833 and $210,833, respectively. On February 12, 2019, the investor funded the first back-end note, when the Company received proceeds of $94,100, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the first back-end note resulted in an initial debt discount of $94,100, an initial derivative expense of $64,364 and an initial derivative liability of $158,464. For the six months ended June 30, 2019, amortization of the debt discount of $35,288 was charged to interest expense. The Company also recorded a debt issue discount of $10,000 and amortized $3,750 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the first back-end note balance is $115,000, with a carrying value of $49,937 net of unamortized discounts of $65,063. On March 1, 2019, the investor funded the second back-end note, when the Company received proceeds of $98,175, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the funding of the second back-end note resulted in an initial debt discount of $98,175, an initial derivative expense of $62,254 and an initial derivative liability of $160,429. For the six months ended June 30, 2019, amortization of the debt discount of $31,013 was charged to interest expense. The Company also recorded a debt issue discount of $10,000 and amortized $3,159 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the second back-end note balance is $15,000, with carrying values of $40,997, net of unamortized discounts of $74,003. On December 24, 2018, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $195,000 and two back-end convertible redeemable notes for $97,500 each. The notes mature on December 24, 2019, have a stated interest of 8% and each note is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on December 26, 2018, when the Company received proceeds of $177,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $177,000, an initial derivative expense of $92,464 and an initial derivative liability of $269,464. For the six months ended June 30, 2019, amortization of the debt discount of $88,500 was charged to interest expense. The Company also recorded a debt issue discount of $18,000 and amortized $9,000 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, and December 31, 2018, the initial note balance is $195,000, with carrying values of $100,100 and $2,600, respectively, net of unamortized discounts of $94,900 and $192,400, respectively. On January 22, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $245,000 and two back-end convertible redeemable notes for $122,500 each. The notes mature on January 22, 2020, have a stated interest of 8% and each note is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on January 22, 2019, when the Company received proceeds of $200,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $200,000, an initial derivative expense of $134,208 and an initial derivative liability of $334,208. For the six months ended June 30, 2019, amortization of the debt discount of $87,500 was charged to interest expense. The Company also recorded a debt issue discount of $25,000 and amortized $10,938 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the initial note balance is $245,000, with a carrying value of $118,437, net of unamortized discounts of $126,563. On February 22, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $116,667. The note matures on February 22, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on February 22, 2019, when the Company received proceeds of $90,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $90,000, an initial derivative expense of $36,138 and an initial derivative liability of $126,138. For the six months ended June 30, 2019, amortization of the debt discount of $31,875 was charged to interest expense. The Company also recorded a debt issue discount of $16,667, and amortized $5,903 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $116,667, with a carrying value of $47,778, net of unamortized discounts of 68,889. On March 8, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $133,333. The note matures on February 22, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on March 8, 2019, when the Company received proceeds of $106,200, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $106,200, an initial derivative expense of $82,538 and an initial derivative liability of $188,738. For the six months ended June 30, 2019, amortization of the debt discount of $33,097 was charged to interest expense. The Company also recorded a debt issue discount of $19,333, and amortized $6,025 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $133,333, with carrying values of $46,922, net of unamortized discounts of $86,411. On March 20, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $89,075 and a back-end convertible redeemable note for $89,075. The notes mature on March 20, 2020, hasa stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on March 20, 2019, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $75,000, an initial derivative expense of $48,913 and an initial derivative liability of $123,913. For the six months ended June 30, 2019, amortization of the debt discount of $20,756 was charged to interest expense. The Company also recorded a debt issue discount of $9,210, and amortized $2,549 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the initial note balance is $89,075, with carrying values of $28,170, net of unamortized discounts of $60,905. Also, on March 20, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $89,075 and a back-end convertible redeemable note for $89,075. The notes mature on March 20, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The initial note was funded on March 20, 2019, when the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $75,000, an initial derivative expense of $48,913 and an initial derivative liability of $123,913.. For the six months ended June 30, 2019, amortization of the debt discount of $20,756 was charged to interest expense. The Company also recorded a debt issue discount of $9,210, and amortized $2,549 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the initial note balance is $89,075, with carrying values of $28,170, net of unamortized discounts of $60,905. On April 12, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $208,000. The note matures on April 12, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on April 12, 2019, when the Company received proceeds of $175,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $175,000, an initial derivative expense of $104,450 and an initial derivative liability of $279,450. For the six months ended June 30, 2019, amortization of the debt discount of $36,359 was charged to interest expense. The Company also recorded a debt issue discount of $21,550, and amortized $4,477 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $208,000, with a carrying value of $52,286, net of unamortized discounts of $155,714. Also, on April 12, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $208,000. The note matures on April 12, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on April 12, 2019, when the Company received proceeds of $175,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $175,000, an initial derivative expense of $104,450 and an initial derivative liability of $279,450. For the six months ended June 30, 2019, amortization of the debt discount of $36,359 was charged to interest expense. The Company also recorded a debt issue discount of $21,550, and amortized $4,477 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $208,000, with a carrying value of $52,286, net of unamortized discounts of $155,714. On May 15, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $208,000. The note matures on May 15, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on May 15, 2019, when the Company received proceeds of $175,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $175,000, an initial derivative expense of $104,082 and an initial derivative liability of $279,082. For the six months ended June 30, 2019, amortization of the debt discount of $21,815 was charged to interest expense. The Company also recorded a debt issue discount of $21,550, and amortized $2,686 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $208,000, with a carrying value of $35,951, net of unamortized discounts of $172,049. Also, on May 15, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $167,352. The note matures on May 15, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on May 15, 2019, when the Company received proceeds of $140,250, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $140,250, an initial derivative expense of $85,329 and an initial derivative liability of $225,579. For the six months ended June 30, 2019, amortization of the debt discount of $17,483 was charged to interest expense. The Company also recorded a debt issue discount of $17,352, and amortized $2,686 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $167,352, with a carrying value of $29,455, net of unamortized discounts of $137,897. On June 13, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $119,000. The note matures on June 13, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on June 13, 2019, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $100,000, an initial derivative expense of $49,779 and an initial derivative liability of $149,779. For the six months ended June 30, 2019, amortization of the debt discount of $4,155 was charged to interest expense. The Company also recorded a debt issue discount of $12,500, and amortized $520 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $119,000, with a carrying value of $11,175, net of unamortized discounts of $107,825. Also, on June 13, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $119,000. The note matures on June 13, 2020, has a stated interest of 8% and convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on June 13, 2019, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. The embedded conversion feature included in the note resulted in an initial debt discount of $100,000, an initial derivative expense of $49,779 and an initial derivative liability of $149,779. For the six months ended June 30, 2019, amortization of the debt discount of $4,155 was charged to interest expense. The Company also recorded a debt issue discount of $12,500, and amortized $520 to interest expense for the six months ended June 30, 2019. As of June 30, 2019, the note balance is $119,000, with a carrying value of $11,175, net of unamortized discounts of $107,825. A summary of the convertible note balances as of June 30, 2019, and December 31, 2018, is as follows: June 30, 2019 December 31, 2018 Principal balance $ 2,936,955 $ 1,277,108 Unamortized discounts (1,978,128 ) (1,125,942 ) Ending balance, net $ 958,827 $ 151,166 The following is a summary of the Company’s convertible notes and related discounts as of June 30, 2019: Principal Balance Debt Discounts Total Balance at January 1, 2019 $ 1,277,108 $ (1,125,942 ) $ 151,166 New issuances 2,026,022 (2,026,022 ) — Conversions (366,175 ) — (366,175 ) Amortization — 1,173,836 1,173,836 Balance at June 30, 2019 $ 2,936,955 $ (1,978,128 ) $ 958,827 |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 6 Months Ended |
Jun. 30, 2019 | |
Notes to Financial Statements | |
DERIVATIVE LIABILITIES | NOTE 13 – 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 12. The Company used the Monte Carlo simulation valuation model with the following assumptions for new notes issued during the six months ended June 30, 2019, risk-free interest rates from 2.00% to 2.59% and volatility of 319% to 387%, and as of December 31, 2018, risk-free interest rates from 2.56% to 2.62% and volatility of 355% to 391%. A summary of the activity related to derivative liabilities for the six months ended June 30, 2019, is as follows: June 30, 2019 Beginning Balance $ 1,807,404 Initial Derivative Liability 2,717,846 Fair Value Change (696,761 ) Reclassification for conversions (746,421 ) Ending Balance $ 3,082,068 Derivative liability expense of $342,360 for the six months ended June 30, 2019, consisted of the initial derivative expense of $1,039,121 and the above decrease in the fair value of $696,761. |
OPERATING LEASE RIGHT-OF-USE AS
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES | NOTE 14- OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 7.5%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. During the three and six months ended June 30, 2019, the Company recorded $98,133 and $194,062, respectively, and $36,000 and $72,000 for the three and six months ended June 30, 2018, respectively, as operating lease expense which is included in rent expense on the statements of operations and includes $36,000 and $72,000 of rent to a related party during the three and six months ended June 30, 2019, and 2018, respectively. On June 14, 2017, the company entered into a five-year lease with LLC1 (see Note 10) for approximately 6,944 square feet and a monthly rent of $12,000. On September 10, 2018, pursuant to the Amos Audiology acquisition, the Company assumed a lease dated December 1, 2017 and expiring April 30, 2023, in Walnut Creek, California. Lease payments in the first year of the lease are $3, 988 per month and increase by 3% on December 1 each new lease year. As of December 31, 2018, the Company was in arrears of $25,182 (including late fees) in lease payments and has agreed with the landlord to pay the arrears in seven monthly payments of $3,597 in addition to the monthly lease payments for January 2019 through July 2019. On October 15, 2018, the Company entered into lease to operate a retail hearing aid clinic in Roseville, California expiring December 31, 2023. Initial lease payments of $3,102 begin on January 1, 2019, and increase by 3% on January 1 each new lease year. On December 1, 2018, the Company entered into lease to operate a retail hearing aid clinic in Sacramento, California expiring March 31, 2024. Initial lease payments of $3,002 begin on April 1, 2019, and increase by 3.33% on April 1, 2020 and 2021, and by 3% on April 1, 2022. On February 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Elk Grove, California expiring January 31, 2024. Initial lease payments of $2,307 begin on February 1, 2019, and increase by an average of 2.6% on February 1, each new lease year. On February 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Fremont, California expiring February 28, 2021. Initial lease payments of $2,019 begin on March 1, 2019, and increases by 3% on March 1, 2020. On April 15, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Pleasanton, California expiring April 30, 2024. Initial lease payments of $3,550 begin on May 1, 2019, and increases by 3% on each new lease year throughout the term. On June 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Hayward, California expiring December 31, 2020. Initial lease payments of $1,816 begin on June 1, 2019, and increases to $1,871 on January 1, 2020. On June 1, 2019, the Company entered into a lease to operate a retail hearing aid clinic in Santa Rosa, California expiring June 30, 2023. Initial lease payments of $2,327 begin on June 1, 2019, and increases by approximately 2.5% annually beginning on July 1, 2020. In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. During the six months ended June 30, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $1,428,534. Right-of- use assets are summarized below: June 30, 2019 Office and retail leases $ 1,428,534 Less accumulated amortization (126,350 ) Right-of-us assets, net $ 1,302,184 Operating lease liabilities are summarized as follows: June 30, 2019 Lease liability $ 1,317,947 Less current portion (323,309 ) Long term portion $ 994,739 Maturity of lease liabilities are as follows: Amount For the six months ending December 31, 2019 $ 205,506 For the year ending December 31, 2020 415,006 For the year ending December 31, 2021 378,257 For the year ending December 31, 2022 308,645 For the year ending December 31, 2023 192,785 Thereafter 28,407 Total $ 1,528,606 Less: present value discount (210,659 ) Lease liability $ 1,317,947 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 15– COMMITMENTS AND CONTINGENCIES Consulting Agreements On August 9, 2018, the Company entered into a monthly Consulting Services Master Agreement (the “CSMA”). The CSMA requires a two- month minimum and a 30- day termination notice. Pursuant to the CSMA, the Company is to compensate the consultant $12,500 per month by the issuance of restricted shares of common stock, based on the average closing trading prices for the three days prior to each monthly payment. For the six months ended June 30, 2019, the Company issued 515,818 shares of common stock under the CSMA and the parties agreed to terminate the CSMA. On August 15, 2018, the Company entered into a six-month Consulting Agreement (the “CA”). Pursuant to the CA, the Company agreed to issue 2,500,000 shares of restricted common stock to the consultant. On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds , On October 31, 2018, the Company entered into a three-year Joint Development Agreement (the “JD Agreement”) and an Exclusive Distribution Agreement (the “ED Agreement”) with Erchonia Corporation (“Erchonia”). As part of the JD Agreement, the Company and Erchonia will conduct FDA clinical research and trials for the purposes of obtaining 510k FDA Clearances for devices, technologies, methods and techniques used in the treatment of hearing relating conditions and disorders such as Tinnitus, Sensorineural hearing Loss, dizziness and other disorders. The agreements give the Company the exclusive worldwide rights for all designs and any newly developed Erchonia 3LT lasers and related technologies and gives the Company the rights to license and distribute such products worldwide. Pursuant to the JD Agreement, the Company has agreed to issue 1,000,000 shares of common stock. The Company valued the common stock to be issued at $60,000, based on the market price of the common stock on the date of the JD Agreement, to be amortized over the three-year term. For the three and six months ended June 30, 2019, the Company amortized $5,000 and $13,333, respectively, as stock-based compensation. As of June 30, 2019, there remains $46,667, of deferred stock compensation on the condensed consolidated balance sheet, to be amortized over the three-year contract term. On December 7, 2018, the Company entered into a one- year consulting agreement (the “Media Consulting Agreement”) with a third- party consultant (the “Consultant”). The Consultant will provide communication and broadcast services, as well as strategic planning services. Pursuant to the Media Consulting Agreement, the Company has agreed to issue the Consultant 3,125,000 shares of restricted common stock. On December 7, 2018, the Company recorded 3,125,000 shares of common stock to be issued. The Company valued the common stock to be issued at $125,000 based on the market price of the common stock on the date of the Media Consulting Agreement, to be amortized over the term of the agreement. The Company issued 1,712,329 of the shares and there remain 1,412,671 shares to be issued. The Company amortized $31,250 and $62,500 for the three and six months ended June 30, 2019, respectively, and is included in Professional fees on the condensed consolidated Statement of operations. As of June 30, 2019, there remains $54,861 of deferred stock compensation on the consolidated balance sheet, to be amortized in 2019. On April 1, 2019, the Company entered into a six- month consulting agreement with a third- party consultant (the “Consultant”). The Consultant will provide consulting services related to the conception and implementation of the Company’s business development plan, as well as other strategic planning services. Pursuant to the agreement, the Company issued the Consultant 2,000,000 shares of restricted common stock. The Company valued the common stock at $128,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. The Company amortized $64,000 for the three and six months ended June 30, 2019, and is included in Professional fees on the condensed consolidated Statement of operations. As of June 30, 2019, there remains $64,000 of deferred stock compensation on the consolidated balance sheet, to be amortized in 2019. On April 3, 2019, the Company entered into a six- month consulting agreement with a third- party consultant (the “Consultant”). The Consultant will provide consulting services related to the conception and implementation of the Company’s marketing plans, promoting the goals and objectives of the Company. Pursuant to the agreement, the Company paid $20,000 and issued 1,000,000 shares of restricted common stock to the Consultant. The Company valued the common stock at $75,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. The Company amortized $37,500 for the three and six months ended June 30, 2019, and is included in Professional fees on the condensed consolidated Statement of operations. As of June 30, 2019, there remains $37,500 of deferred stock compensation on the consolidated balance sheet, to be amortized in 2019. On April 17, 2019, the Company entered into a six- month consulting agreement with a third- party consultant (the “Consultant”). The Consultant will provide consulting services related to the corporate communications. Pursuant to the agreement, the Company issued 1,000,000 shares of restricted common stock to the Consultant. The Company valued the common stock at $67,500 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. The Company amortized $28,125 for the three and six months ended June 30, 2019, and is included in Professional fees on the condensed consolidated Statement of operations. As of June 30, 2019, there remains $39,375 of deferred stock compensation on the consolidated balance sheet, to be amortized in 2019. 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 both parties dismissing all claims against the other party with prejudice and Matthew, Mark and Kimberly have been released from their covenant not to compete agreement signed in August 2016 with Helix. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2019 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 16 – STOCKHOLDERS’ EQUITY Preferred Stock The Company has 25,000,000 authorized shares of $0.0001 preferred stock. Series A Preferred Stock On June 4, 2018, the Company filed in the State of Nevada a Certificate of Designation of a series of preferred stock, the Series A Preferred Stock. 9,510,000 shares were designated as Series A Preferred Stock. The Series A Preferred Stock has mandatory conversion rights, whereby each share of Series A Preferred Stock will convert two (2) shares of common stock upon the Company filing Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, increasing the authorized shares of common stock. The Series A Preferred Stock has voting rights on an is if converted basis. The Series A Preferred Stock does not have any right to dividends. On June 4, 2018 the Company issued 3,170,000 shares of Series A Preferred Stock each to Matthew, Mark and Kimberly, in exchange for each of them cancelling and returning to treasury 6,340,000 shares of common stock. The issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the shareholders are accredited investors, there was no general solicitation, and the transaction did not involve a public offering. As of June 30, 2019, and December 31, 2018, there were no shares of Series A Preferred Stock issued and outstanding. Series B Preferred Stock On June 4, 2018, the Company also filed in the State of Nevada a Certificate of Designation of a series of preferred stock, the Series B Preferred Stock. 900,000 shares were designated as Series B Preferred Stock. The Series B Preferred Stock is not convertible into common stock, nor does the Series B Preferred Stock have any right to dividends and any liquidation preference. The Series B Preferred Stock entitles its holder to a number of votes per share equal to 1,000 votes. On June 4, 2018, the Company issued 300,000 shares of its Series B Preferred Stock each to Matthew, Mark and Kimberly, in consideration of $45,000 of accrued expenses, the Company’s failure to timely pay current and past salaries, and the willingness to accrue unpaid payroll and non-reimbursement of business expenses without penalty or action for all amounts. The issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the shareholders are accredited investors, there was no general solicitation, and the transaction did not involve a public offering. As of June 30, 2019, and December 31, 2018, there were 900,000 shares of Series B Preferred Stock issued and outstanding. Common Stock The Company has 490,000,000 authorized shares of $0.0001 common stock. As of June 30, 2019, and December 31, 2018, there are 161,826,468 and 120,425,344, respectively, shares of common stock outstanding. On January 24, 2019, the Company issued 515,818 shares of restricted common stock pursuant to the CSMA (See Note 15). The shares were valued at $12,500 based on the average closing price for the three days prior to the effective date of the CSMA. During the six months ended June 30, 2019, the Company issued 3,961,177 shares of common stock that were classified as common stock to be issued as of December 31, 2018. During the six months ended June 30, 2019, the Company issued 37,764 shares of common stock to an employee as part of their compensation. The Company agreed to issue $10,000 of stock, over a twelve- month period starting November 2018 based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment, and accordingly recorded stock-based compensation of $1,392 and $2,500 for the three and six months ended June 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein. . During the six months ended June 30, 2019, the Company issued 104,166 shares of common stock to an employee as part of their compensation. The Company agreed to issue $20,000 of stock, over a twelvemonth period based on continual employment, based on the highest closing price of the Company’s common stock for the 5 days prior to employment, and accordingly recorded stock-based compensation of $1,146 and $5,000 for the three and six months ended June 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein. During the six months ended June 30, 2019, the Company issued 84,270 shares of common stock to an employee as part of their compensation. The Company agreed to issue $10,000 of stock, over a twelve- month period based on continual employment, based on the average closing price of the Company’s common stock for the 3 days prior to employment, and accordingly recorded stock-based compensation of $2,500 for the six months ended June 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein. During the six months ended June 30, 2019, the Company issued 64,404 shares of common stock each to two employees as part of their compensation. The Company agreed to issue $20,000 of stock to each employee over a six- month period starting November 2018 based on continual employment, to each, based on the average closing price of the Company’s common stock for the 3 days prior to employment, and accordingly recorded stock-based compensation of $6,750 and $10,000 for the three and six months ended June 30, 2019, included in Compensation and benefits in the condensed consolidated statement of operations, included herein. During the six months ended June 30, 2019, the Company issued 113,637 shares of common stock to an employee as part of their compensation. The Company agreed to issue $20,000 of stock, over a twelve- month period based on continual employment, based on the highest closing price of the Company’s common stock for the 5 days prior to employment, and accordingly recorded stock-based compensation of $1,629 and $5,000 for the three and six months ended June 30, 2019, included in Compensation and benefits in the consolidated statement of operations, included herein. On April 1, 2019, the Company issued the to a consultant 2,000,000 shares of restricted common stock. The Company valued the common stock at $128,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. On April 2, 2019, the Company issued 625,000 shares of restricted common stock in settlement of $25,000 of accounts payable owed. The Company valued the stock at $40,625 based on the market price of the common stock on the date of the agreement. The Company recorded a loss on debt extinguishment of $15,625 related to the issuance of 625,000 shares. On April 3, 2019, the Company issued 1,000,000 shares of restricted common stock to a consultant. The Company valued the common stock at $75,000 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. On April 17, 2019, the Company issued 1,000,000 shares of restricted common stock to a consultant. The Company valued the common stock at $67,500 based on the market price of the common stock on the date of the agreement, to be amortized over the term of the agreement. On May 22, 2019, the Company issued 666,666 shares of restricted common stock to a consultant for financial services provided. The Company valued the common stock at $32,000 based on the market price of the common stock on the date of the agreement, and is included in stock-based compensation expense for the three and six months ended June 30, 2019. During the six months ended June 30, 2019, the Company issued 31,163,818 shares of common stock for conversion of $366,175 of principal and $52,790 of accrued interest and fees, for a total of $418,965. Common Stock to be issued During the six months ended June 30, 2019, the Company issued 3,961,177 shares of common stock that were classified as common stock to be issued as of December 31, 2018. During the six months ended June 30, 2019, the Company recorded 468,645 shares of common stock to be issued to employees as part of their compensation. The Company agreed to issue stock, over a twelve- month period based on continual employment, based on their offer of employment, and, accordingly, recorded $25,000 for the three and six months ended June 30, 2019, for the common stock to be issued (issued on July 5, 2019). As of June 30, 2019, there were 2,881,316 shares of common stock to be issued. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 17 – SUBSEQUENT EVENTS From July 1, 2019, through August 24, 2019, the Company received conversion notices for the issuances of 35,281,904 shares of common stock for conversion of $365,600 of principal and $19,006 of accrued interest on convertible notes. On May 31, 2019, the Company entered into a lease beginning July 1, 2019, to operate a retail hearing aid clinic in Greenhaven, California expiring June 30, 2022. Initial lease payments of $1,450 begin on July 1, 2019, and increase by approximately 5% annually beginning on July 1, 2020. On July 1, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $183,975. The note matures on July 1, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on July 1, 2019, when the Company received proceeds of $150,000, after disbursements for the lender’s transaction costs, fees and expenses. On July 5, 2019, the Company issued 468,645 shares of restricted common stock to employees (see note 16). On July 18, 2019, the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses of the $122,500 back-end note dated January 22, 2019. On August 9, 2019, the Company issued to a third-party investor a convertible redeemable note (the “Note”) with a face value of $122,650. The note matures on August 9, 2020, has a stated interest of 8% and is convertible at any time following the funding of such note into a variable number of the Company's common stock, based on a conversion ratio of 70% of the lowest closing bid price for the 15 days prior to conversion. The note was funded on August 9, 2019, when the Company received proceeds of $100,000, after disbursements for the lender’s transaction costs, fees and expenses. On August 20, 2019, the Company received proceeds of $75,000, after disbursements for the lender’s transaction costs, fees and expenses of the $89,085 back-end note dated March 20, 2019. On August 26, 2019, the Company filed Amended and Restated Articles of Incorporation (the “Amendment”) with the Nevada Secretary of State, pursuant to which the Company increased the authorized shares of capital stock of the Company to 1,000,000,000, consisting of 975,000,000 shares of common stock, par value $0.0001, and 25,000,000 shares of preferred stock, par value $0.0001 (the “Preferred Stock”), with the Preferred Stock issuable in such series, and with such designations, rights and preferences, as the Board of Directors may determine from time to time. 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. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
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, 2018, filed with the United States Securities and Exchange Commission (the “SEC”) on April 16, 2019. Interim results of operations for the three and six months ended June 30, 2019, and 2018, are not necessarily indicative of future results for the full year. Certain amounts from the 2018 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 for certain accounting standards. |
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 | Cash 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. We held no cash equivalents as of June 30, 2019, and December 31, 2018. Cash 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 expense. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. As of June 30, 2019, and December 31, 2018, management’s evaluation required the establishment of an allowance for uncollectible receivables of $18,383. |
Sales Concentration and Credit Risk | Sales Concentration and Credit Risk Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three and six months ended June 30, 2018. No customer accounted for more than ten percent (10%) of the Company’s revenues for the three and months ended June 30, 2019. Accounts Receivable June 30, 2018 as of 3 months 6 months June 30, % % 2019 Customer A, related 46.6 % 49.1 % $ 283,064 Customer B 27.0 % 25.6 % $ — |
Inventory | Inventory Inventory is valued at the lower of cost or net realizable 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. As of June 30, 2019, and December 31, 2018, management’s analysis did not require any provisions to be recognized. |
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 sheets. On October 3, 2018, the Company entered into a Manufacturing Design and Marketing Agreement (the “Agreement”) with Zounds Hearing, Inc., a Delaware corporation (“Zounds”), whereby, Zounds as the Subcontractor will provide design, technology, manufacturing and supply chain services to the Company (see Note 15) for a period of ten years. The Company will pay Zounds One Million ($1,000,000) for the right to use proprietary technology (the “Technology Access Fee”). As of December 31, 2018, the Company has capitalized the $1,000,000 Technology Access Fee as an intangible asset on the condensed consolidated balance sheets. The Technology Access Fee will be amortized over the term of the Agreement. The Company also acquired intangible assets from an asset purchase agreement (see Note 2). |
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 Machinery and equipment 5 years Furniture and fixtures 5 years The Company's property and equipment consisted of the following at June 30, 2019, and December 31, 2018: June 30, December 31, Computer equipment $ 4,272 $ 2,651 Machinery and equipment 52,102 31,122 Furniture and fixtures 21,840 2,160 Leasehold improvements 16,206 12,222 Accumulated depreciation (12,587 ) (4,705 ) Balance $ 81,833 $ 43,450 Depreciation expense of $5,032 and $7,882 was recorded for the three and six months ended June 30, 2019, respectively, and $221 and $442, for the three and six months ended June 30, 2018, respectively. |
Investment in Undivided Interest in Real Estate | Investment in Undivided Interest in Real Estate The Company accounts for its’ investment in undivided interest in real estate using the equity method, as the Company is severally liable only for the indebtedness incurred with its interest in the property. The Company includes its allocated portion of net income or loss in Other income (expense) in its Statement of Operations, with the offset to the equity investment account on the balance sheet. For the six months ended June 30, 2019 and 2018, the Company recognized a gain of $4,816 and $741, respectively. As of June 30, 2019, and December 31, 2018, the carrying value of the Company’s investment in undivided interest in real estate was $1,231,779 and $1,226,963 respectively (see Note 11). |
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 June 30, 2019 and December 31, 2018, for each fair value hierarchy level: June 30, 2019 Derivative Liabilities Total Level I $ — $ — Level II $ — $ — Level III $ 3,082,068 $ 3,082,068 December 31, 2018 Level I $ — $ — Level II $ — $ — Level III $ 1,807,404 $ 1,807,404 |
Embedded Conversion Features | 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 w ould 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 Effective January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. 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, generally upon delivery or has services are provided. As of June 30, 2019, the Company had received $71,409 of customer deposits, that will be recognized as revenue after June 30, 2019, when the hearing aids are delivered to the customer. |
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. |
Advertising and Marketing Expenses | Advertising and Marketing Expenses The Company expenses advertising and marketing costs as incurred. For the three and six months ended June 30, 2019, advertising and marketing expenses were $143,800 and $311,584, respectively, and for the three and six months ended June 30, 2018, advertising and marketing expenses were $66,007 and $91,328, respectively. |
Leases | Leases Effective January 1, 2019, the Company began accounting for leases under ASU 2016-02 (see Note 14). Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the condensed consolidated balance sheets. The Company leases an office space and several retail locations used to conduct our business. On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. Operating lease ROU assets represent the right to use the leased asset for the lease term |
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 June 30, 2019, and 2018, the Company’s outstanding convertible debt is convertible into approximately 155,394,444 and 90,570,304 shares of common stock, subject to adjustment based on changes in the Company’s stock price, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-11 “Earnings Per Share (Topic 260)”. The amendments in the update change the classification of certain equity-linked financial instruments (or embedded features) with down round features. The amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted. The Company adopted this pronouncement as of fiscal 2017. In June 2018, the FASB issued ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company does not anticipate this ASU having a material impact on the Company’s financial statements. In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements. Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
Asset Purchase Acquisition of_2
Asset Purchase Acquisition of Kathy L Amos Audiology (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Purchase price allocation of fair value of assets acquired and liabilities assumed | Purchase Price Allocation Fair value of consideration for Acquisition $ 22,974 Liabilities assumed 33,049 Total purchase consideration $ 56,023 Tangible assets acquired $ 43,016 Intangible assets 13,007 $ 56,023 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Summary Of Significant Accounting Prouncements Tables Abstract | |
Concentration of customer revenues and accounts receivable balance | Accounts Receivable June 30, 2018 as of 3 months 6 months June 30, % % 2019 Customer A, related 46.6 % 49.1 % $ 283,064 Customer B 27.0 % 25.6 % $ — |
Property and equipment | June 30, December 31, Computer equipment $ 4,272 $ 2,651 Machinery and equipment 52,102 31,122 Furniture and fixtures 21,840 2,160 Leasehold improvements 16,206 12,222 Accumulated depreciation (12,587 ) (4,705 ) Balance $ 81,833 $ 43,450 |
Financial instruments measured at fair value on a recurring basis | June 30, 2019 Derivative Liabilities Total Level I $ — $ — Level II $ — $ — Level III $ 3,082,068 $ 3,082,068 December 31, 2018 Level I $ — $ — Level II $ — $ — Level III $ 1,807,404 $ 1,807,404 |
INTANGIBLE ASSETS, NET (OTHER_2
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of activity related to intangible assets | June 30, December 31, Customer list $ 300 $ 300 Non-compete 12,708 12,708 Technology access fee 1,000,000 1,000,000 Amortization (80,420 ) (2,168 ) Balance $ 932,588 $ 1,010,840 |
ADVANCES PAYABLE, SHAREHOLDERS
ADVANCES PAYABLE, SHAREHOLDERS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Advances Payable Shareholders | |
Advances from shareholders | June 30, 2019 December 31, 2018 Beginning Balance $ 57,526 $ 138,637 Amounts paid on Company’s behalf 367,831 589,524 Amount applied to accrued officer salaries 17,228 — Reimbursements (378,943 ) (625,635 ) Cancelled in exchange for Series B preferred stock — (45,000 ) Ending Balance $ 63,642 $ 57,526 |
NOTE PAYABLE, STOCKHOLDER AND_2
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Note Payable Stockholder And Note Payable | |
Amounts loaned by stockholder | June 30, December 31, Beginning Balance $ 95,800 $ 65,000 Amounts loaned to the Company — 36,800 Repaid — — Ending Balance $ 95,800 $ 95,800 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Expenses to officers | Three months ended June 30, Six months ended June 30, Description 2019 2018 2019 2018 CEO $ 56,250 $ 56,250 $ 112,500 $ 112,500 CFO 31,250 31,251 62,500 61,540 Total $ 87,500 $ 87,501 $ 175,000 $ 174,040 |
INVESTMENT IN UNDIVIDED INTER_2
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Investment In Undivided Interest In Real Estate | |
Condensed balance sheet and condensed statement of operations for the real property | (Unaudited) (Unaudited) Current assets: June 30, 2019 December 31, 2018 Cash $ 380 $ 2,257 Due from InnerScope 50,300 30,500 Prepaid expenses and other current assets 63,530 72,931 Total current assets 114,210 105,958 Land and Building, net 2,332,502 2,354,282 Other Assets, net 49,634 53,323 Total assets $ 2,496,345 $ 2,513,563 Current portion of mortgage payable $ 41,022 $ 40,122 Other current liabilities 47,894 48,551 Total current liabilities 88,916 88,673 Mortgage payable, long-term 1,941,786 1,969,076 Security deposits 13,064 13,064 Total liabilities 2,043,766 2,070,813 Total equity 452,579 442,750 Total liabilities and equity $ 2,496,345 $ 2,513,563 2019 2018 Rental income $ 149,029 $ 63,211 Expenses: Property taxes 4,430 6,646 Depreciation and amortization 21,780 11,446 Insurance 14,130 2,033 Repairs and maintenance 13,916 3,549 Utilities and other 20,703 10,087 Interest expense 64,242 32,355 Total expenses 139,201 67,916 Net income (loss) $ 9,828 $ (4,705 ) |
NOTE PAYABLE - UNDIVIDED INTE_2
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Future principal payments for Company's portion of SBA Note | Twelve months ending June 30, Amount 2020 $ 20,096 2021 21,495 2022 22,870 2023 24,228 2024 25,579 Thereafter 862,370 Total $ 976,638 |
CONVERTIBLE NOTES PAYABLE (Tabl
CONVERTIBLE NOTES PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Summary of convertible notes payable balance | June 30, 2019 December 31, 2018 Principal balance $ 2,936,955 $ 1,277,108 Unamortized discounts (1,978,128 ) (1,125,942 ) Ending balance, net $ 958,827 $ 151,166 |
Convertible notes and related discounts | Principal Balance Debt Discounts Total Balance at January 1, 2019 $ 1,277,108 $ (1,125,942 ) $ 151,166 New issuances 2,026,022 (2,026,022 ) — Conversions (366,175 ) — (366,175 ) Amortization — 1,173,836 1,173,836 Balance at June 30, 2019 $ 2,936,955 $ (1,978,128 ) $ 958,827 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Notes to Financial Statements | |
Summary of activity related to derivative liabilities | June 30, 2019 Beginning Balance $ 1,807,404 Initial Derivative Liability 2,717,846 Fair Value Change (696,761 ) Reclassification for conversions (746,421 ) Ending Balance $ 3,082,068 |
OPERATING LEASE RIGHT-OF-USE _2
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Right-of-use assets and operating lease liabilities | Right-of- use assets are summarized below: June 30, 2019 Office and retail leases $ 1,428,534 Less accumulated amortization (126,350 ) Right-of-us assets, net $ 1,302,184 Operating lease liabilities are summarized as follows: June 30, 2019 Lease liability $ 1,317,947 Less current portion (323,309 ) Long term portion $ 994,739 |
Maturity of lease liabilities | Amount For the six months ending December 31, 2019 $ 205,506 For the year ending December 31, 2020 415,006 For the year ending December 31, 2021 378,257 For the year ending December 31, 2022 308,645 For the year ending December 31, 2023 192,785 Thereafter 28,407 Total $ 1,528,606 Less: present value discount (210,659 ) Lease liability $ 1,317,947 |
Asset Purchase Acquisition of_3
Asset Purchase Acquisition of Kathy L Amos Audiology - Purchase price allocation of fair value of assets acquired and liabilities assumed (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Business Combinations [Abstract] | |
Fair value of consideration for Acquisition | $ 22,974 |
Liabilities assumed | 33,049 |
Total purchase consideration | 56,023 |
Tangible assets acquired | 43,016 |
Intangible assets | 13,007 |
Total assets acquired | $ 56,023 |
Asset Purchase Acquisition of_4
Asset Purchase Acquisition of Kathy L Amos Audiology (Details Narrative) | 6 Months Ended |
Jun. 30, 2019shares | |
Business Combinations [Abstract] | |
Shares issued in exchange in Acquisition | 340,352 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Concentration of customer revenues and accounts receivable balance (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2019 | |
Customer A, related | |||
Revenue concentration | 46.60% | 49.10% | |
Accounts receivable balance | $ 283,064 | ||
Customer B | |||
Revenue concentration | 27.00% | 25.60% | |
Accounts receivable balance |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Property and equipment (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Summary Of Significant Accounting Principles - Property And Equipment | ||
Computer equipment | $ 4,272 | $ 2,651 |
Machinery and equipment | 52,102 | 31,122 |
Furniture and fixtures | 21,840 | 2,160 |
Leasehold improvements | 16,206 | 12,222 |
Accumulated depreciation | (12,587) | (4,705) |
Balance | $ 81,833 | $ 43,450 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Financial instruments measured at fair value on a recurring basis (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Derivative liability | $ 3,082,068 | $ 1,807,404 |
Level I | ||
Derivative liability | ||
Level II | ||
Derivative liability | ||
Level III | ||
Derivative liability | $ 3,082,068 | $ 1,807,404 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Summary Of Significant Accounting Principles Details Narrative Abstract | |||||
Allowance for uncollectible receivables | $ 18,383 | $ 18,383 | $ 18,383 | ||
Depreciation expense | (5,032) | $ (221) | (7,882) | $ (442) | |
Allocated portion of net income (loss) from investment in undivided interest in real estate | 4,816 | 741 | |||
Carrying value of equity method investment | 1,231,779 | 1,231,779 | $ 1,226,963 | ||
Advertising and marketing expenses | $ (143,800) | $ (66,007) | $ (311,584) | $ (91,328) | |
Antidilutive shares excluded from computation of earnings per share | 155,394,444 | 90,570,304 |
GOING CONCERN AND MANAGEMENT'_2
GOING CONCERN AND MANAGEMENT'S PLANS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Going Concern And Managements Plans | |||||||
Net loss | $ (1,505,411) | $ (2,003,038) | $ (1,853,025) | $ (697,945) | $ (3,508,449) | $ (2,550,969) | |
Working capital deficit | (5,343,093) | (5,343,093) | |||||
Accumulated deficit | $ (9,880,578) | $ (9,880,578) | $ (6,372,129) |
INTANGIBLE ASSETS, NET (OTHER_3
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) - Summary of activity related to intangible assets (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Carrying value | $ 932,588 | $ 1,010,840 |
Amortization | (80,420) | (2,168) |
Customer List - 2 Years | ||
Carrying value | 300 | 300 |
Non-compete - 2 Years | ||
Carrying value | 12,708 | 12,708 |
Technology Access Fee - 10 Years | ||
Carrying value | $ 1,000,000 | $ 1,000,000 |
INTANGIBLE ASSETS, NET (OTHER_4
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense recognized | $ 26,626 | $ 78,252 |
ADVANCES PAYABLE, SHAREHOLDER_2
ADVANCES PAYABLE, SHAREHOLDERS - Advances from shareholders (Details) - Chief Executive Officer - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Beginning Balance | $ 57,526 | $ 138,637 |
Amounts paid on Company's behalf | 367,831 | 589,524 |
Amount applied to accrued officer salaries | 17,228 | |
Reimbursements | (378,943) | (625,635) |
Cancelled in exchange for Series B preferred stock | (45,000) | |
Ending Balance | $ 63,642 | $ 57,526 |
NOTE PAYABLE, STOCKHOLDER AND_3
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE - Amounts loaned by stockholder (Details) - Chief Executive Officer - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Beginning Balance | $ 95,800 | $ 65,000 |
Amounts loaned to the Company | 36,800 | |
Repaid | ||
Ending Balance | $ 95,800 | $ 95,800 |
NOTE PAYABLE, STOCKHOLDER AND_4
NOTE PAYABLE, STOCKHOLDER AND NOTE PAYABLE (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
October BLA | ||
Business Loan Agreement with third party, principal amount | $ 47,215 | |
Business Loan Agreement, proceeds received | 35,500 | |
Required monthly payments of principal and interest, first period | $ 4,467 | 4,467 |
Required monthly payments of principal and interest, second period | $ 3,402 | $ 3,402 |
BLA interest rate | 33.00% | 33.00% |
BLA maturity date | Oct. 28, 2019 | Oct. 28, 2019 |
Balance of BLA note | $ 17,010 | $ 38,280 |
Carrying value of BLA note | 13,641 | 29,270 |
Unamortized discounts on BLA note | 3,379 | $ 9,011 |
February 2019 BLA | ||
Business Loan Agreement with third party, principal amount | 8,584 | |
Business Loan Agreement, proceeds received | 7,400 | |
Required monthly payments of principal and interest, first period | 1,640 | |
Required monthly payments of principal and interest, second period | $ 1,326 | |
BLA interest rate | 16.00% | |
BLA maturity date | Aug. 4, 2019 | |
Balance of BLA note | $ 2,653 | |
Carrying value of BLA note | 2,455 | |
Unamortized discounts on BLA note | 198 | |
May 2019 BLA | ||
Business Loan Agreement with third party, principal amount | 18,088 | |
Business Loan Agreement, proceeds received | 13,600 | |
Required monthly payments of principal and interest, first period | 1,711 | |
Required monthly payments of principal and interest, second period | $ 1,303 | |
BLA interest rate | 33.00% | |
BLA maturity date | May 7, 2020 | |
Balance of BLA note | $ 16,377 | |
Carrying value of BLA note | 12,625 | |
Unamortized discounts on BLA note | $ 3,752 |
RELATED PARTY TRANSACTIONS - Ex
RELATED PARTY TRANSACTIONS - Expenses to officers (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Expenses recorded to officers | $ 87,500 | $ 87,501 | $ 175,000 | $ 174,040 |
Chief Executive Officer | ||||
Expenses recorded to officers | 56,250 | 56,250 | 112,500 | 112,500 |
Chief Financial Officer | ||||
Expenses recorded to officers | $ 31,250 | $ 31,251 | $ 62,500 | $ 61,540 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 29 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | |
Amounts due to officer | $ 63,642 | $ 63,642 | $ 57,526 | |||
Balance due to MFHC per Marketing Agreement | 22,548 | 22,548 | 22,548 | |||
Revenues from LLC1 Marketing Agreement | 15,000 | $ 15,000 | $ 30,000 | |||
Amounts invoiced to LLC1 for Company's production, printing and mailing services | $ 8,323 | 50,744 | ||||
Amounts invoiced to LLC1 for Company's sale of products | $ 1,275 | |||||
Amounts owed to Company by LLC1 | 283,064 | 283,064 | 203,325 | |||
Expenses related to LLC1 lease | 36,000 | 72,000 | ||||
Amounts owed to LLC1 for unpaid rent | 50,300 | 50,300 | 30,500 | |||
Chief Executive Officer | ||||||
Officer compensation, annual base salary | $ 225,000 | |||||
Officer compensation, amounts owed | 156,201 | 156,201 | 156,201 | |||
Chief Financial Officer | ||||||
Officer compensation, annual base salary | $ 125,000 | |||||
Officer compensation, amounts owed | $ 188,942 | $ 188,942 | $ 188,942 |
INVESTMENT IN UNDIVIDED INTER_3
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE - Condensed balance sheet and condensed statement of operations for the real property (Details) - USD ($) | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Current assets: | |||
Cash | $ 380 | $ 2,257 | |
Due from InnerScope | 50,300 | 30,500 | |
Prepaid expenses and other current assets | 63,530 | 72,931 | |
Total current assets | 114,210 | 105,958 | |
Land and Building, net | 2,332,502 | 2,354,282 | |
Other assets, net | 49,634 | 53,323 | |
Total assets | 2,496,345 | 2,513,563 | |
Current portion of mortgage payable | 41,022 | 40,122 | |
Other current liabilities | 47,894 | 48,551 | |
Total current liabilities | 88,916 | 88,673 | |
Mortgage payable, long-term | 1,941,786 | 1,969,076 | |
Security deposits | 13,064 | 13,064 | |
Total liabilities | 2,043,766 | 2,070,813 | |
Total equity | 452,579 | 442,750 | |
Total liabilities and equity | 2,496,345 | $ 2,513,563 | |
Rental income | 149,029 | $ 63,211 | |
Expenses: | |||
Property taxes | 4,430 | 6,646 | |
Depreciation and amortization | 21,780 | 11,446 | |
Insurance | 14,130 | 2,033 | |
Repairs and maintenance | 13,916 | 3,549 | |
Utilities and other | 20,703 | 10,087 | |
Interest expense | 64,242 | 32,355 | |
Total expenses | 139,201 | 67,916 | |
Net income (loss) | $ 9,828 | $ (4,705) |
INVESTMENT IN UNDIVIDED INTER_4
INVESTMENT IN UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | 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, included in other income (expense), net | $ 5,856 | $ 3,046 | 4,816 | $ 741 | ||
Carrying value of equity method investment | $ 1,231,779 | $ 1,231,779 | $ 1,226,963 |
NOTE PAYABLE - UNDIVIDED INTE_3
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE - Future principal payments for Company's portion of SBA Note (Details) | Jun. 30, 2019USD ($) |
Debt Disclosure [Abstract] | |
2020 | $ 20,096 |
2021 | 21,495 |
2022 | 22,870 |
2023 | 24,228 |
2024 | 25,579 |
Thereafter | 862,370 |
Total | $ 976,638 |
NOTE PAYABLE - UNDIVIDED INTE_4
NOTE PAYABLE - UNDIVIDED INTEREST IN REAL ESTATE (Details Narrative) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
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 | 20,096 |
Long term portion of SBA Note | $ 956,542 |
CONVERTIBLE NOTES PAYABLE - Sum
CONVERTIBLE NOTES PAYABLE - Summary of convertible notes payable balance (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Principal balance | $ 1,277,108 | |
Unamortized note discounts | (1,125,942) | |
Ending balance, net | $ 151,166 | |
Total | ||
Principal balance | $ 2,936,955 | |
Unamortized note discounts | (1,978,128) | |
Ending balance, net | $ 958,827 |
CONVERTIBLE NOTES PAYABLE - Con
CONVERTIBLE NOTES PAYABLE - Convertible notes and related discounts (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Principal Balance | |
Beginning balance | $ 1,277,108 |
New issuances | 2,026,022 |
Conversions | (366,175) |
Amortization | |
Ending balance | 2,936,955 |
Debt Discounts | |
Beginning balance | (1,125,942) |
New issuances | (2,026,022) |
Conversions | |
Amortization | 1,173,836 |
Ending balance | (1,978,128) |
Total | |
Beginning balance | 151,166 |
New issuances | |
Conversions | (366,175) |
Amortization | 1,173,836 |
Ending balance | $ 958,827 |
DERIVATIVE LIABILITIES - Summar
DERIVATIVE LIABILITIES - Summary of activity related to derivative liabilities (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Notes to Financial Statements | |
Beginning Balance | $ 1,807,404 |
Initial Derivative Liability | 2,717,846 |
Fair Value Change | (696,761) |
Reclassification for conversions | (746,421) |
Ending Balance | $ 3,082,068 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Risk free interest rate as of December 31, 2018, minimum | 2.56% | |
Risk free interest rate as of December 31, 2018, maximum | 2.62% | |
Volatility as of December 31, 2018, minimum | 355.00% | |
Volatility as of December 31, 2018, maximum | 391.00% | |
Derivative liability expense | $ 342,360 | |
Initial derivative expense | 1,039,121 | |
Fair value change | $ (696,761) | |
Minimum | ||
Risk free interest rate | 2.00% | |
Volatility | 319.00% | |
Maximum | ||
Risk free interest rate | 2.59% | |
Volatility | 387.00% |
OPERATING LEASE RIGHT-OF-USE _3
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES - Right-of-use assets and operating lease liabilities (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Right-of-use assets | ||
Office and retail leases | $ 1,428,534 | |
Less accumulated amortization | (126,350) | |
Right-of-use assets, net | 1,302,184 | |
Operating lease liability: | ||
Lease liability | 1,317,947 | |
Less current portion | (323,209) | |
Long term portion | $ 994,739 |
OPERATING LEASE RIGHT-OF-USE _4
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES - Maturity of lease liabilities (Details) | Jun. 30, 2019USD ($) |
Debt Disclosure [Abstract] | |
For the six months ending December 31, 2019 | $ 205,506 |
For the year ending December 31, 2020 | 415,006 |
For the year ending December 31, 2021 | 378,257 |
For the year ending December 31, 2022 | 308,645 |
For the year ending December 31, 2023 | 192,785 |
Thereafter | 28,407 |
Total | 1,528,606 |
Less: present value discount | (210,659) |
Lease liability | $ 1,317,947 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Consulting Agreements | |||
Common stock issued under CSMA | 515,818 | ||
Amounts paid towards Technology Access Fee for Zounds Agreement | $ 280,800 | ||
Zounds Agreement amounts included in accounts payable and accrued expenses | $ 536,000 | 536,000 | $ 816,800 |
JD Agreement, amortization of stock-based compensation | 5,000 | 13,333 | |
JD Agreement, deferred stock compensation remaining | 46,667 | 46,667 | |
Media Consulting Agreement, amortization of stock-based compensation | 31,250 | 62,500 | |
Media Consulting Agreement, deferred stock compensation remaining | 54,861 | 54,861 | |
Consultant Agreement (1), amortization of stock-based compensation | 64,000 | 64,000 | |
Consultant Agreement (1), deferred stock compensation remaining | 64,000 | 64,000 | |
Consultant Agreement (2), amortization of stock-based compensation | 37,500 | 37,500 | |
Consultant Agreement (2), deferred stock compensation remaining | 37,500 | 37,500 | |
Consultant Agreement (3), amortization of stock-based compensation | 28,125 | 28,125 | |
Consultant Agreement (3), deferred stock compensation remaining | $ 39,375 | $ 39,375 | |
Legal Matters | |||
Amounts received from settlement agreement | $ 450,000 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Issued pursuant to CSMA | ||
Common stock issued, shares | 515,818 | |
Common stock issued, value | $ 12,500 | |
Previously classified as to be issued | ||
Common stock issued, shares | 3,961,177 | |
Issued to employee as part of compensation (1) | ||
Common stock issued, shares | 37,764 | |
Stock compensation expense recorded | $ 1,392 | $ 2,500 |
Issued to employee as part of compensation (2) | ||
Common stock issued, shares | 104,166 | |
Stock compensation expense recorded | 1,146 | $ 5,000 |
Issued to employee as part of compensation (3) | ||
Common stock issued, shares | 84,270 | |
Stock compensation expense recorded | $ 2,500 | |
Issued to employee as part of compensation (4) | ||
Common stock issued, shares | 64,404 | |
Stock compensation expense recorded | 6,750 | $ 10,000 |
Issued to employee as part of compensation (5) | ||
Common stock issued, shares | 113,637 | |
Stock compensation expense recorded | 1,629 | $ 5,000 |
Issued to consultant (1) | ||
Common stock issued, shares | 2,000,000 | |
Common stock issued, value | $ 128,000 | |
Issued in settlement of accounts payable owed | ||
Common stock issued, shares | 625,000 | |
Common stock issued, value | $ 40,625 | |
Issued to consultant (2) | ||
Common stock issued, shares | 1,000,000 | |
Common stock issued, value | $ 75,000 | |
Issued to consultant (3) | ||
Common stock issued, shares | 1,000,000 | |
Common stock issued, value | $ 67,500 | |
Issued to consultant (4) | ||
Common stock issued, shares | 666,666 | |
Common stock issued, value | $ 32,000 | |
Conversions | ||
Conversion, common stock shares issued | 31,163,818 | |
Conversion, total amount | $ 418,965 | |
To be issued to employees as part of compensation | ||
Common stock to be issued, shares | 468,645 | |
Stock compensation expense recorded | $ 25,000 | $ 25,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) | 2 Months Ended |
Aug. 24, 2019USD ($)shares | |
Subsequent Events [Abstract] | |
Conversion notices, issuances of shares | shares | 35,281,904 |
Conversion notices, conversion of principal | $ 365,600 |
Conversion notices, conversion of accrued interest | 19,006 |
Convertible note issued to third-party investor, face value (1) | 183,975 |
Convertible note issued to third-party investor, net proceeds received (1) | $ 150,000 |
Restricted common stock issued to employees | shares | 468,645 |
January 22, 2019 back-end note, net proceeds received | $ 100,000 |
Convertible note issued to third-party investor, face value (2) | 122,650 |
Convertible note issued to third-party investor, net proceeds received (2) | 100,000 |
March 20, 2019 back-end note, net proceeds received | $ 75,000 |