Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 13, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Helix TCS, Inc. | |
Entity Central Index Key | 1,611,277 | |
Trading Symbol | HLIX | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 28,644,522 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 130,125 | $ 57,841 |
Accounts receivable, net | 558,141 | 257,974 |
Costs & earnings in excess of billings | 151,445 | |
Total current assets | 839,711 | 315,815 |
Property and equipment, net | 122,472 | 55,600 |
Intangible assets, net | 3,215,604 | 279,744 |
Goodwill | 664,329 | |
Deposits and other assets | 38,810 | 20,290 |
Total assets | 4,880,926 | 671,449 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 315,779 | 106,600 |
Advances from related parties | 102,000 | 76,500 |
Billings in excess of costs | 53,237 | |
Deferred rent | 7,245 | 4,243 |
Notes payable, current portion | 10,268 | |
Obligation pursuant to acquisitions | 548,279 | 178,090 |
Convertible notes payable, net of discount | 508,642 | 470,000 |
Convertible note payable - related party | 265,593 | 274,574 |
Obligation to issue warrants | 1,432,529 | |
Total current liabilities | 3,243,572 | 1,110,007 |
Long-term liabilities: | ||
Notes payable, net of current portion | 50,933 | |
Total long-term liabilities | 50,933 | |
Total liabilities | 3,294,505 | 1,110,007 |
Shareholders' equity (deficit): | ||
Common stock; par value $0.001; 200,000,000 shares authorized; 28,644,522 shares issued and outstanding as of September 30, 2017; 28,533,411 shares issued and outstanding as of December 31, 2016 | 28,644 | 28,533 |
Additional paid-in capital | 17,242,695 | 7,107,630 |
Accumulated deficit | (15,695,748) | (7,575,721) |
Total shareholders' equity (deficit) | 1,586,421 | (438,558) |
Total liabilities and shareholders' equity (deficit) | 4,880,926 | 671,449 |
Preferred stock (Class A) | ||
Shareholders' equity (deficit): | ||
Preferred stock value | 1,000 | 1,000 |
Total shareholders' equity (deficit) | 1,000 | 1,000 |
Preferred stock (Class B) | ||
Shareholders' equity (deficit): | ||
Preferred stock value | 9,830 | |
Total shareholders' equity (deficit) | $ 9,830 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 28,644,522 | 28,533,411 |
Common stock, shares outstanding | 28,644,522 | 28,533,411 |
Preferred Stock (Class A) | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Preferred stock (Class B) | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 13,000,000 | 13,000,000 |
Preferred stock, shares issued | 9,830,035 | 0 |
Preferred stock, shares outstanding | 9,830,035 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Statement [Abstract] | ||||
Revenue | $ 1,129,746 | $ 612,017 | $ 2,837,145 | $ 1,477,345 |
Cost of revenue | 814,031 | 447,690 | 2,192,366 | 1,149,278 |
Gross margin | 315,715 | 164,327 | 644,779 | 328,067 |
Operating expenses: | ||||
Selling, general and administrative | 269,143 | 78,784 | 649,973 | 285,545 |
Salaries and wages | 315,316 | 179,176 | 602,254 | 448,372 |
Professional and legal fees | 261,098 | 219,364 | 641,958 | 375,375 |
Depreciation and amortization | 194,347 | 17,955 | 292,757 | 41,817 |
Total operating expenses | 1,039,904 | 495,279 | 2,186,942 | 1,151,109 |
Loss from operations | (724,189) | (330,952) | (1,542,163) | (823,042) |
Other income (expenses): | ||||
Change in fair value of liability of shares to be issued | (29,250) | (19,250) | ||
Change in fair value of obligation to issue warrants | 531,395 | 406,604 | ||
Change in fair value of convertible notes | 115,000 | (1,393) | (210,000) | (233,342) |
Change in fair value of convertible note - related party | (34,725) | (697) | 8,971 | (107,107) |
Change in fair value of contingent consideration | (25,078) | 10,186 | ||
Loss on extinguishment of debt | (4,611,395) | |||
Loss on induced conversion of convertible note | (1,503,876) | |||
Loss on impairment of intangible assets | (1,278,323) | |||
Interest expense | (117,760) | (9,493) | (678,354) | (23,560) |
Other expenses | 468,832 | (40,833) | (6,577,864) | (1,661,582) |
Net loss | (255,357) | (371,785) | (8,120,027) | (2,484,624) |
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend | (8,044,958) | (11,200,845) | ||
Net loss attributable to common shareholders | $ (8,300,315) | $ (371,785) | $ (19,320,872) | $ (2,484,624) |
Net loss per share attributable to common shareholders - basic and diluted | $ (0.29) | $ (0.01) | $ (0.68) | $ (0.09) |
Weighted average common shares outstanding - basic and diluted | 28,644,522 | 27,290,360 | 28,592,643 | 27,290,360 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Shareholders' Equity (Deficit) (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($) | Total | Preferred Stock (Class A) | Preferred Stock (Class B) | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Beginning Balance at Dec. 31, 2016 | $ (438,558) | $ 1,000 | $ 28,533 | $ 7,107,630 | $ (7,575,721) | |
Beginning Balance, Shares at Dec. 31, 2016 | 1,000,000 | 28,533,411 | ||||
Beneficial conversion feature of Series B convertible preferred stock | 11,200,845 | 11,200,845 | ||||
Deemed dividend on conversion of Series B convertible preferred stock to common stock | (11,200,845) | (11,200,845) | ||||
Issuance of Series B preferred shares | 2,985,000 | $ 8,289 | 2,976,711 | |||
Issuance of Series B preferred shares, shares | 9,830,035 | |||||
Cost of issuance of Series B preferred shares | (1,941,633) | (1,941,633) | ||||
Stock options issued pursuant to acquisition consideration | 916,643 | 916,643 | ||||
Stock options issued in satisfaction of contingent consideration | 871,193 | 871,193 | ||||
Induced conversion of convertible debt | 2,003,876 | 1,541 | 2,002,335 | |||
Issuance of common stock per share purchase agreements | 100,000 | $ 111 | 99,889 | |||
Issuance of common stock per share purchase agreements, shares | 111,111 | |||||
Warrant issuances to investors | 93,200 | 93,200 | ||||
Beneficial conversion feature on convertible debt | 535,332 | 535,332 | ||||
Reacquisition price of convertible debt | 4,581,395 | 4,581,395 | ||||
Net loss | (8,120,027) | (8,120,027) | ||||
Ending Balance at Sep. 30, 2017 | $ 1,586,421 | $ 1,000 | $ 9,830 | $ 28,644 | $ 17,242,695 | $ (15,695,748) |
Ending balance, Shares at Sep. 30, 2017 | 1,000,000 | 9,830,035 | 28,644,522 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (8,120,027) | $ (2,484,624) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 292,757 | 41,817 |
Amortization of debt discounts | 244,843 | |
Change in fair value of liability of shares to be issued | 19,250 | |
Change in fair value of obligation to issue warrants | (406,604) | |
Change in fair value of convertible notes | 210,000 | 233,342 |
Change in fair value of convertible note - related party | (8,971) | 107,107 |
Change in fair value of contingent consideration | (10,186) | |
Loss on extinguishment of debt | 4,611,395 | |
Loss on induced conversion of convertible note | 1,503,876 | |
Loss on impairment of intangible assets | 1,278,323 | |
Loss on beneficial conversion feature of convertible note | 390,666 | |
Non-employee stock compensation expense | 150,710 | |
Change in operating assets and liabilities: | ||
Accounts receivable | (246,375) | (53,507) |
Prepaid expenses | 16,595 | |
Deposits | (14,640) | |
Costs in excess of billings | (54,547) | |
Accounts payable and accrued expenses | 122,875 | 88,501 |
Deferred rent | 3,002 | |
Billings in excess of costs | 29,270 | |
Net cash used in operating activities | (1,452,666) | (602,486) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (31,054) | (2,231) |
Payments for business combination, net of cash acquired | (1,631,313) | |
Payments for asset acquisition | (46,872) | (419,830) |
Net cash used in investing activities | (1,709,239) | (422,061) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Advances from related parties | 60,500 | |
Payments pursuant to advances from related parties | (32,000) | |
Payments pursuant to notes payable | (3,466) | |
Proceeds from the issuance of convertible notes payable | 229,167 | 200,000 |
Proceeds from the issuance of convertible note payable - related party | 300,000 | |
Proceeds from the issuance of a promissory note | 255,000 | |
Proceeds from the issuance of common stock | 100,000 | 385,143 |
Proceeds from the issuance of Series B convertible preferred stock | 2,624,988 | |
Net cash provided by financing activities | 3,234,189 | 885,143 |
Net change in cash | 72,284 | (139,404) |
Cash, beginning of period | 57,841 | 154,282 |
Cash, end of period | 130,125 | 14,878 |
Supplemental disclosure of cash and non-cash transactions: | ||
Financing of property and equipment purchases | 52,082 | |
Common stock issued pursuant to asset acquisition | 944,875 | |
Cost of issuance of Series B preferred shares | (1,941,633) | |
Stock options issued pursuant to acquisition consideration | 916,643 | |
Stock options issued pursuant to contingent consideration as part of acquisition | 871,193 | |
Warrant issuances to investors | 93,200 | |
Reacquisition price of convertible debt | $ 4,581,395 |
Description of Business
Description of Business | 9 Months Ended |
Sep. 30, 2017 | |
Description of Business [Abstract] | |
Description of Business | 1. Description of Business Helix TCS, Inc. (the “Company” or “Helix”) was incorporated in Delaware on March 13, 2014. Pursuant to the acquisition of the assets of Helix TCS, LLC, as discussed below, the Company changed its name from Jubilee4 Gold, Inc. to Helix TCS, Inc. effective October 25, 2015. Effective October 25, 2015, the Company entered into an acquisition and exchange agreement with Helix TCS LLC. The transaction contemplated under the Agreement closed on December 23, 2015 and Helix TCS, LLC was merged into and with Helix. Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 20 million common shares and 1 million convertible preferred shares of the Company. The Acquisition Agreement of Helix TCS, LLC was treated as a recapitalization for financial accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and their historical financial statements before the Acquisition Agreement were replaced with the historical financial statements of the Company. The common stock account of the Company continues post-merger, while the retained earnings of the acquiree is eliminated. The historical information of Helix TCS, Inc. is presented for comparative purposes. On April 11, 2016, the Company acquired the assets of Revolutionary Software, LLC (“Revolutionary”) (see Note 6). Furthermore, on June 2, 2017, the Company entered into a Membership Interest Purchase Agreement in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (“Security Grade”), which comprised of 800,000 Class A Units and 200,000 Class B Units. The merger was accounted for as a business combination in accordance with ASC 805 (see Note 5). |
Revision of Prior Period Financ
Revision of Prior Period Financial Statements | 9 Months Ended |
Sep. 30, 2017 | |
Revision of Prior Period Financial Statements [Abstract] | |
Revision of Prior Period Financial Statements | 2. Revision of Prior Period Financial Statements The Company corrected certain immaterial errors in its financial statements contained herein. In accordance with ASC 650-10-S99 and S55 (formerly Staff Accounting Bulletins (“SAB”) No. 99 and No. 108), Accounting Changes and Error Corrections, the Company concluded that these errors were, individually, and in the aggregate, not material, quantitatively or qualitatively, to the financial statements in these periods. In October 2015, the Company’s shareholders’ and its Board of Directors approved a 1 for 4 reverse split of the Company’s common stock. The reverse split was effective on October 27, 2015. Prior to the reverse split the Company had 3,908,617 shares issued and outstanding. Upon further review and reconciliation of the Company’s transfer agent reports it was determined that due to rounding, the share count as of December 31, 2014 was understated by 26 shares of common stock. The balance at December 31, 2014 of common stock was originally reported at 977,154 and revised as 977,180. During the year ended December 31, 2015, the Company issued common stock on the open market. Upon further review and reconciliation of the Company’s transfer agent reports it was determined that the share count was overstated by 56 shares of common stock. The total issuance of common stock on the open market for the year ended December 31, 2015 was originally reported as 1,087 shares of common stock and is being revised as 1,031. Furthermore, during the year ended December 31, 2016, specifically the three months ended March 31, 2016, the Company issued 150,000 shares of restricted common stock to a third party for professional consulting services rendered that was not accounted for. The Company performed an evaluation of the 150,000 shares of restricted common stock and determined they should be accounted for in accordance with ASC 718, Compensation – Stock Based Compensation Equity Based Payments to Non-Employees Additionally, it was determined that the Weighted Average Common Shares Outstanding – basic and diluted for the three months ending March 31, 2017 was incorrectly stated on the Consolidated Statements of Operations in the original Form 10-Q filing. This error resulted in the Weighted Average Common Shares Outstanding – basic and diluted being understated by 1,923,185 shares and the Net Loss per Common Share – basic and diluted being overstated by $.02. During the year ended December 31, 2016 the Company issued three Unsecured Convertible Promissory Notes to three individual investors referred to as Note One, Note Two and Note Three (collectively “the Notes”) The Notes were initially measured at fair value pursuant to ASC 480, Distinguishing Liabilities from Equity Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s amended audited consolidated financial statements for the year ended December 31, 2016 included in the Company’s Amended Fiscal 2016 Annual Report on Form 10-K/A, filed with the SEC on July 7, 2017. In addition, the Company’s future Quarterly Reports on Form 10-Q for subsequent quarterly periods during the current fiscal year will reflect the impact of the revision in the comparative prior quarter and year-to-date periods. The following table summarizes the effects of the revisions on the financial statements for the periods reported. Previously Reported Adjustments Restated Condensed Consolidated Balance Sheet as of March 31, 2017 Common stock $ 28,383 $ 150 $ 28,533 Additional paid-in capital $ 12,190,797 $ 55,560 $ 12,246,357 Accumulated deficit $ (12,987,681 ) $ (55,710 ) $ (13,043,391 ) Condensed Consolidated Balance Sheet as of December 31, 2016 Common stock $ 28,383 $ 150 $ 28,533 Additional paid-in capital $ 7,052,070 $ 55,560 $ 7,107,630 Accumulated deficit $ (7,520,011 ) $ (55,710 ) $ (7,575,721 ) Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 Net loss per common share - basic and diluted $ (0.21 ) $ 0.02 $ (0.19 ) Weighted average common shares outstanding - basic and diluted 26,610,226 1,923,185 28,533,411 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 Professional and legal fees $ 54,472 $ 55,710 $ 110,182 Change in fair value of convertible notes $ 20,014 $ (384,303 ) $ (364,289 ) Net loss $ (203,620 ) $ (440,013 ) $ (643,633 ) Net loss per common share - basic and diluted $ (0.01 ) $ (0.02 ) $ (0.03 ) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 Non-employee stock compensation expense $ 95,000 $ 55,710 $ 150,710 |
Going Concern Uncertainty, Fina
Going Concern Uncertainty, Financial Condition and Management's Plans | 9 Months Ended |
Sep. 30, 2017 | |
Going Concern Uncertainty, Financial Condition and Management's Plans [Abstract] | |
Going Concern Uncertainty, Financial Condition and Management's Plans | 3. Going Concern Uncertainty, Financial Condition and Management’s Plans The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next 12 months. The Company believes that its ability to continue operations depends on its ability to sustain and grow revenue and results of operations as well as its ability to access capital markets when necessary to accomplish the Company’s strategic objectives. The Company believes that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and, depending on the results of operations, the Company may need additional equity or debt financing until the Company can achieve profitability and positive cash flows from operating activities, if ever. At September 30, 2017, the Company had a working capital deficit of approximately $2,403,861 as compared to working capital deficit of approximately $794,192 at December 31, 2016. The decrease of $1,609,669 in the Company’s working capital from December 31, 2016 to September 30, 2017 was primarily the result of an obligation pursuant to the acquisition of Security Grade. The Company’s future capital requirements for its operations will depend on many factors, including the profitability of its businesses, the number and cash requirements of other acquisition candidates that the Company pursues, and the costs of operations. The Company has been investing in expanding its operation in new states, its courier service in Colorado though acquisitions, and transforming the assets acquired from Revolutionary. The Company’s management has taken several actions to ensure that it will have sufficient liquidity to meet its obligations through December 31, 2017, including growing and diversifying its revenue streams, selectively reducing expenses, and discussing additional funding with potential investors. Additionally, if the Company’s actual revenues are less than forecasted, the Company anticipates that variable expenses will also decline, and the Company’s management can implement expense reduction as necessary. The Company is evaluating other measures to further improve its liquidity, including the sale of equity or debt securities. Lastly, the Company may elect to reduce certain related-party and third-party debt by converting such debt into common shares. The Company’s management believes that these actions will enable the Company to meet its liquidity requirements through December 31, 2017. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2017 and beyond. The Company plans to generate positive cash flow from its recently-completed asset acquisition and business combination to address some of the liquidity concerns. However, to execute the Company’s business plan, service existing indebtedness and implement its business strategy, the Company anticipates that it will need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. The Company cannot be sure that any additional funding, if needed, will be available on terms favorable to the Company or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute the Company’s current stockholders’ ownership and could also result in a decrease in the market price of the Company’s common stock. The terms of those securities issued by the Company in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. The Company also may be required to recognize non-cash expenses in connection with certain securities it issues, such as convertible notes and warrants, which may adversely impact the Company’s operating results and financial condition. Furthermore, any debt financing, if available, may subject the Company to restrictive covenants and significant interest costs. There can be no assurance that the Company will be able to raise additional capital, when needed, to continue operations in their current form. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 4. Summary of Significant Accounting Policies Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC (“Security Consultants”), Boss Security Solutions, Inc. (“Boss Security”), Security Consultants Group Oregon, LLC (“Security Oregon”) and Security Grade Protective Services, Ltd., (“Security Grade”) (since June 2, 2017). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Use of estimates includes the following: 1) allowance for doubtful accounts, 2) estimated useful lives of property, equipment and intangible assets, 3) impairment of goodwill and intangible assets, 4) valuation of convertible notes payable 5) valuation of stock options 6) fair value of assets and liabilities acquired pursuant to business combination and 7) revenue recognition. Actual results could differ from estimates. Cash and Cash equivalents Cash consists of checking accounts. The Company considers all highly-liquid investments purchased with a maturity of three months or less at the time of purchase to be cash. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. Management charges balances off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due or delinquent based on how recently payments have been received. Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $31,767 at September 30, 2017 and December 31, 2016, respectively. Long-Lived Assets, Including Definite Lived Intangible Assets Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of non-compete agreements and customer relationships. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. Accounting for Acquisitions In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. Revenue Recognition The Company recognizes revenue when: (1) persuasive evidence of an arrangement exists, (2) the services have been rendered to the customer, (3) the sales price is fixed or determinable and, (4) collectability is reasonably assured. The Company’s revenues are principally derived from providing security services to its clientele. The security services revenue is generated from performing armed and unarmed guarding which is contracted for on an hourly basis. Revenues associated with these contracted services are recognized under time-based arrangements as services are provided. Additionally, the Company provides transportation security services, which are generally contracted for on a per run basis and sometimes additional fees and surcharges are also billed to the client depending on the length of the run. Revenues associated with these services are recognized as the transportation service is provided. The Company generates advertising revenues from consumer advertising on its Cannabase platform. Revenue is recognized over the contract period associated with each specific advertising campaign. Expenses Cost of Revenue The cost of revenue is the total cost incurred to obtain a sale and the cost of the goods or services sold. Cost of revenue primarily consisted of hourly compensation for security personal. Operating Expenses Operating expenses encompass selling general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Other Expenses Other expenses, net consisted of the change in the fair value of obligation to issue warrants, the change in the fair value of convertible notes, the change in fair value of convertible note related party, loss on extinguishment of debt, loss on induced conversion of convertible note and interest expense. Property and Equipment Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives are 3 years for vehicles and 5 years for furniture and equipment. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are sold, or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in other income. Contingencies Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Leases Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a capital lease; and if none of the four criteria are met, the lease is classified by the Company as an operating lease. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities. Advertising Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $7,298 and $11,131 for the three months ended September 30, 2017 and 2016, respectively, and $12,477 and $30,100 for the nine months ended September 30, 2017 and 2016, respectively. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the nine months ended September 30, 2017 and 2016. Distinguishing Liabilities from Equity The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. Initial Measurement The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. Subsequent Measurement – Financial instruments classified as liabilities The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other income (expenses). Beneficial Conversion Feature If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a Beneficial Conversion Feature (“BCF”). A beneficial conversion feature is recorded by the Company as a debt discount pursuant to ASC 470-20, Debt with Conversion and Other Options The Company accounts for the beneficial conversion feature on its convertible preferred stock in accordance with ASC 470-20, Debt with Conversion and Other Options To determine the effective conversion price, the Company first allocates the proceeds received to the convertible preferred stock and then uses those allocated proceeds to determine the effective conversion price. If the convertible instrument is issued in a basket transaction (i.e., issued along with other freestanding financial instruments), the proceeds should first be allocated to the various instruments in the basket. Any amounts paid to the investor when the transaction is consummated (e.g., origination fees, due diligence costs) represent a reduction in the proceeds received by the issuer. The intrinsic value of the conversion option should be measured using the effective conversion price for the convertible preferred stock on the proceeds allocated to that instrument. The effective conversion price represents proceeds allocable to the convertible preferred stock divided by the number of shares into which it is convertible. The effective conversion price is then compared to the per share fair value of the underlying shares on the commitment date. The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible preferred stock. This discount should be accreted from the date on which the BCF is first recognized through the earliest conversion date for instruments that do not have a stated redemption date. The intrinsic value of the BCF is recognized as a deemed dividend on convertible preferred stock over a period specified in the guidance. Share-based Compensation The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock Based Compensation The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model, and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurements and Disclosures ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows: ● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 – Inputs that are unobservable for the asset or liability. Certain assets and liabilities of the Company are required to be recorded at fair value either on a recurring or non-recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. The following section describes the valuation methodologies that the Company used to measure, for disclosure purposes, its financial instruments at fair value. Convertible notes payable The fair value of the Company’s convertible notes payable, approximated the carrying value as of September 30, 2017 and December 31, 2016. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2. Additional Disclosures Regarding Fair Value Measurements The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable and accrued liabilities, advances from shareholders and obligation pursuant to acquisition approximate their fair value due to the short-term maturity of those item. Contingent Consideration The Company’s contingent consideration measured at fair value on a recurring basis are comprised of performance-based awards issued to certain former owners of the acquired businesses in exchange for future services. Contingent liabilities are valued using significant inputs that are not observable in the market, which are defined as Level 3 inputs according to fair value measurement accounting. The Company estimates the fair value of contingent liabilities based on certain milestones of the acquired businesses and estimated probabilities of achievement, then discounts the liabilities to present value. The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved. During the three months ended September 30, 2017, the Company satisfied its contingent consideration liability related to the Security Grade Acquisition. The change in the fair value associated with the contingent consideration was $(25,078) and $10,186 for the three and nine months ended September 30, 2017, respectively. Earnings (Loss) per Share The Company follows ASC 260, Earnings Per Share Basic net loss per share is based on the weighted average number of common and common-equivalent shares outstanding. Potential common shares includable in the computation of fully-diluted per share results are not presented in the consolidated financial statements for the three and nine months ended September 30, 2017 and September 30, 2016 as their effect would be anti-dilutive. Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share. The anti-dilutive shares of common stock outstanding for three months ended and nine months ended September 30, 2017 and September 30, 2016 were as follows: For the Three Months Ended For the Nine Months Ended 2017 2016 2017 2016 Potentially dilutive securities: Convertible notes payable 226,320 1,558,226 226,320 1,558,226 Convertible Preferred A Stock 1,000,000 16,746,127 1,000,000 16,746,127 Convertible Preferred B Stock 9,830,035 - 9,830,035 - Warrants 2,557,195 1,920,000 2,557,195 1,920,000 Recent Accounting Pronouncements In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The standard’s core principle (issued as Accounting Standards Update “ASU” 2014-09 In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception Topic 480, Distinguishing Liabilities from Equity |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2017 | |
Business Combination [Abstract] | |
Business Combination | 5. Business Combination On June 2, 2017 (the “Closing”), the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (“Security Grade”), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, provided that, within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60 th st The merger is being accounted for as a business combination in accordance with ASC 805. The Company’s allocation of the purchase price was calculated as follows: Base Price - Cash $ 2,100,373 Base Price - Stock Options 916,643 Contingent Consideration - Stock Options 916,643 Total Purchase Price $ 3,933,659 Weighted Average Useful Life Description Fair Value (in years) Assets acquired: Cash $ 14,137 Accounts receivable 53,792 Costs & earnings in excess of billings 96,898 Property, plant and equipment, net 27,775 Trademarks 25,000 10 Customer lists 3,154,578 5 Web address 5,000 5 Goodwill 664,329 Other assets 3,880 Total assets acquired $ 4,045,389 Liabilities assumed: Billings in excess of costs $ 23,967 Loans payable 18,414 Credit card payable and other liabilities 69,349 Total liabilities assumed 111,730 Estimated fair value of net assets acquired $ 3,933,659 Total acquisition costs for the Security Grade acquisition incurred during the three and nine months ended September 30, 2017 was $0 and $17,659, respectively and is included in selling, general and administrative expense in the Company’s Statements of Operations. The initial stock options are included as part of the purchase price – please see Note 16 for the Company’s valuation methods and assumptions. The Company determined the fair value of the contingent consideration to be $916,643 at June 2, 2017 and recorded it as a liability in its unaudited condensed consolidated balance sheets. For the three and nine months ended September 30, 2017, the Company recorded a change in fair value of contingent consideration of $(25,078) and $10,186, respectively. The Company satisfied their contingent consideration liability during the three months ended September 30, 2017. Unaudited Pro Forma Results The operating results of the acquired business has been included in the Company’s income statement since closing. The revenues and net income (loss) of the acquired business was as follows: For the Three Months Ended For the Nine Months Ended Acquisition Total Revenue Net Total Net Security Grade Protective Services, Ltd $ 579,951 $ 180,292 $ 1,239,369 $ 139,470 Total $ 579,951 $ 180,292 $ 1,239,369 $ 139,470 The following table below represents the revenue, net loss and loss per share effect of the acquired company, as reported in our consolidated financial statements and on a pro forma basis as if the acquisition occurred on January 1, 2016. These pro forma results are not necessarily indicative of the results that actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods. For the Three Months Ended For the Nine Months Ended Description 2017 2016 2017 2016 Revenues $ 1,709,697 $ 1,026,401 $ 3,607,865 $ 2,503,599 Net loss (75,065 ) (291,282 ) (7,970,731 ) (2,387,097 ) Net loss attributable to common shareholders (8,120,023 ) (291,282 ) (19,171,576 ) (2,387,097 ) Loss per share attributable to common shareholders: Basic and diluted-as pro forma (unaudited) (0.28 ) (0.01 ) (0.67 ) (0.09 ) |
Asset Acquisition
Asset Acquisition | 9 Months Ended |
Sep. 30, 2017 | |
Asset Acquisition [Abstract] | |
Asset Acquisition | 6. Asset Acquisition The acquisition of the assets of Revolutionary Software, LLC occurred via two transactions: 1. On March 14, 2016, the Company purchased one-third of the equity interest in Revolutionary for total consideration of $350,000 in cash and 75,000 shares of common stock of the Company. $50,000 was paid in cash at closing, with the balance ($300,000) being paid in twenty-four monthly installments of $10,417, with a final payment of $50,000 to be paid on the twenty-fifth month. 2. On April 11, 2016, the Company entered into an asset purchase agreement with Revolutionary; in which the Company purchased all of the intangible rights and property of Revolutionary for total consideration of $300,000 payable in two equal installments pursuant to a promissory note and 2,320,000 shares of restricted common stock of the Company. As of June 30, 2017, the Company owed Revolutionary $0. The total purchase price for the Revolutionary assets acquired was $1,596,750. The acquisition cost has been allocated over the intangible assets acquired in accordance with the guidance set forth in ASC 805, Business Combinations |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2017 | |
Property and Equipment, Net [Abstract] | |
Property and Equipment, Net | 7. Property and Equipment, Net Property and equipment consisted of the following: September 30, 2017 December 31, 2016 Furniture and equipment $ 16,332 $ 14,731 Software 743 - Vehicles 175,412 68,295 Total 192,487 83,026 Less: Accumulated depreciation (70,015 ) (27,426 ) Property and equipment, net $ 122,472 $ 55,600 Depreciation expense was $19,553 and $4,424 for the three months ended September 30, 2017 and 2016, respectively, and $42,589 and $16,519 for the nine months ended September 30, 2017 and 2016, respectively. |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets, Net [Abstract] | |
Intangible Assets, Net | 8. Intangible Assets, Net The following table summarizes the Company’s intangible assets: September 30, 2017 Estimated Useful Life (Years) Gross Carrying Amount at December 31, 2016 Assets Acquired Pursuant to Business Combination (1) Accumulated Amortization Net Book Value Database 5 $ 93,427 $ - $ (27,476 ) $ 65,951 Tradenames and trademarks 10 100,000 25,000 (15,526 ) 109,474 Web addresses 5 125,000 5,000 (37,089 ) 92,911 Customer list 5 - 3,154,578 (207,310 ) 2,947,268 $ 318,427 $ 3,184,578 $ (287,401 ) $ 3,215,604 December 31, 2016 Estimated Useful Life (Years) Gross Carrying Amount at December 31, 2015 Assets Acquired (1) Impairment (2) Accumulated Amortization Net Book Value In-process software 5 $ - $ 800,500 $ (800,500 ) $ - $ - Database 5 - 571,250 (477,823 ) (13,464 ) 79,963 Trade names 10 - 100,000 - (7,205 ) 92,795 Web addresses 5 - 125,000 - (18,014 ) 106,986 $ - $ 1,596,750 $ (1,278,323 ) $ (38,683 ) $ 279,744 (1) On April 11, 2016, the Company acquired various assets of Revolutionary Software, LLC. (See Note 6) (2) During the second quarter for the Year ended December 31, 2016, the Company performed the two-step indefinite lived impairment test and determined the in-process software and database acquired failed both tests. Based on the testing performed, the Company recorded a non-cash impairment charge of $1,278,323. (3) On June 2, 2017, the Company acquired various assets of Security Grade, Ltd. (See Note 5) The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $173,344 and $13,531 for the three months ended September 30, 2017 and 2016, respectively, and $248,718 and $25,298 for the nine months ended Sept 30, 2017 and 2016, respectively. |
Costs, Estimated Earnings and B
Costs, Estimated Earnings and Billings | 9 Months Ended |
Sep. 30, 2017 | |
Costs, Estimated Earnings and Billings [Abstract] | |
Costs, Estimated Earnings and Billings | 9. Costs, Estimated Earnings and Billings Costs, estimated earnings and billings on uncompleted contracts are summarized as follows as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, Costs incurred on uncompleted contracts $ 281,634 $ - Estimated earnings 120,700 - Cost and estimated earnings earned on uncompleted contracts 402,334 - Billings to date 304,126 - Costs and estimated earnings in excess of billings on uncompleted contracts 98,208 - Costs in excess of billings $ 151,445 $ - Billings in excess of cost (53,237 ) - $ 98,208 $ - |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 9 Months Ended |
Sep. 30, 2017 | |
Accounts Payable and Accrued Expenses [Abstract] | |
Accounts payable and accrued expenses | 10. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following: September 30, 2017 December 31, 2016 Accounts payable $ 156,447 $ 83,308 Accrued expenses 112,099 14,805 Accrued interest 47,233 8,487 Total $ 315,779 $ 106,600 |
Convertible Notes Payable
Convertible Notes Payable | 9 Months Ended |
Sep. 30, 2017 | |
Convertible Notes Payable/Promissory Notes and Notes Payable [Abstract] | |
Convertible Notes Payable | 11. Convertible Notes Payable September 30, 2017 December 31, 2016 Note Four, 0% convertible promissory note, unsecured, maturing June 1, 2017, net of debt discount for debt issuance costs and BCF $ - $ 470,000 Note Five, 10% convertible promissory note, fixed secured, originally maturing September 12, 2017, net of debt discount for debt issuance costs, warrants and BCF 183,334 - Note Six, 10% convertible promissory note, fixed secured, originally maturing September 13, 2017 25,000 - Note Seven, 10% convertible promissory note, fixed secured, originally maturing October 26, 2017, net of debt discount for debt issuance costs and warrants 300,308 508,642 470,000 Less: Current portion (508,642 ) (470,000 ) Long-term portion $ - $ - On December 16, 2015, the Company entered into an Unsecured Convertible Promissory Note (“Note One”) with an investor (the “Investor”). The Investor provided the Company with $100,000 in cash, and the Company promised to pay the principal amount, together with interest at an annual rate of 7%, with principal and accrued interest on Note One due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note One was convertible at the election of the Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. The Company evaluated Note One in accordance with ASC 480, Distinguishing Liabilities from Equity On December 18, 2015, the Company entered into an Unsecured Convertible Promissory Note (“Note Two”) with a second investor (the “Second Investor”). The Second Investor provided the Company with $100,000 in cash, which was received by the Company during the year ended December 31, 2016. The Company promised to pay the principal amount, together with interest at the annual rate of 7%, with principal and accrued interest on Note Two due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note Two was convertible at the election of the Second Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. On December 31, 2016, the Company and the Second Investor of Note Two entered into an Amendment and Extension Agreement (“Amended Note Two”). Per Amendment Note Two, the conversion rate under Note Two was amended to a new conversion rate of $1.00 per common share, for the outstanding principal balance and any accrued and unpaid interest to date. If the Second Investor elects to convert the entire outstanding principal balance of the note on or before ten (10) days from the date of the Amended Note Two, the Second Investor of Note Two receives the right to purchase 50,000 restricted shares of common stock of the Company at $1.00 per share, for cash. On December 31, 2016, the Amended Note Two was converted into 107,000 shares of restricted common stock. In addition, the Investor elected to purchase 50,000 restricted shares of common stock of the Company, which the Company received proceeds of $50,000 (“Amended Note Two Subscription”). In accordance with ASC 470, the Company recorded a loss on induced conversion associated with the Amended Note Two and Amended Note Two Subscription of $1,003,751. The Company did not record a change in the fair value of Note Two for the three and nine months ended September 30, 2017. For the three and nine months ended September 30, 2016, the Company recorded a loss and gain, respectively, pertaining to the change in fair value of Note Two of $465 and $80,969. The interest expense associated with Note Two was $0 and $1,765 for the three months ended September 30, 2017 and 2016, respectively. Interest expense associated with Note Two was $0 and $5,236 for the nine months ended September 30, 2017 and 2016, respectively. On February 12, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Three”) with a third investor (the “Third Investor”). The Third Investor provided the Company with $100,000 in cash, and the Company promised to pay the principal amount, together with interest at an annual rate of 7%, with principal and accrued interest on Note Three due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note Three was convertible at the election of the Third Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. On December 31, 2016, the Company and the Investor of Note Three entered into an Amendment and Extension Agreement (“Amended Note Three”). Per Amended Note Three, the conversion rate under Note Three was amended to a new conversion rate of $1.00 per share, for the outstanding principal balance and any accrued and unpaid interest to date. If the Investor elects to convert the entire outstanding principal balance of the note on or before ten (10) days from the date of the Amended Note Three, the Investor of Note Three receives the right to purchase 25,000 restricted shares of common stock of the Company at $1.00 per common share, for cash. On December 31, 2016, the Amended Note Three was converted into 106,000 shares of restricted common stock. In addition, the Investor elected to purchase 25,000 restricted shares of common stock of the Company, which the Company received proceeds of $25,000 (“Amended Note Three Subscription”). In accordance with ASC 470, Debt On September 30, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Four”) with a fourth investor (the “Fourth Investor”) in which the Fourth Investor provided the Company $500,000 in cash. As of December 31, 2016, the Class B Preferred Shares were not established as a result of Holder Default, in which, the Fourth Investor did not act in good faith towards the prompt negotiation, execution and delivery of the Class B Preferred Shares. On March 31, 2017, the First Amendment to Note Four (the “Amended Note”) was entered by the Company and the Fourth Investor. In the absence of a Company Event of Default or Fourth Investor Event of Default, Amended Note is payable by issuance upon conversion into Class B Preferred Shares of the Company, which was to occur no later than June 1, 2017. The Amended Note was converted on May 17, 2017 (see below). The Amended Note had the following conversion features: ● Automatic Conversion. ● Company Default. ● Holder Default. ● The Valuation and Consideration provision in Section 2 of the Term Sheet is affirmed and ratified; provided, however, that the parties agree that the $12,000,000 valuation therein is subject to dilution of $600,000 from additional investments in the Company by third parties following the Holder’s $500,000 investment that is memorialized in the Amended Note. For the avoidance of doubt, the Holder will receive the same number of shares as it would have for its investment if it had converted at a $12,000,000 valuation on October 20, 2016 given the 26,587,497 shares outstanding at that time. For the avoidance of doubt, the Note will convert into 1,162,500 shares. Due to the terms of the Amendment, the Company evaluated Note Four under ASC 470-50 to determine if modification or extinguishment treatment was necessary. After performing the analysis under ASC 470-50, it was determined extinguishment treatment was appropriate and the Company should extinguish Note Four and recognize the Amended Note as new debt. The Company recognized a loss on extinguishment of $4,611,395 on Note Four. The Company evaluated the Amended Note and the embedded conversion feature under ASC 815 and determined the conversion feature did not meet the definition of a derivative and therefore should not be bifurcated. The Company then evaluated the Amended Note in accordance with ASC 480 and determined that Note Four will be accounted for as a liability measured at fair value. As of March 31, 2017, the fair value of the liability was $500,000. On May 17, 2017, pursuant to the Series B Preferred Stock Purchase Agreement (see Note 13), Note Four was converted into 1,540,649 Series B Preferred Shares in which the conversion feature into common stock was altered from $0.43 per share of common stock to $0.3245385 per share of the Series B Preferred Stock. In accordance with ASC 470, the Company recorded a loss on induced conversion associated with the conversion of Note Four of $1,503,876. On February 13, 2017, the Company entered into a $183,333 10% Fixed Secured Convertible Promissory Note (“Note Five”) with a fourth investor (the “Fourth Investor”). The Fourth Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the Fourth Investor for due diligence and legal bills for the transaction. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on Note Five due and payable on September 12, 2017 (unless converted under terms and provisions as set forth within Note Five). The principal balance of Note Five was convertible at the election of the Fourth Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at $1.50 per share. In conjunction with Note Five, the Company issued a warrant to the third investor to purchase 25,000 shares of the Company’s common stock at $1.00 per share. The Company evaluated the embedded conversion feature within the above convertible note under ASC 815 and determined the conversion feature did not meet the definition of a derivative and therefore should not be bifurcated. Then the Company evaluated the conversion feature for a beneficial conversion feature at inception. The Company accounted for the intrinsic value of a Beneficial Conversion Feature inherent to the convertible note payable and a total debt discount of $183,333 was recorded. The company recorded a debt discount relating to the warrants issued in the amount of $22,000 based on the relative fair values of Note Five without the warrants and the warrants themselves at the effective date of Note Five. The additional $16,666 retained by the Fourth Investor for due diligence and legal bills for the transaction will be recorded as a debt discount. The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $183,333. Therefore, the debt discount related to the beneficial conversion feature was in the amount of $144,666. The excess value of the beneficial conversion feature discount was recognized as a loss in earnings and recorded as a component of interest expense in the amount of $390,666. The debt discounts will be amortized to interest expense over the life of Note Five. Amounts amortized to interest expense were approximately $64,603 and $0 for the three months ended September 30, 2017 and 2016, respectively. Amounts amortized to interest expense were approximately $183,333 and $0 for the nine months ended September 30, 2017 and 2016, respectively. Note Five was fully amortized at September 30, 2017. The interest expense associated with Note Five was $6,460 and $0 for the three months ended September 30, 2017 and 2016, respectively. Interest expense associated with Note Five was $18,333 and $0 for the nine months ended September 30, 2017 and 2016, respectively. On February 13, 2017, the Company entered into a $25,000 10% Fixed Secured Convertible Promissory Note (“Note Six”) with a fourth investor (the “Fourth Investor”). The Fourth Investor provided the Company with $25,000 in cash, which was received by the Company during the period ended March 31, 2017. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on Note Six due and payable on September 13, 2017. The principal balance of Note Six was convertible at the election of the Fourth Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at $6.10 per share. Note Six became effective on February 14, 2017 upon the execution by the Company and the Holder of numerous exhibit documents. The Company evaluated Note Six in accordance with ASC 815, Derivatives and Hedging On April 26, 2017, the Company entered into a $100,000 10% Secured Convertible Promissory Note (“Note Seven”) with a fourth investor (the “Fourth Investor”). The Fourth Investor provided the Company with $72,000 in cash proceeds, which was received by the Company during the three months ended June 30, 2017. Note Seven is due on October 26, 2017 and the Company must pay guaranteed interest on the principal balance at an amount equivalent to 10% of the note amount. The principal balance of Note Seven is convertible at the election of the Fourth Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at the lower of $1.00 or a 50% discount to the lowest closing bid price of the Company’s common stock for the 30 Trading Days prior to conversion. In conjunction with Note Seven, the Company issued a warrant to the fourth investor to purchase 150,000 shares of the Company’s common stock at $1.00 per share. The Company evaluated Note Seven in accordance with ASC 480, Distinguishing Liabilities from Equity The debt discounts will be amortized to interest expense over the life of Note Seven. Amounts amortized to interest expense were approximately $36,220 and $0 for the three months ended September 30, 2017 and 2016, respectively. Amounts amortized to interest expense were approximately $61,510 and $0 for the nine months ended September 30, 2017 and 2016, respectively. The unamortized discount balance at September 30, 2017 was approximately $9,690. The interest expense associated with Note Seven was $5,027 and $0 for the three months ended September 30, 2017 and 2016, respectively. Interest expense associated with Note Seven was $8,579 and $0 for the nine months ended September 30, 2017 and 2016, respectively. On November 16, 2017, the Company amended the terms of Notes Five, Six and Seven, whose original maturity dates were September 12, 2017, September 12, 2017 and October 26, respectively. These notes now mature on May 16, 2018. See Note 20 for details relating to the amended terms of Note Five, Six and Seven. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 12. Related Party Transactions Advances from Related Parties The Company has a loan outstanding from Helix Opportunities. The advance does not accrue interest and has no definite repayment terms. The loan balance was $0 as of September 30, 2017. The Company has an additional loan outstanding from a Company executive. The advance does not accrue interest and has no definite repayment terms. The loan balance was $102,000 as of September 30, 2017. Convertible Note Payable On March 11, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Eight”) with Paul Hodges, a Director of the Company (the “Related Party Holder”). The Related Party Holder provided the Company with $150,000 in cash, and the Company promised to pay the principal amount, together with interest at an annual rate of 7%, with principal and accrued interest on Note Eight due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note Eight was convertible at the election of the Related Party Holder, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. The Company evaluated Note Eight in accordance with ASC 480, Distinguishing Liabilities from Equity Warrants In March 2016, the Company issued 960,000 shares of restricted common stock to the Related Party Holder per a subscription agreement for total proceeds of $150,000. In conjunction with the subscription agreement, the Company issued a warrant to the Related Party Holder to purchase 1,920,000 restricted shares of the Company’s common stock at $0.16 per share. The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company’s notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company’s notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of September 30, 2017, the warrants granted are not exercisable. |
Promissory Notes and Notes Paya
Promissory Notes and Notes Payable | 9 Months Ended |
Sep. 30, 2017 | |
Convertible Notes Payable/Promissory Notes and Notes Payable [Abstract] | |
Promissory Notes and Notes Payable | 13. Promissory Notes and Notes Payable On January 30, 2017, the Company entered into an unsecured promissory note in the amount of $75,000. The unsecured promissory note has a fixed interest rate of 8% and is due and payable on June 30, 2017. In conjunction with the Series B Preferred Stock Purchase Agreement, as discussed in Note 13, the Company satisfied its liability in exchange for Series B Preferred Stock. As of September 30, 2017, the Company had $0 outstanding on the unsecured promissory note. The interest expense associated with the unsecured promissory note was $0 for the three months ended September 30, 2017. The interest expense associated with the unsecured promissory note was $2,570 for the nine months ended September 30, 2017. On February 13, 2017, the Company entered into an unsecured promissory note in the amount of $180,000. The unsecured promissory note has a fixed interest rate of 8% and is due and payable on June 30, 2017. In conjunction with the Series B Preferred Stock Purchase Agreement, as discussed in Note 13, the Company satisfied its liability in exchange for Series B Preferred Stock. As of September 30, 2017, the Company had $0 outstanding on the unsecured promissory note. The interest expense associated with the unsecured promissory note was $0 for the three months ended September 30, 2017. The interest expense associated with the unsecured promissory note was $2,570 for the nine months ended September 30, 2017. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2017 | |
Notes Payables [Abstract] | |
Notes Payable | 14. Notes Payable Notes payable consisted of the following: September 30, 2017 December 31, Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022 $ 44,344 $ - Loans Payable - Credit Union 16,857 Less: Current portion of loans payable (10,268 ) - Long-term portion of loans payable $ 50,933 $ - The interest expense associated with the notes payable was $230 and $300 for the three months ended September 30, 2017 and 2016, respectively. The interest expense associated with the notes payable was $460 and $600 for the nine months ended September 30, 2017 and 2016, respectively. |
Shareholders' Equity (Deficit)
Shareholders' Equity (Deficit) | 9 Months Ended |
Sep. 30, 2017 | |
Shareholders' Equity (Deficit) [Abstract] | |
Shareholders' Equity (Deficit) | 15. Shareholders’ Equity (Deficit) Common Stock In May 2017, the Company issued 111,111 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $100,000. Series A convertible preferred stock In October 2015, the Company issued a total of 1,000,000 shares of its Class A Preferred Stock as part of a reorganization in which Helix Opportunities LLC contributed 100% of itself and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 1,000,000 convertible preferred shares of the Company. The Class A Preferred Stock included super majority voting rights and were convertible into 60% of the Company’s common stock. During the three months ended September 30, 2017, the Company modified the conversion rate on the Class A Preferred Stock to a 1:1 ratio. This modification reduced the amount of potentially dilutive Convertible Series A Stock by 15,746,127 shares to a total of 1,000,000 at September 30, 2017. Series B convertible preferred stock Series B Preferred Stock Purchase Agreement On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares are convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees listed below and the satisfaction of the promissory notes discussed in Note 12. In connection with the Series B Preferred Stock Purchase Agreement, the Company is obligated to issue warrants to a third-party for services to purchase 462,195 shares of common stock at $0.325 per share (see Note 15). These warrants have been accounted for as an obligation to issue because as of the balance sheet date the Company did not deliver the warrants though incurred the obligation; accordingly, they were recognized as a liability on the unaudited condensed consolidated balance sheet and cost of issuance of Series B preferred shares on the unaudited condensed consolidated statement of shareholders’ equity (deficit). On July 28, 2017, as contemplated by the Initial Series B Preferred Purchase Agreement, the Parties entered into a second Series B Preferred Stock Purchase Agreement (the “Second Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 1,680,000 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $840,000. On August 29, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a third Series B Preferred Stock Purchase Agreement (the “Third Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 369,756 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $120,000. On September 15, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a third Series B Preferred Stock Purchase Agreement (the “Third Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 462,195 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $150,000. Series B Preferred Stock In accordance with the Certificate of Incorporation, there were 9,000,000 authorized Series B Preferred Stock at a par value of $ 0.001 . Conversion: Each Series B Preferred Share is convertible at the option of the holder at any time on or after May 12, 2018 into such number of shares of the Company’s common stock equal to the number of Series B Preferred Shares to be converted, multiplied by the Preferred Conversation Rate. The Preferred Conversion Rate shall be the quotient obtained by dividing the Preferred Stock Original Issue Price ($0.3253815) by the Preferred Stock Conversation Price in effect at the time of the conversion (the initial conversion price will be equal to the Preferred Stock Original Issue Price, subject to adjustment in the event of stock splits, stock dividends, and fundamental transactions). Based on the current conversion price, the Series B Preferred Shares are convertible into 9,830,035 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (i) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (ii) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company’s Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000). Beneficial Conversion Feature – Series B Preferred Stock (deemed dividend): Each share of Series B Preferred Stock is convertible into shares of common stock, at any time at the option of the holder at any time on or after May 12, 2018. On May 17, 2017, the date of issuances of the Series B, the publicly traded common stock price was $3.98. Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature exists, as the effective conversion price for the Series B preferred shares at issuance was less than the fair value of the common stock into which the preferred shares are convertible. A beneficial conversion feature based on the intrinsic value at the date of issuances for the Series B preferred shares is scheduled below. For the three and nine months ended September 30, 2017, the beneficial conversion amount of $8,044,958 and $11,200,845 was accreted back to the preferred stock as a deemed dividend and charged to additional paid in capital in the absence of earning as the beneficial conversion feature is amortized over time through the earliest conversion date, May 12, 2018. Provided below is a schedule of the issuances of Series B preferred shares and the amount accredited to deemed dividend at September 30, 2017. For the Three Months Ended September 30, 2017 Issuance Date Beneficial Conversion Feature Term (months) Number of shares Fair Value of Beneficial Conversion Feature Amount accreted as a deemed dividend Unamortized Beneficial Conversion Feature May 17, 2017 12 7,318,084 $ 25,247,098 $ (6,311,775 ) $ 15,779,436 July 29, 2017 9.5 1,680,000 6,804,000 (1,493,561 ) 5,310,439 August 29, 2017 8.5 369,756 1,148,263 (143,533 ) 1,004,730 September 15, 2017 8 462,195 1,435,329 (96,089 ) 1,339,240 Total 9,830,035 $ 34,634,690 $ (8,044,958 ) $ 23,433,845 For the Nine Months Ended September 30, 2017 Issuance Date Beneficial Conversion Feature Term (months) Number of shares Fair Value of Beneficial Conversion Feature Amount accreted as a deemed dividend Unamortized Beneficial Conversion Feature May 17, 2017 12 7,318,084 $ 25,247,098 $ (9,467,662 ) $ 15,779,436 July 29, 2017 9.5 1,680,000 6,804,000 (1,493,561 ) 5,310,439 August 29, 2017 8.5 369,756 1,148,263 (143,533 ) 1,004,730 September 15, 2017 8 462,195 1,435,329 (96,089 ) 1,339,240 Total 9,830,035 $ 34,634,690 $ (11,200,845 ) $ 23,433,845 Dividends, Voting Rights and Liquidity Value: Pursuant to the Certificate of Designations, the Series B Preferred Shares shall bear no dividends, except that if the Board shall declare a dividend payable upon the then-outstanding shares of the Company’s common stock. The Series B Preferred Shares vote together with the common stock and all other classes and series of stock of the Company as a single class on all actions to be taken by the stockholders of the Company including, but not limited to, actions amending the certification of incorporation of the Company to increase the number of authorized shares of the common stock. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series B Preferred Shares are entitled to (i) first receive distributions out of our assets in an amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock and (ii) second, on an as-converted basis alongside the common stock. Classification: These Series B Preferred Shares are classified within permanent equity on the Company’s consolidated balance sheet as they do not meet the criteria that would require presentation outside of permanent equity under ASC 480, Distinguishing Liabilities from Equity |
Stock Options
Stock Options | 9 Months Ended |
Sep. 30, 2017 | |
Stock Options [Abstract] | |
Stock Options | 16. Stock Options As part of the Membership Interest Purchase Agreement entered into between the Company and Security Grade, on June 2, 2017 (see Note 5), the Company granted to the selling Members the option to purchase up to 414,854 shares of the Company’s common stock at a price of $0.001 per share. Of the 414,854 options granted, 207,427 were vested at closing and equity classified. The vesting of the remaining 207,427 shares were subject to certain milestones being achieved and was initially recognized as contingent consideration, both a component of purchase price. As a result of the milestones being met during the three months ended September 30, 2017, the remaining 207,427 shares have also vested. The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant. The fair value of the stock options was estimated using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgement. The assumptions at the inception date are as follows: As of August 2, 2017 As of Exercise Price $ 0.001 $ 0.001 Fair value of company’s common stock $ 4.20 $ 4.42 Dividend yield 0 % 0 % Expected volatility 179.9 % 181.2 % Risk Free interest rate 1.52 % 1.42 % Expected life (years) 2.67 2.67 Stock option activity for the nine-months ended September 30, 2017 is as follows: Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at January 1, 2017 - - - Granted 414,854 $ 0.001 3.00 Forfeited and expired - - - Exercised - - - Outstanding at September 30, 2017 414,854 $ 0.001 2.67 Vested options at September 30, 2017 414,854 $ 0.001 2.67 |
Warrants
Warrants | 9 Months Ended |
Sep. 30, 2017 | |
Warrants [Abstract] | |
Warrants | 17. Warrants On February 13, 2017, the Company entered into a $183,333 Fixed secured Convertible Promissory Note (“Note Five”) with a fourth investor (the “Fourth Investor”). The Fourth Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the Fourth Investor for due diligence and legal bills for the transaction. In conjunction with Note Five, the Company issued a warrant, of which the value was derived and based off the fair value of Note Five, to the fourth investor to purchase 25,000 shares of the Company’s common stock at $1.00 per share. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after February 14, 2017 and on or before February 12, 2022, by delivery to the Company of the Notice of Exercise. As of September 30, 2017, the warrants granted were not exercised. In connection with the issuance of the Note Seven the Company issued a warrant (the “Warrant”) to the Purchaser to purchase 150,000 shares of Common Stock pursuant to the terms and provisions thereunder. The Warrant is exercisable at any time within five (5) years of issuance and entitles the Purchaser to purchase 150,000 shares of the Common Stock at an exercise price of the lesser of either i) $1.00 or ii) a 50% discount to the lowest closing bid price thirty (30) trading days immediately preceding conversion, subject to certain adjustments. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after April 26, 2017 and on or before April 26, 2022, by delivery to the Company of the Notice of Exercise. As of September 30, 2017, the warrants granted were not exercised. A summary of warrant activity is as follows: September 30, 2017 Warrant Shares Weighed Average Exercise Price Balance at beginning of period 1,920,000 $ 0.16 Warrants granted 637,195 $ 0.51 Balance at end of period 2,557,195 $ 0.25 Liability to issue warrants In connection with the Series B Preferred Stock Purchase Agreement, the Company is obligated to issue warrants to a third-party for services to purchase 462,195 shares of common stock at $0.325 per share. These warrants have been accounted for as an obligation to issue because as of the balance sheet date the Company did not deliver the warrants though incurred the obligation; accordingly, they were recognized as a liability on the unaudited condensed consolidated balance sheet and cost of issuance of Series B preferred shares on the unaudited condensed consolidated statement of shareholders’ equity (deficit). The fair value of the Company’s obligation to issue warrants was calculated using the Black-Scholes model and the following assumptions: As of September 30, 2017 As of Fair value of company’s common stock $ 3.10 $ 3.98 Dividend yield 0 % 0 % Expected volatility 243.5 % 181.2 % Risk Free interest rate 1.62 % 1.42 % Expected life (years) 2.63 3.00 Fair value of financial instruments - warrants $ 1,432,529 $ 1,839,133 The change in fair value of the financial instrument – warrants is as follows: Amount Balance as of January 1, 2017 $ - Fair value of warrants at date of inception 1,839,133 Change in fair value of liability to issue warrants (406,604 ) Balance as of September 30, 2017 $ 1,432,529 Amount Balance as of June 30, 2017 $ 1,963,924 Change in fair value of liability to issue warrants (531,395 ) Balance as of September 30, 2017 $ 1,432,529 The Company recorded a charge of $531,395 and $406,604 for the three and nine months ended September 30, 2017 as a result of the change in the fair value of the obligation which was recorded in other income (expense) on the consolidated statements of operations. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes [Abstract] | |
Income Taxes | 18. Income Taxes No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company’s net deferred income tax assets for the nine months ended September 30, 2017 and 2016 consist of income tax loss carryforwards. These amounts are available for carryforward for use in offsetting taxable income of future years through 2035. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry-forward period. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Due to the Company’s history of operating losses, these deferred tax assets arising from the future tax benefits are currently not likely to be realized and are thus reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes. For the nine months ended September 30, 2017 and 2016, the company has a net operating loss carry forward of approximately $5,800,000 and $1,385,000, respectively. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382. The Company applied a 100% valuation reserve against the deferred tax benefit as the realization of the benefit is not certain. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 19. Commitments and Contingencies The Company is obligated under an operating lease agreement for an office facility in Colorado, which expires on February 28, 2021. Rent expense incurred under the Company’s operating leases amount to $14,438 and $18,033 during the three months ended September 30, 2017 and 2016, respectively. Rent expense for the nine months ended September 30, 2017 and 2016 was $55,159 and $62,697, respectively. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 20. Subsequent Events On October 11, 2017, as contemplated by the Initial Series B Preferred Purchase Agreement, the Parties entered into a Series B Preferred Stock Purchase Agreement (the “Fifth Series B Purchase Agreement”) whereby the Company conducted a fifth closing of the sale of its Series B Preferred Stock and issued and sold to the Purchaser 231,097.5 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $75,000. On October 31, 2017, as contemplated by the Initial Series B Preferred Purchase Agreement, the Parties entered into a Series B Preferred Stock Purchase Agreement (the “Sixth Series B Purchase Agreement”) whereby the Company conducted a sixth closing of the sale of its Series B Preferred Stock and issued and sold to the Purchaser 246,504 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $80,000. On October 31, 2017, as contemplated by the Initial Series B Preferred Purchase Agreement, the Parties entered into a Series B Preferred Stock Purchase Agreement (the “Seventh Series B Purchase Agreement”) whereby the Company conducted a seventh closing of the sale of its Series B Preferred Stock and issued and sold to the Purchaser 795,833 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $477,500. On November 16, 2017, the Company amended Notes Five, Six, and Seven with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. Notes Six and Seven may be repaid by November 21, 2017 at a principal amount that is reduced by 15% of the stated Principal Amount. The Note Five, Six and Seven Principal Amounts are amended to $281,900, $38,441 and $131,107, respectively. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC (“Security Consultants”), Boss Security Solutions, Inc. (“Boss Security”), Security Consultants Group Oregon, LLC (“Security Oregon”) and Security Grade Protective Services, Ltd., (“Security Grade”) (since June 2, 2017). |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Use of estimates includes the following: 1) allowance for doubtful accounts, 2) estimated useful lives of property, equipment and intangible assets, 3) impairment of goodwill and intangible assets, 4) valuation of convertible notes payable 5) valuation of stock options 6) fair value of assets and liabilities acquired pursuant to business combination and 7) revenue recognition. Actual results could differ from estimates. |
Cash and Cash equivalents | Cash and Cash equivalents Cash consists of checking accounts. The Company considers all highly-liquid investments purchased with a maturity of three months or less at the time of purchase to be cash. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. Management charges balances off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due or delinquent based on how recently payments have been received. Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $31,767 at September 30, 2017 and December 31, 2016, respectively. |
Long-Lived Assets, Including Definite Lived Intangible Assets | Long-Lived Assets, Including Definite Lived Intangible Assets Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of non-compete agreements and customer relationships. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. |
Accounting for Acquisitions | Accounting for Acquisitions In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when: (1) persuasive evidence of an arrangement exists, (2) the services have been rendered to the customer, (3) the sales price is fixed or determinable and, (4) collectability is reasonably assured. The Company’s revenues are principally derived from providing security services to its clientele. The security services revenue is generated from performing armed and unarmed guarding which is contracted for on an hourly basis. Revenues associated with these contracted services are recognized under time-based arrangements as services are provided. Additionally, the Company provides transportation security services, which are generally contracted for on a per run basis and sometimes additional fees and surcharges are also billed to the client depending on the length of the run. Revenues associated with these services are recognized as the transportation service is provided. The Company generates advertising revenues from consumer advertising on its Cannabase platform. Revenue is recognized over the contract period associated with each specific advertising campaign. |
Expenses | Expenses Cost of Revenue The cost of revenue is the total cost incurred to obtain a sale and the cost of the goods or services sold. Cost of revenue primarily consisted of hourly compensation for security personal. Operating Expenses Operating expenses encompass selling general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Other Expenses Other expenses, net consisted of the change in the fair value of obligation to issue warrants, the change in the fair value of convertible notes, the change in fair value of convertible note related party, loss on extinguishment of debt, loss on induced conversion of convertible note and interest expense. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives are 3 years for vehicles and 5 years for furniture and equipment. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are sold, or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in other income. |
Contingencies | Contingencies Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. |
Leases | Leases Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a capital lease; and if none of the four criteria are met, the lease is classified by the Company as an operating lease. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities. |
Advertising | Advertising Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $7,298 and $11,131 for the three months ended September 30, 2017 and 2016, respectively, and $12,477 and $30,100 for the nine months ended September 30, 2017 and 2016, respectively. |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the nine months ended September 30, 2017 and 2016. |
Distinguishing Liabilities from Equity | Distinguishing Liabilities from Equity The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. Initial Measurement The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. Subsequent Measurement – Financial instruments classified as liabilities The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other income (expenses). |
Beneficial Conversion Feature | Beneficial Conversion Feature If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a Beneficial Conversion Feature (“BCF”). A beneficial conversion feature is recorded by the Company as a debt discount pursuant to ASC 470-20, Debt with Conversion and Other Options The Company accounts for the beneficial conversion feature on its convertible preferred stock in accordance with ASC 470-20, Debt with Conversion and Other Options To determine the effective conversion price, the Company first allocates the proceeds received to the convertible preferred stock and then uses those allocated proceeds to determine the effective conversion price. If the convertible instrument is issued in a basket transaction (i.e., issued along with other freestanding financial instruments), the proceeds should first be allocated to the various instruments in the basket. Any amounts paid to the investor when the transaction is consummated (e.g., origination fees, due diligence costs) represent a reduction in the proceeds received by the issuer. The intrinsic value of the conversion option should be measured using the effective conversion price for the convertible preferred stock on the proceeds allocated to that instrument. The effective conversion price represents proceeds allocable to the convertible preferred stock divided by the number of shares into which it is convertible. The effective conversion price is then compared to the per share fair value of the underlying shares on the commitment date. The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible preferred stock. This discount should be accreted from the date on which the BCF is first recognized through the earliest conversion date for instruments that do not have a stated redemption date. The intrinsic value of the BCF is recognized as a deemed dividend on convertible preferred stock over a period specified in the guidance. |
Share-based Compensation | Share-based Compensation The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock Based Compensation The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model, and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurements and Disclosures ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows: ● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 – Inputs that are unobservable for the asset or liability. Certain assets and liabilities of the Company are required to be recorded at fair value either on a recurring or non-recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. The following section describes the valuation methodologies that the Company used to measure, for disclosure purposes, its financial instruments at fair value. Convertible notes payable The fair value of the Company’s convertible notes payable, approximated the carrying value as of September 30, 2017 and December 31, 2016. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2. Additional Disclosures Regarding Fair Value Measurements The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable and accrued liabilities, advances from shareholders and obligation pursuant to acquisition approximate their fair value due to the short-term maturity of those item. Contingent Consideration The Company’s contingent consideration measured at fair value on a recurring basis are comprised of performance-based awards issued to certain former owners of the acquired businesses in exchange for future services. Contingent liabilities are valued using significant inputs that are not observable in the market, which are defined as Level 3 inputs according to fair value measurement accounting. The Company estimates the fair value of contingent liabilities based on certain milestones of the acquired businesses and estimated probabilities of achievement, then discounts the liabilities to present value. The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved. During the three months ended September 30, 2017, the Company satisfied its contingent consideration liability related to the Security Grade Acquisition. The change in the fair value associated with the contingent consideration was $(25,078) and $10,186 for the three and nine months ended September 30, 2017, respectively. |
Earnings (Loss) per Share | Earnings (Loss) per Share The Company follows ASC 260, Earnings Per Share Basic net loss per share is based on the weighted average number of common and common-equivalent shares outstanding. Potential common shares includable in the computation of fully-diluted per share results are not presented in the consolidated financial statements for the three and nine months ended September 30, 2017 and September 30, 2016 as their effect would be anti-dilutive. Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share. The anti-dilutive shares of common stock outstanding for three months ended and nine months ended September 30, 2017 and September 30, 2016 were as follows: For the Three Months Ended For the Nine Months Ended 2017 2016 2017 2016 Potentially dilutive securities: Convertible notes payable 226,320 1,558,226 226,320 1,558,226 Convertible Preferred A Stock 1,000,000 16,746,127 1,000,000 16,746,127 Convertible Preferred B Stock 9,830,035 - 9,830,035 - Warrants 2,557,195 1,920,000 2,557,195 1,920,000 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The standard’s core principle (issued as Accounting Standards Update “ASU” 2014-09 In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception Topic 480, Distinguishing Liabilities from Equity |
Revision of Prior Period Fina28
Revision of Prior Period Financial Statements (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Revision of Prior Period Financial Statements [Abstract] | |
Summary of effects of revisions on financial statements | Previously Reported Adjustments Restated Condensed Consolidated Balance Sheet as of March 31, 2017 Common stock $ 28,383 $ 150 $ 28,533 Additional paid-in capital $ 12,190,797 $ 55,560 $ 12,246,357 Accumulated deficit $ (12,987,681 ) $ (55,710 ) $ (13,043,391 ) Condensed Consolidated Balance Sheet as of December 31, 2016 Common stock $ 28,383 $ 150 $ 28,533 Additional paid-in capital $ 7,052,070 $ 55,560 $ 7,107,630 Accumulated deficit $ (7,520,011 ) $ (55,710 ) $ (7,575,721 ) Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 Net loss per common share - basic and diluted $ (0.21 ) $ 0.02 $ (0.19 ) Weighted average common shares outstanding - basic and diluted 26,610,226 1,923,185 28,533,411 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 Professional and legal fees $ 54,472 $ 55,710 $ 110,182 Change in fair value of convertible notes $ 20,014 $ (384,303 ) $ (364,289 ) Net loss $ (203,620 ) $ (440,013 ) $ (643,633 ) Net loss per common share - basic and diluted $ (0.01 ) $ (0.02 ) $ (0.03 ) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 Non-employee stock compensation expense $ 95,000 $ 55,710 $ 150,710 |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of anti-dilutive shares of common stock outstanding | For the Three Months Ended For the Nine Months Ended 2017 2016 2017 2016 Potentially dilutive securities: Convertible notes payable 226,320 1,558,226 226,320 1,558,226 Convertible Preferred A Stock 1,000,000 16,746,127 1,000,000 16,746,127 Convertible Preferred B Stock 9,830,035 - 9,830,035 - Warrants 2,557,195 1,920,000 2,557,195 1,920,000 |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Combination [Abstract] | |
Schedule of allocation of the purchase price | Base Price - Cash $ 2,100,373 Base Price - Stock Options 916,643 Contingent Consideration - Stock Options 916,643 Total Purchase Price $ 3,933,659 |
Schedule of assets acquired and liabilities assumed | Weighted Average Useful Life Description Fair Value (in years) Assets acquired: Cash $ 14,137 Accounts receivable 53,792 Costs & earnings in excess of billings 96,898 Property, plant and equipment, net 27,775 Trademarks 25,000 10 Customer lists 3,154,578 5 Web address 5,000 5 Goodwill 664,329 Other assets 3,880 Total assets acquired $ 4,045,389 Liabilities assumed: Billings in excess of costs $ 23,967 Loans payable 18,414 Credit card payable and other liabilities 69,349 Total liabilities assumed 111,730 Estimated fair value of net assets acquired $ 3,933,659 |
Schedule of revenues and net income (loss) of the acquired business | For the Three Months Ended For the Nine Months Ended Acquisition Total Revenue Net Total Net Security Grade Protective Services, Ltd $ 579,951 $ 180,292 $ 1,239,369 $ 139,470 Total $ 579,951 $ 180,292 $ 1,239,369 $ 139,470 |
Schudule of the pro forma financial information purport to represent the results of operations for future periods | For the Three Months Ended For the Nine Months Ended Description 2017 2016 2017 2016 Revenues $ 1,709,697 $ 1,026,401 $ 3,607,865 $ 2,503,599 Net loss (75,065 ) (291,282 ) (7,970,731 ) (2,387,097 ) Net loss attributable to common shareholders (8,120,023 ) (291,282 ) (19,171,576 ) (2,387,097 ) Loss per share attributable to common shareholders: Basic and diluted-as pro forma (unaudited) (0.28 ) (0.01 ) (0.67 ) (0.09 ) |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property and Equipment, Net [Abstract] | |
Schedule of property and equipment | September 30, 2017 December 31, 2016 Furniture and equipment $ 16,332 $ 14,731 Software 743 - Vehicles 175,412 68,295 Total 192,487 83,026 Less: Accumulated depreciation (70,015 ) (27,426 ) Property and equipment, net $ 122,472 $ 55,600 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets, Net [Abstract] | |
Schedule of intangible assets | September 30, 2017 Estimated Useful Life (Years) Gross Carrying Amount at December 31, 2016 Assets Acquired Pursuant to Business Combination (1) Accumulated Amortization Net Book Value Database 5 $ 93,427 $ - $ (27,476 ) $ 65,951 Tradenames and trademarks 10 100,000 25,000 (15,526 ) 109,474 Web addresses 5 125,000 5,000 (37,089 ) 92,911 Customer list 5 - 3,154,578 (207,310 ) 2,947,268 $ 318,427 $ 3,184,578 $ (287,401 ) $ 3,215,604 December 31, 2016 Estimated Useful Life (Years) Gross Carrying Amount at December 31, 2015 Assets Acquired (1) Impairment (2) Accumulated Amortization Net Book Value In-process software 5 $ - $ 800,500 $ (800,500 ) $ - $ - Database 5 - 571,250 (477,823 ) (13,464 ) 79,963 Trade names 10 - 100,000 - (7,205 ) 92,795 Web addresses 5 - 125,000 - (18,014 ) 106,986 $ - $ 1,596,750 $ (1,278,323 ) $ (38,683 ) $ 279,744 (1) On April 11, 2016, the Company acquired various assets of Revolutionary Software, LLC. (See Note 6) (2) During the second quarter for the Year ended December 31, 2016, the Company performed the two-step indefinite lived impairment test and determined the in-process software and database acquired failed both tests. Based on the testing performed, the Company recorded a non-cash impairment charge of $1,278,323. (3) On June 2, 2017, the Company acquired various assets of Security Grade, Ltd. (See Note 5) |
Costs, Estimated Earnings and33
Costs, Estimated Earnings and Billings (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Costs, Estimated Earnings and Billings [Abstract] | |
Summary of costs estimated earnings and billings on uncompleted contracts | September 30, 2017 December 31, Costs incurred on uncompleted contracts $ 281,634 $ - Estimated earnings 120,700 - Cost and estimated earnings earned on uncompleted contracts 402,334 - Billings to date 304,126 - Costs and estimated earnings in excess of billings on uncompleted contracts 98,208 - Costs in excess of billings $ 151,445 $ - Billings in excess of cost (53,237 ) - $ 98,208 $ - |
Accounts Payable and Accrued 34
Accounts Payable and Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accounts Payable and Accrued Expenses [Abstract] | |
Schedule of accounts payable and accrued expenses | September 30, 2017 December 31, 2016 Accounts payable $ 156,447 $ 83,308 Accrued expenses 112,099 14,805 Accrued interest 47,233 8,487 Total $ 315,779 $ 106,600 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Convertible Notes Payable/Promissory Notes and Notes Payable [Abstract] | |
Schedule of convertible notes payable | September 30, 2017 December 31, 2016 Note Four, 0% convertible promissory note, unsecured, maturing June 1, 2017, net of debt discount for debt issuance costs and BCF $ - $ 470,000 Note Five, 10% convertible promissory note, fixed secured, originally maturing September 12, 2017, net of debt discount for debt issuance costs, warrants and BCF 183,334 - Note Six, 10% convertible promissory note, fixed secured, originally maturing September 13, 2017 25,000 - Note Seven, 10% convertible promissory note, fixed secured, originally maturing October 26, 2017, net of debt discount for debt issuance costs and warrants 300,308 508,642 470,000 Less: Current portion (508,642 ) (470,000 ) Long-term portion $ - $ - |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Notes Payables [Abstract] | |
Schedule of notes payable | September 30, 2017 December 31, Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022 $ 44,344 $ - Loans Payable - Credit Union 16,857 Less: Current portion of loans payable (10,268 ) - Long-term portion of loans payable $ 50,933 $ - |
Shareholders' Equity (Deficit)
Shareholders' Equity (Deficit) (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Shareholders' Equity (Deficit) [Abstract] | |
Schedule of the issuances of Series B preferred shares | For the Three Months Ended September 30, 2017 Issuance Date Beneficial Conversion Feature Term (months) Number of shares Fair Value of Beneficial Conversion Feature Amount accreted as a deemed dividend Unamortized Beneficial Conversion Feature May 17, 2017 12 7,318,084 $ 25,247,098 $ (6,311,775 ) $ 15,779,436 July 29, 2017 9.5 1,680,000 6,804,000 (1,493,561 ) 5,310,439 August 29, 2017 8.5 369,756 1,148,263 (143,533 ) 1,004,730 September 15, 2017 8 462,195 1,435,329 (96,089 ) 1,339,240 Total 9,830,035 $ 34,634,690 $ (8,044,958 ) $ 23,433,845 For the Nine Months Ended September 30, 2017 Issuance Date Beneficial Conversion Feature Term (months) Number of shares Fair Value of Beneficial Conversion Feature Amount accreted as a deemed dividend Unamortized Beneficial Conversion Feature May 17, 2017 12 7,318,084 $ 25,247,098 $ (9,467,662 ) $ 15,779,436 July 29, 2017 9.5 1,680,000 6,804,000 (1,493,561 ) 5,310,439 August 29, 2017 8.5 369,756 1,148,263 (143,533 ) 1,004,730 September 15, 2017 8 462,195 1,435,329 (96,089 ) 1,339,240 Total 9,830,035 $ 34,634,690 $ (11,200,845 ) $ 23,433,845 |
Stock Options (Tables)
Stock Options (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stock Options [Abstract] | |
Schedule of fair value assumptions | As of August 2, 2017 As of Exercise Price $ 0.001 $ 0.001 Fair value of company’s common stock $ 4.20 $ 4.42 Dividend yield 0 % 0 % Expected volatility 179.9 % 181.2 % Risk Free interest rate 1.52 % 1.42 % Expected life (years) 2.67 2.67 |
Schedule of stock option activity | Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at January 1, 2017 - - - Granted 414,854 $ 0.001 3.00 Forfeited and expired - - - Exercised - - - Outstanding at September 30, 2017 414,854 $ 0.001 2.67 Vested options at September 30, 2017 414,854 $ 0.001 2.67 |
Warrants (Tables)
Warrants (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Warrants [Abstract] | |
Summary of warrant activity | September 30, 2017 Warrant Shares Weighed Average Exercise Price Balance at beginning of period 1,920,000 $ 0.16 Warrants granted 637,195 $ 0.51 Balance at end of period 2,557,195 $ 0.25 |
Schedule of fair value of the company's obligation to issue warrants using Black-Scholes model | As of September 30, 2017 As of Fair value of company’s common stock $ 3.10 $ 3.98 Dividend yield 0 % 0 % Expected volatility 243.5 % 181.2 % Risk Free interest rate 1.62 % 1.42 % Expected life (years) 2.63 3.00 Fair value of financial instruments - warrants $ 1,432,529 $ 1,839,133 |
Schedule of fair value of the financial instrument | Amount Balance as of January 1, 2017 $ - Fair value of warrants at date of inception 1,839,133 Change in fair value of liability to issue warrants (406,604 ) Balance as of September 30, 2017 $ 1,432,529 Amount Balance as of June 30, 2017 $ 1,963,924 Change in fair value of liability to issue warrants (531,395 ) Balance as of September 30, 2017 $ 1,432,529 |
Description of Business (Detail
Description of Business (Details) | Apr. 11, 2017 | Oct. 01, 2015 |
Description of Business (Textual) | ||
Exchanged percentage of Helix TCS | 100.00% | |
Business acquisition, description | The Company entered into a Membership Interest Purchase Agreement in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. ("Security Grade"), which comprised of 800,000 Class A Units and 200,000 Class B Units. | Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 20 million common shares and 1 million convertible preferred shares of the Company. |
Revision of Prior Period Fina41
Revision of Prior Period Financial Statements (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Statement of Financial Position [Abstract] | |||||||
Common stock | $ 28,644 | $ 28,533 | $ 150 | $ 28,644 | $ 28,533 | ||
Additional paid-in capital | 17,242,695 | 12,246,357 | $ 55,560 | 17,242,695 | 7,107,630 | ||
Accumulated deficit | $ (15,695,748) | $ (13,043,391) | $ (15,695,748) | (7,575,721) | |||
Income Statement [Abstract] | |||||||
Net loss per common share - basic and diluted | $ (0.29) | $ (0.19) | $ (0.01) | $ (0.03) | $ (0.68) | $ (0.09) | |
Weighted average common shares outstanding - basic and diluted | 28,644,522 | 28,533,411 | 27,290,360 | 28,592,643 | 27,290,360 | ||
Professional and legal fees | $ 261,098 | $ 219,364 | $ 110,182 | $ 641,958 | $ 375,375 | ||
Change in fair value of convertible notes | 115,000 | (1,393) | (364,289) | (210,000) | (233,342) | ||
Net loss | $ (255,357) | $ (371,785) | (643,633) | $ (8,120,027) | (2,484,624) | ||
Statement of Cash Flows [Abstract] | |||||||
Non-employee stock compensation expense | $ 150,710 | $ 150,710 | |||||
Previously Reported [Member] | |||||||
Statement of Financial Position [Abstract] | |||||||
Common stock | $ 28,383 | 28,383 | |||||
Additional paid-in capital | 12,190,797 | 7,052,070 | |||||
Accumulated deficit | $ (12,987,681) | (7,520,011) | |||||
Income Statement [Abstract] | |||||||
Net loss per common share - basic and diluted | $ (0.21) | $ (0.01) | |||||
Weighted average common shares outstanding - basic and diluted | 26,610,226 | ||||||
Professional and legal fees | $ 54,472 | ||||||
Change in fair value of convertible notes | 20,014 | ||||||
Net loss | (203,620) | ||||||
Statement of Cash Flows [Abstract] | |||||||
Non-employee stock compensation expense | $ 95,000 | ||||||
Adjustments [Member] | |||||||
Statement of Financial Position [Abstract] | |||||||
Common stock | $ 150 | 150 | |||||
Additional paid-in capital | 55,560 | 55,560 | |||||
Accumulated deficit | $ (55,710) | $ (55,710) | |||||
Income Statement [Abstract] | |||||||
Net loss per common share - basic and diluted | $ 0.02 | $ (0.02) | |||||
Weighted average common shares outstanding - basic and diluted | 1,923,185 | ||||||
Professional and legal fees | $ 55,710 | ||||||
Change in fair value of convertible notes | (384,303) | ||||||
Net loss | (440,013) | ||||||
Statement of Cash Flows [Abstract] | |||||||
Non-employee stock compensation expense | $ 55,710 |
Revision of Prior Period Fina42
Revision of Prior Period Financial Statements (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
May 31, 2017 | Oct. 31, 2015 | Sep. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2016 | |
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Issued of common stock, shares | 28,644,522 | 28,644,522 | 28,533,411 | ||||||||
Shares of restricted common stock | 111,111 | 150,000 | |||||||||
Professional and legal fees | $ 261,098 | $ 219,364 | $ 110,182 | $ 641,958 | $ 375,375 | ||||||
Increases in common stock, value | 28,644 | $ 28,533 | 150 | 28,644 | $ 28,533 | ||||||
Additional paid-in capital | $ 17,242,695 | $ 12,246,357 | $ 55,560 | $ 17,242,695 | $ 7,107,630 | ||||||
Weighted average common shares outstanding - basic and diluted | 28,644,522 | 28,533,411 | 27,290,360 | 28,592,643 | 27,290,360 | ||||||
Net loss per common share - basic and diluted | $ (0.29) | $ (0.19) | $ (0.01) | $ (0.03) | $ (0.68) | $ (0.09) | |||||
Net loss | $ (255,357) | $ (371,785) | $ (643,633) | $ (8,120,027) | $ (2,484,624) | ||||||
Non-cash loss | $ (29,250) | $ (364,289) | $ (19,250) | ||||||||
Board of Directors [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Reverse split of common stock | 1 for 4 reverse split | ||||||||||
Third Party [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Shares, issued | 150,000 | ||||||||||
Common Stock [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Rounded shares of understated common shares | 26 | ||||||||||
Shares, outstanding | 28,644,522 | 28,644,522 | 28,533,411 | ||||||||
Issuance of common stock, shares | 1,087 | 977,154 | |||||||||
Net loss | |||||||||||
Prior to Reverse Split [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Shares, issued | 3,908,617 | ||||||||||
Shares, outstanding | 3,908,617 | ||||||||||
Restricted Stock [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Shares of restricted common stock | 150,000 | ||||||||||
Overstated [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Issued of common stock, shares | 56 | ||||||||||
Revised [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Issuance of common stock, shares | 1,031 | 977,180 | |||||||||
Adjustments [Member] | |||||||||||
Revision of Prior Period Financial Statements (Textual) | |||||||||||
Professional and legal fees | $ 55,710 | ||||||||||
Increases in common stock, value | $ 150 | $ 150 | |||||||||
Additional paid-in capital | $ 55,560 | $ 55,560 | |||||||||
Weighted average common shares outstanding - basic and diluted | 1,923,185 | ||||||||||
Net loss per common share - basic and diluted | $ 0.02 | $ (0.02) | |||||||||
Net loss | $ (440,013) | ||||||||||
Non-cash loss | $ (384,303) |
Going Concern Uncertainty, Fi43
Going Concern Uncertainty, Financial Condition and Management's Plans (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Going Concern Uncertainty, Financial Condition and Management's Plans (Textual) | ||
Working capital deficit | $ 2,403,861 | $ 794,192 |
Working capital decrease | $ 1,609,669 |
Summary of Significant Accoun44
Summary of Significant Accounting Policies (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Warrants [Member] | ||||
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Potentially dilutive securities | 2,557,195 | 1,920,000 | 2,557,195 | 1,920,000 |
Convertible notes payable [Member] | ||||
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Potentially dilutive securities | 226,320 | 1,558,226 | 226,320 | 1,558,226 |
Convertible Preferred A Stock[Member] | ||||
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Potentially dilutive securities | 1,000,000 | 16,746,127 | 1,000,000 | 16,746,127 |
Convertible Preferred B Stock(Member) | ||||
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Potentially dilutive securities | 9,830,035 | 9,830,035 |
Summary of Significant Accoun45
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Summary of Significant Accounting Policies (Textual) | |||||
Allowance for doubtful accounts | $ 31,767 | $ 31,767 | $ 31,767 | ||
Lease agreements, description | (a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. | ||||
Selling, general and administrative expenses | 269,143 | $ 78,784 | $ 649,973 | $ 285,545 | |
Change in fair value of contingent consideration | $ (25,078) | $ 10,186 | |||
Vehicles [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment estimated useful lives | 3 years | ||||
Furniture and equipment [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment estimated useful lives | 5 years |
Business Combination (Details)
Business Combination (Details) | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Business Combination [Abstract] | |
Base Price - Cash | $ 2,100,373 |
Base Price - Stock Options | 916,643 |
Contingent Consideration - Stock Options | 916,643 |
Total Purchase Price | $ 3,933,659 |
Business Combination (Details 1
Business Combination (Details 1) | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Assets acquired: | |
Cash | $ 14,137 |
Accounts receivable | 53,792 |
Costs & earnings in excess of billings | 96,898 |
Property, plant and equipment, net | 27,775 |
Trademarks | 25,000 |
Customer lists | 3,154,578 |
Web address | 5,000 |
Goodwill | 664,329 |
Other assets | 3,880 |
Total assets acquired | 4,045,389 |
Liabilities assumed: | |
Billings in excess of costs | 23,967 |
Loans payable | 18,414 |
Credit card payable and other liabilities | 69,349 |
Total liabilities assumed | 111,730 |
Estimated fair value of net assets acquired | $ 3,933,659 |
Customer list [Member] | |
Liabilities assumed: | |
Weighted Average Useful Life (in years) | 5 years |
Trademarks [Member] | |
Liabilities assumed: | |
Weighted Average Useful Life (in years) | 10 years |
Web address [Member] | |
Liabilities assumed: | |
Weighted Average Useful Life (in years) | 5 years |
Business Combination (Details 2
Business Combination (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Defined Benefit Plan Disclosure [Line Items] | ||
Total Revenue | $ 579,951 | $ 1,239,369 |
Net Income | 180,292 | 139,470 |
Security Grade Protective Services, Ltd [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total Revenue | 579,951 | 1,239,369 |
Net Income | $ 180,292 | $ 139,470 |
Business Combination (Details 3
Business Combination (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Schedule of revenue and net loss effect on pro forma basis | ||||
Revenues | $ 579,951 | $ 1,239,369 | ||
Net loss | 180,292 | 139,470 | ||
Net loss attributable to common shareholders | (8,300,315) | $ (371,785) | (19,320,872) | $ (2,484,624) |
Pro Forma [Member] | ||||
Schedule of revenue and net loss effect on pro forma basis | ||||
Revenues | 1,709,697 | 1,026,401 | 3,607,865 | 2,503,599 |
Net loss | (75,065) | (291,282) | (7,970,731) | (2,387,097) |
Net loss attributable to common shareholders | $ (8,120,023) | $ (291,282) | $ (19,171,576) | $ (2,387,097) |
Loss per share attributable to common shareholders: | ||||
Basic and diluted-as pro forma (unaudited) | $ (0.28) | $ (0.01) | $ (0.67) | $ (0.09) |
Business Combination (Details T
Business Combination (Details Textual) - USD ($) | Apr. 11, 2017 | Oct. 01, 2015 | Jun. 02, 2017 | Sep. 30, 2017 | Sep. 30, 2017 |
Business Combination (Textual) | |||||
Business acquisition, description | The Company entered into a Membership Interest Purchase Agreement in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. ("Security Grade"), which comprised of 800,000 Class A Units and 200,000 Class B Units. | Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 20 million common shares and 1 million convertible preferred shares of the Company. | |||
Liability pursuant to agreement | $ 500,373 | $ 500,373 | |||
Cash payment will be payable | $ 800,000 | ||||
Fair value of contingent consideration | $ 916,643 | ||||
Change in fair value of contingent consideration | (25,078) | 10,186 | |||
Total acquisition costs | $ 0 | $ 17,659 | |||
Security Grade Protective Services, Ltd [Member] | |||||
Business Combination (Textual) | |||||
Business acquisition, description | The Company entered into a Membership Interest Purchase Agreement (the "Agreement") in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. ("Security Grade"), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the "Initial Stock Options"). | ||||
Business combination, contractual relationship description | Provided that, within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the closing, on the 61st day following the closing, the Company shall issue 207,427 additional stock options (the "Additional Stock Options"). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Agreement within the first 60 days following the closing, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Agreement in the 180 days immediately preceding such termination. |
Asset Acquisition (Details)
Asset Acquisition (Details) - USD ($) | Apr. 11, 2016 | Mar. 14, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | |
Asset Acquisition (Textual) | |||||
Total consideration | $ 300,000 | $ 350,000 | |||
Acquisition of assets, description | On April 11, 2016, the Company entered into an asset purchase agreement with Revolutionary; in which the Company purchased all of the intangible rights and property of Revolutionary for total consideration of $300,000 payable in two equal installments pursuant to a promissory note and 2,320,000 shares of restricted common stock of the Company. As of June 30, 2017, the Company owed Revolutionary $0. | On March 14, 2016, the Company purchased one-third of the equity interest in Revolutionary for total consideration of $350,000 in cash and 75,000 shares of common stock of the Company. $50,000 was paid in cash at closing, with the balance ($300,000) being paid in twenty-four monthly installments of $10,417, with a final payment of $50,000 to be paid on the twenty-fifth month. | |||
Total purchase price for assets acquired | [1] | $ 3,184,578 | $ 1,596,750 | ||
Liability pursuant to the revolutionary asset acquisition | $ 47,906 | ||||
[1] | On April 11, 2016, the Company acquired various assets of Revolutionary Software, LLC. (See Note 6) |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Property and Equipment, Net [Line Items] | ||
Total | $ 192,487 | $ 83,026 |
Less: Accumulated depreciation | (70,015) | (27,426) |
Property and equipment, net | 122,472 | 55,600 |
Furniture and equipment [Member] | ||
Property and Equipment, Net [Line Items] | ||
Total | 16,332 | 14,731 |
Vehicles [Member] | ||
Property and Equipment, Net [Line Items] | ||
Total | 175,412 | 68,295 |
Software [Member] | ||
Property and Equipment, Net [Line Items] | ||
Total | $ 743 |
Property and Equipment, Net (53
Property and Equipment, Net (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Property and Equipment, Net (Textual) | ||||
Depreciation expense | $ 19,553 | $ 4,424 | $ 42,589 | $ 16,519 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||
Intangible Assets, Net [Line Items] | ||||
Gross Carrying Amount | $ 318,427 | |||
Assets Acquired Pursuant to Business Combination | [1] | $ 3,184,578 | 1,596,750 | |
Impairment | [2] | (1,278,323) | ||
Accumulated Amortization | (287,401) | (38,683) | ||
Net Book Value | $ 3,215,604 | $ 279,744 | ||
In-process Software [Member] | ||||
Intangible Assets, Net [Line Items] | ||||
Estimated Useful Life (Years) | 5 years | |||
Gross Carrying Amount | ||||
Assets Acquired Pursuant to Business Combination | [1] | $ 800,500 | ||
Impairment | [2] | (800,500) | ||
Accumulated Amortization | ||||
Net Book Value | ||||
Database [Member] | ||||
Intangible Assets, Net [Line Items] | ||||
Estimated Useful Life (Years) | 5 years | 5 years | ||
Gross Carrying Amount | $ 93,427 | |||
Assets Acquired Pursuant to Business Combination | [1] | 571,250 | ||
Impairment | [2] | (477,823) | ||
Accumulated Amortization | (27,476) | (13,464) | ||
Net Book Value | $ 65,951 | $ 79,963 | ||
Trade names [Member] | ||||
Intangible Assets, Net [Line Items] | ||||
Estimated Useful Life (Years) | 10 years | |||
Gross Carrying Amount | $ 100,000 | |||
Assets Acquired Pursuant to Business Combination | [1] | 100,000 | ||
Impairment | [2] | |||
Accumulated Amortization | (7,205) | |||
Net Book Value | $ 92,795 | |||
Tradenames and trademarks [Member] | ||||
Intangible Assets, Net [Line Items] | ||||
Estimated Useful Life (Years) | 10 years | |||
Assets Acquired Pursuant to Business Combination | [1] | $ 25,000 | ||
Accumulated Amortization | (15,526) | |||
Net Book Value | $ 109,474 | |||
Web addresses [Member] | ||||
Intangible Assets, Net [Line Items] | ||||
Estimated Useful Life (Years) | 5 years | 5 years | ||
Gross Carrying Amount | $ 125,000 | |||
Assets Acquired Pursuant to Business Combination | [1] | $ 5,000 | 125,000 | |
Impairment | [2] | |||
Accumulated Amortization | (37,089) | (18,014) | ||
Net Book Value | $ 92,911 | 106,986 | ||
Customer list [Member] | ||||
Intangible Assets, Net [Line Items] | ||||
Estimated Useful Life (Years) | 5 years | |||
Gross Carrying Amount | ||||
Assets Acquired Pursuant to Business Combination | [1] | $ 3,154,578 | ||
Accumulated Amortization | (207,310) | |||
Net Book Value | $ 2,947,268 | |||
[1] | On April 11, 2016, the Company acquired various assets of Revolutionary Software, LLC. (See Note 6) | |||
[2] | During the second quarter for the Year ended December 31, 2016, the Company performed the two-step indefinite lived impairment test and determined the in-process software and database acquired failed both tests. Based on the testing performed, the Company recorded a non-cash impairment charge of $1,278,323. |
Intangible Assets, Net (Detai55
Intangible Assets, Net (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Intangible Assets, Net (Textual) | |||||
Non-cash impairment charges | $ 1,278,323 | ||||
Amortization expense related to intangible assets | $ 173,344 | $ 13,531 | $ 248,718 | $ 25,298 |
Costs, Estimated Earnings and56
Costs, Estimated Earnings and Billings (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Costs, Estimated Earnings and Billings [Abstract] | ||
Costs incurred on uncompleted contracts | $ 281,634 | |
Estimated earnings | 120,700 | |
Cost and estimated earnings earned on uncompleted contracts | 402,334 | |
Billings to date | 304,126 | |
Costs and estimated earnings in excess of billings on uncompleted contracts | 98,208 | |
Costs in excess of billings | 151,445 | |
Billings in excess of cost | (53,237) | |
Total | $ 98,208 |
Accounts Payable and Accrued 57
Accounts Payable and Accrued Expenses (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts Payable and Accrued Expenses [Abstract] | ||
Accounts payable | $ 156,447 | $ 83,308 |
Accrued expenses | 112,099 | 14,805 |
Accrued interest | 47,233 | 8,487 |
Total | $ 315,779 | $ 106,600 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Short-term Debt [Line Items] | ||
Convertible notes payable | $ 508,642 | $ 470,000 |
Less: Current portion | (508,642) | (470,000) |
Long-term portion | ||
Note Four, 0% convertible promissory note, unsecured, maturing June 1, 2017, net of debt discount for debt issuance costs and BCF [Member] | ||
Short-term Debt [Line Items] | ||
Convertible notes payable | 470,000 | |
Note Five, 10% convertible promissory note, fixed secured, originally maturing September 12, 2017, net of debt discount for debt issuance costs, warrants and BCF [Member] | ||
Short-term Debt [Line Items] | ||
Convertible notes payable | 183,334 | |
Note Six, 10% convertible promissory note, fixed secured, originally maturing September 13, 2017 [Member] | ||
Short-term Debt [Line Items] | ||
Convertible notes payable | 25,000 | |
Note Seven, 10% convertible promissory note, fixed secured, originally maturing October 26, 2017, net of debt discount for debt issuance costs and warrants [Member] | ||
Short-term Debt [Line Items] | ||
Convertible notes payable | $ 300,308 |
Convertible Notes Payable (De59
Convertible Notes Payable (Details Textual) | Feb. 12, 2016USD ($)TradingDays | Dec. 18, 2015USD ($)TradingDays | Dec. 16, 2015USD ($)TradingDays | May 17, 2017USD ($)$ / sharesshares | Apr. 26, 2017USD ($)TradingDays$ / sharesshares | Feb. 13, 2017USD ($)$ / sharesshares | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($)TradingDays$ / sharesshares | Mar. 31, 2017USD ($) | Jan. 30, 2017USD ($) | Dec. 31, 2015USD ($) |
Convertible Notes Payable (Textual) | |||||||||||||||
Change in fair value liability | |||||||||||||||
Interest expense on convertible debt | 230 | $ 300 | 460 | $ 600 | |||||||||||
Loss on extinguishment of debt | $ (4,611,395) | ||||||||||||||
Warrant issued to purchase shares of common stock | shares | 150,000 | ||||||||||||||
Warrants exercise price | $ / shares | $ 1 | ||||||||||||||
Beneficial conversion feature | $ 535,332 | ||||||||||||||
Loss on induced conversion of convertible note | 1,503,876 | ||||||||||||||
Interest expense | 117,760 | 9,493 | 678,354 | 23,560 | |||||||||||
Unsecured Convertible Promissory Note One [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Unsecured convertible promissory note | $ 75,000 | ||||||||||||||
Interest expense on convertible debt | 0 | 2,570 | |||||||||||||
Loss or gain pertaining to the change in fair value | 465 | 80,969 | |||||||||||||
Unsecured Convertible Promissory Note One [Member] | Investor [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Unsecured convertible promissory note | $ 100,000 | ||||||||||||||
Annual interest rate on debt | 7.00% | ||||||||||||||
Convertible notes payable, due date | Dec. 31, 2017 | ||||||||||||||
Discount on debt conversion, description | Forty percent (40%) discount to the average market closing price. | ||||||||||||||
Trading days related to conversion of debt | TradingDays | 5 | 10 | |||||||||||||
Fair value of liability | $ 90,436 | ||||||||||||||
Change in fair value liability | $ 9,546 | ||||||||||||||
Conversion rate, per share | $ / shares | $ 1 | ||||||||||||||
Restricted shares of common stock | shares | 50,000 | ||||||||||||||
Purchase price of stock, per share | $ / shares | $ 1 | ||||||||||||||
Common stock conversion, description | The Amended Note One was converted into 107,000 shares of restricted common stock. In addition, the Investor elected to purchase 50,000 restricted shares of common stock of the Company, which the Company received proceeds of $50,000 | ||||||||||||||
Induced conversion of convertible debt | $ 1,003,751 | ||||||||||||||
Interest expense on convertible debt | 0 | 3,471 | |||||||||||||
Interest expense | 0 | 1,765 | 0 | 5,236 | |||||||||||
Unsecured Convertible Promissory Note Two [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Unsecured convertible promissory note | $ 180,000 | ||||||||||||||
Interest expense on convertible debt | 0 | 2,570 | |||||||||||||
Loss or gain pertaining to the change in fair value | 465 | 80,969 | |||||||||||||
Unsecured Convertible Promissory Note Two [Member] | Investor Two [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Unsecured convertible promissory note | $ 100,000 | ||||||||||||||
Annual interest rate on debt | 7.00% | ||||||||||||||
Convertible notes payable, due date | Dec. 31, 2017 | ||||||||||||||
Discount on debt conversion, description | Forty percent (40%) discount to the average market closing price. | ||||||||||||||
Trading days related to conversion of debt | TradingDays | 5 | 10 | |||||||||||||
Conversion rate, per share | $ / shares | $ 1 | ||||||||||||||
Restricted shares of common stock | shares | 50,000 | ||||||||||||||
Purchase price of stock, per share | $ / shares | $ 1 | ||||||||||||||
Common stock conversion, description | The Amended Note Two was converted into 107,000 shares of restricted common stock. In addition, the Investor elected to purchase 50,000 restricted shares of common stock of the Company, which the Company received proceeds of $50,000 | ||||||||||||||
Induced conversion of convertible debt | $ 1,003,751 | ||||||||||||||
Interest expense on convertible debt | 0 | ||||||||||||||
Interest expense | 0 | 1,765 | 0 | 5,236 | |||||||||||
Unsecured Convertible Promissory Note Three [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Interest expense on convertible debt | 0 | 1,765 | |||||||||||||
Unsecured Convertible Promissory Note Three [Member] | Investor Three [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Unsecured convertible promissory note | $ 100,000 | ||||||||||||||
Annual interest rate on debt | 7.00% | ||||||||||||||
Convertible notes payable, due date | Dec. 31, 2017 | ||||||||||||||
Discount on debt conversion, description | Forty percent (40%) discount to the average market closing price. | ||||||||||||||
Trading days related to conversion of debt | TradingDays | 5 | 10 | |||||||||||||
Conversion rate, per share | $ / shares | $ 1 | ||||||||||||||
Restricted shares of common stock | shares | 25,000 | ||||||||||||||
Purchase price of stock, per share | $ / shares | $ 1 | ||||||||||||||
Common stock conversion, description | The Amended Note Three was converted into 106,000 shares of restricted common stock. In addition, the Investor elected to purchase 25,000 restricted shares of common stock of the Company, which the Company received proceeds of $25,000 | ||||||||||||||
Induced conversion of convertible debt | $ 882,641 | ||||||||||||||
Interest expense on convertible debt | 0 | 1,744 | 0 | 4,430 | |||||||||||
Loss or gain pertaining to the change in fair value | 465 | 71,405 | |||||||||||||
Interest expense | 0 | 1,765 | 0 | 4,430 | |||||||||||
Unsecured Convertible Promissory Note Four [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Fair value of liability | $ 500,000 | ||||||||||||||
Loss on extinguishment of debt | $ 4,611,395 | ||||||||||||||
Unsecured Convertible Promissory Note Four [Member] | Investor Four [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Unsecured convertible promissory note | $ 500,000 | 500,000 | 500,000 | ||||||||||||
Annual interest rate on debt | 0.00% | ||||||||||||||
Convertible preferred stock, terms of conversion, description | Company Default. In the event of a Company Event of Default, the Fourth Investor the shall have the right to elect to (i) at any time prior to June 30, 2017, convert the aggregate outstanding principal amount of Note Four into Class B Preferred Shares equal to 6.3% of the Company's equity capital calculated on a fully-diluted basis, or (ii) at any time commencing on July 1, 2017 and ending on September 31, 2017, have Note Four redeemed for cash at a redemption price, in aggregate, equal to 150% of the aggregate principal outstanding balance of Note Four or (iii) to convert Note Four into common shares of the Company equal to 6.3% of the Company's equity capital calculated on a fully-diluted basis. In the event the Holder does not elect any remedy in the event of a Company Event of Default, on September 31, 2017 the Amended Note shall be converted in whole into common shares of the Company equal to 6.3% of the Company's equity capital calculated on a fully-diluted basis.Holder Default. In the event of a Holder Event of Default, the Company shall have the right to either (i) redeem the Amended Note at par value at any time prior to June 1, 2017 or (ii) convert the outstanding principal balance into common shares of the Company at market value. The Valuation and Consideration provision in Section 2 of the Term Sheet is affirmed and ratified; provided, however, that the parties agree that the $12,000,000 valuation therein is subject to dilution of $600,000 from additional investments in the Company by third parties following the Holder's $500,000 investment that is memorialized in the Note. For the avoidance of doubt, the Holder will receive the same number of shares as it would have for its investment if it had converted at a $12,000,000 valuation on October 20, 2016 given the 26,587,497 shares outstanding at that time. For the avoidance of doubt, the Note will convert into 1,162,500 shares. | ||||||||||||||
Aggregate principal amount of investment | $ 500,000 | 500,000 | 500,000 | ||||||||||||
Loss on induced conversion of convertible note | $ 1,503,876 | ||||||||||||||
Series B preferred shares issued upon note four conversion | shares | 1,540,649 | ||||||||||||||
Unsecured Convertible Promissory Note Four [Member] | Investor Four [Member] | Maximum [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Conversion rate, per share | $ / shares | $ 0.43 | ||||||||||||||
Unsecured Convertible Promissory Note Four [Member] | Investor Four [Member] | Minimum [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Conversion rate, per share | $ / shares | $ 0.3245385 | ||||||||||||||
Secured Convertible Promissory Note Five [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Convertible notes payable, due date | Sep. 12, 2017 | ||||||||||||||
Interest expense on convertible debt | 64,603 | 0 | $ 183,333 | 0 | |||||||||||
Debt discounts amortized to interest expense | 64,603 | 0 | 183,333 | 0 | |||||||||||
Interest expense | 6,460 | 0 | 18,333 | 0 | |||||||||||
Secured Convertible Promissory Note Five [Member] | Investor Four [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Annual interest rate on debt | 10.00% | ||||||||||||||
Conversion rate, per share | $ / shares | $ 1.50 | ||||||||||||||
Interest expense on convertible debt | 390,666 | ||||||||||||||
Secured convertible promissory note | $ 183,333 | ||||||||||||||
Warrant issued to purchase shares of common stock | shares | 25,000 | ||||||||||||||
Warrants exercise price | $ / shares | $ 1 | ||||||||||||||
Retained amount | $ 16,666 | 16,666 | |||||||||||||
Unamortized discount | 183,333 | ||||||||||||||
Warrants issued amount | 22,000 | 22,000 | |||||||||||||
Value of debt | $ 166,666 | 183,333 | |||||||||||||
Beneficial conversion feature | $ 144,666 | ||||||||||||||
Secured Convertible Promissory Note Six [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Convertible notes payable, due date | Sep. 12, 2017 | ||||||||||||||
Interest expense | 1,090 | 0 | $ 2,713 | 0 | |||||||||||
Secured Convertible Promissory Note Six [Member] | Investor Three [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Interest expense on convertible debt | 1,090 | 0 | $ 2,713 | 0 | |||||||||||
Secured Convertible Promissory Note Six [Member] | Investor Four [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Annual interest rate on debt | 10.00% | ||||||||||||||
Conversion rate, per share | $ / shares | $ 6.10 | ||||||||||||||
Secured convertible promissory note | $ 25,000 | ||||||||||||||
Ownership Percentage | 10.00% | ||||||||||||||
Value of debt | $ 25,000 | ||||||||||||||
Secured Convertible Promissory Note Seven [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Convertible notes payable, due date | Oct. 26, 2017 | ||||||||||||||
Fair value of liability | $ 618,000 | 310,000 | $ 310,000 | ||||||||||||
Unamortized discount | 3,000 | 3,000 | |||||||||||||
Debt discounts amortized to interest expense | 36,220 | 0 | 61,510 | 0 | |||||||||||
Interest expense | 5,027 | $ 0 | 8,579 | $ 0 | |||||||||||
Secured Convertible Promissory Note Seven [Member] | Investor Three [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Interest expense on convertible debt | 1,781 | 1,781 | |||||||||||||
Unamortized discount | $ 9,690 | $ 9,690 | |||||||||||||
Secured Convertible Promissory Note Seven [Member] | Investor Four [Member] | |||||||||||||||
Convertible Notes Payable (Textual) | |||||||||||||||
Annual interest rate on debt | 10.00% | ||||||||||||||
Trading days related to conversion of debt | TradingDays | 30 | ||||||||||||||
Change in fair value liability | $ 210,000 | ||||||||||||||
Convertible preferred stock, terms of conversion, description | At the lower of $1.00 or a 50% discount to the lowest closing bid price of the Company’s common stock for the 30 Trading Days prior to conversion. | ||||||||||||||
Secured convertible promissory note | $ 100,000 | ||||||||||||||
Warrant issued to purchase shares of common stock | shares | 150,000 | ||||||||||||||
Warrants exercise price | $ / shares | $ 1 | ||||||||||||||
Retained amount | $ 25,000 | ||||||||||||||
Unamortized discount | 43,200 | ||||||||||||||
Value of debt | $ 72,000 |
Related Party Transactions (Det
Related Party Transactions (Details) | Mar. 11, 2016USD ($)TradingDays | May 31, 2017shares | Mar. 31, 2016USD ($)$ / sharesshares | Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2016USD ($) | Mar. 31, 2016$ / sharesshares | Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($)$ / sharesshares |
Related Party Transactions (Textual) | |||||||||
Related party loan balance | $ 102,000 | $ 102,000 | $ 76,500 | ||||||
Fair value of liability | 265,593 | 265,593 | |||||||
Change in fair value of convertible note - related party | $ (34,725) | $ (697) | $ 8,971 | $ (107,107) | |||||
Shares of restricted common stock | shares | 111,111 | 150,000 | |||||||
Common stock per share | $ / shares | $ 0.25 | $ 0.25 | $ 0.16 | ||||||
Warrants to purchase shares | shares | 2,557,195 | 2,557,195 | 1,920,000 | ||||||
Subscription agreement [Member] | |||||||||
Related Party Transactions (Textual) | |||||||||
Shares of restricted common stock | shares | 960,000 | ||||||||
Total proceeds | $ 150,000 | ||||||||
Common stock per share | $ / shares | $ 0.16 | $ 0.16 | |||||||
Warrant exercise date, description | The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company's notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company's notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of September 30, 2017, the warrants granted are not exercisable. | ||||||||
Warrants to purchase shares | shares | 1,920,000 | 1,920,000 | |||||||
Helix Opportunities [Member] | |||||||||
Related Party Transactions (Textual) | |||||||||
Related party loan balance | $ 0 | $ 0 | |||||||
Company executive [Member] | |||||||||
Related Party Transactions (Textual) | |||||||||
Related party loan balance | 102,000 | 102,000 | |||||||
Note Eight [Member] | |||||||||
Related Party Transactions (Textual) | |||||||||
Interest expense | $ 2,675 | $ 2,646 | $ 7,853 | $ 7,853 | |||||
Note Eight [Member] | Related Party Holder [Member] | |||||||||
Related Party Transactions (Textual) | |||||||||
Principal amount | $ 150,000 | ||||||||
Annual rate of interest | 7.00% | ||||||||
Discount on debt conversion, description | Forty percent (40%) discount to the average market closing price. | ||||||||
Trading days related to conversion of debt | TradingDays | 5 |
Promissory Notes and Notes Pa61
Promissory Notes and Notes Payable (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Feb. 13, 2017 | Jan. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Promissory Notes and Notes Payable (Textual) | ||||||
Interest expense on unsecured promissory note | $ 230 | $ 300 | $ 460 | $ 600 | ||
Unsecured promissory note [Member] | ||||||
Promissory Notes and Notes Payable (Textual) | ||||||
Unsecured promissory note | $ 75,000 | |||||
Fixed interest rate of unsecured promissory note | 8.00% | |||||
Outstanding on unsecured promissory note | 0 | |||||
Interest expense on unsecured promissory note | 0 | 2,570 | ||||
Promissory note due, description | Due and payable on June 30, 2017. | |||||
Unsecured promissory note one [Member] | ||||||
Promissory Notes and Notes Payable (Textual) | ||||||
Unsecured promissory note | $ 180,000 | |||||
Fixed interest rate of unsecured promissory note | 8.00% | |||||
Outstanding on unsecured promissory note | 0 | |||||
Interest expense on unsecured promissory note | $ 0 | $ 2,570 | ||||
Promissory note due, description | Due and payable on June 30, 2017. |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Notes Payables [Abstract] | ||
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022 | $ 50,933 | |
Loans payable - Credit Union | 16,857 | |
Less: Current portion of loans payable | (10,268) | |
Long-term portion of loans payable | $ 50,933 |
Notes Payable (Details Textual)
Notes Payable (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Notes Payable (Textual) | ||||
Interest expense associated with notes payable | $ 230 | $ 300 | $ 460 | $ 600 |
Maximum [Member] | ||||
Notes Payable (Textual) | ||||
Loans payable, interest rate | 7.00% | 7.00% | ||
Minimum [Member] | ||||
Notes Payable (Textual) | ||||
Loans payable, interest rate | 4.70% | 4.70% |
Shareholders' Equity (Deficit64
Shareholders' Equity (Deficit) (Details) - Series B Preferred Stock [Member] | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($)shares | Sep. 30, 2017USD ($)shares | |
Class of Stock [Line Items] | ||
Number of shares | shares | 9,830,035 | 9,830,035 |
Fair Value of Beneficial Conversion Feature | $ 34,634,690 | $ 34,634,690 |
Amount accreted as a deemed dividend | (8,044,958) | (11,200,845) |
Unamortized Beneficial Conversion Feature | $ 23,433,845 | $ 23,433,845 |
May 17, 2017 [Member] | ||
Class of Stock [Line Items] | ||
Issuance Date | May 17, 2017 | May 17, 2017 |
Beneficial Conversion Feature Term (months) | 12 months | 12 months |
Number of shares | shares | 7,318,084 | 7,318,084 |
Fair Value of Beneficial Conversion Feature | $ 25,247,098 | $ 25,247,098 |
Amount accreted as a deemed dividend | (6,311,775) | (9,467,662) |
Unamortized Beneficial Conversion Feature | $ 15,779,436 | $ 15,779,436 |
July 29, 2017 [Member] | ||
Class of Stock [Line Items] | ||
Issuance Date | Jul. 29, 2017 | Jul. 29, 2017 |
Beneficial Conversion Feature Term (months) | 9 months 15 days | 9 months 15 days |
Number of shares | shares | 1,680,000 | 1,680,000 |
Fair Value of Beneficial Conversion Feature | $ 6,804,000 | $ 6,804,000 |
Amount accreted as a deemed dividend | (1,493,561) | (1,493,561) |
Unamortized Beneficial Conversion Feature | $ 5,310,439 | $ 5,310,439 |
August 29, 2017 [Member] | ||
Class of Stock [Line Items] | ||
Issuance Date | Aug. 29, 2017 | Aug. 29, 2017 |
Beneficial Conversion Feature Term (months) | 8 months 15 days | 8 months 15 days |
Number of shares | shares | 369,756 | 369,756 |
Fair Value of Beneficial Conversion Feature | $ 1,148,263 | $ 1,148,263 |
Amount accreted as a deemed dividend | (143,533) | (143,533) |
Unamortized Beneficial Conversion Feature | $ 1,004,730 | $ 1,004,730 |
September 15, 2017 [Member] | ||
Class of Stock [Line Items] | ||
Issuance Date | Sep. 15, 2017 | Sep. 15, 2017 |
Beneficial Conversion Feature Term (months) | 8 months | 8 months |
Number of shares | shares | 462,195 | 462,195 |
Fair Value of Beneficial Conversion Feature | $ 1,435,329 | $ 1,435,329 |
Amount accreted as a deemed dividend | (96,089) | (96,089) |
Unamortized Beneficial Conversion Feature | $ 1,339,240 | $ 1,339,240 |
Shareholders' Equity (Deficit65
Shareholders' Equity (Deficit) (Details Textual) - USD ($) | Sep. 15, 2017 | Aug. 23, 2017 | Aug. 29, 2017 | Jul. 28, 2017 | May 31, 2017 | May 17, 2017 | Oct. 31, 2015 | Sep. 30, 2017 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Convertible preferred shares | 1,000,000 | 1,000,000 | ||||||||||
Net proceeds | $ 100,000 | |||||||||||
Common stock per share | $ 0.25 | $ 0.25 | $ 0.16 | |||||||||
Beneficial conversion feature | $ 535,332 | |||||||||||
Shares of restricted common stock | 111,111 | 150,000 | ||||||||||
Series B Preferred Stock Purchase Agreement [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Accredited investors an aggregate shares | 462,195 | 369,756 | 1,680,000 | |||||||||
Aggregate cash payment | $ 150,000 | $ 120,000 | $ 840,000 | |||||||||
Director [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Ratio split | 1 for 4 reverse split | |||||||||||
Preferred stock (Class A) [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Convertible preferred shares | 15,746,127 | 15,746,127 | ||||||||||
Preferred stock majority voting rights, description | The Class A Preferred Stock included super majority voting rights and were convertible into 60% of the Company’s common stock. | |||||||||||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||
Preferred stock, shares issued | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||
Beneficial conversion feature | ||||||||||||
Ratio split | 1:1 ratio | |||||||||||
Preferred stock (Class A) [Member] | Security Consultants Group, LLC [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Convertible preferred shares | 1,000,000 | |||||||||||
Equity method investment ownership percentage | 100.00% | |||||||||||
Preferred stock (Class A) [Member] | Boss Security Solutions, Inc. [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Convertible preferred shares | 1,000,000 | |||||||||||
Equity method investment ownership percentage | 100.00% | |||||||||||
Preferred stock (Class B) [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Preferred stock, shares authorized | 13,000,000 | 13,000,000 | 13,000,000 | |||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||
Preferred stock, shares issued | 9,830,035 | 9,830,035 | 0 | |||||||||
Preferred conversion rate, description | The Preferred Conversion Rate shall be the quotient obtained by dividing the Preferred Stock Original Issue Price ($0.3253815) by the Preferred Stock Conversation Price in effect at the time of the conversion (the initial conversion price will be equal to the Preferred Stock Original Issue Price, subject to adjustment in the event of stock splits, stock dividends, and fundamental transactions). Based on the current conversion price, the Series B Preferred Shares are convertible into 9,830,035 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (i) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (ii) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company's Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000). | |||||||||||
Purchase price per share | $ 3.98 | |||||||||||
Net cash proceeds | $ 50,000,000 | $ 50,000,000 | ||||||||||
Beneficial conversion feature | ||||||||||||
Preferred stock original issue price | $ 0.325 | $ 0.325 | ||||||||||
Increase in number of shares authorized | 13,000,000 | |||||||||||
Preferred stock (Class B) [Member] | Series B Preferred Stock Purchase Agreement [Member] | ||||||||||||
Shareholders' Equity (Deficit) (Textual) | ||||||||||||
Convertible preferred shares | 1,536,658 | |||||||||||
Accredited investors an aggregate shares | 5,781,426 | |||||||||||
Gross proceeds from sold on shares | $ 1,875,000 | |||||||||||
Unsecured convertible promissory note | $ 500,000 | |||||||||||
Preferred shares are convertible into common stock | 7,318,084 | |||||||||||
Purchase price per share | $ 0.3245385 | |||||||||||
Net proceeds | $ 1,772,500 | |||||||||||
Warrants issued | 462,195 | |||||||||||
Common stock per share | $ 0.325 | |||||||||||
Beneficial conversion feature | $ 8,044,958 | $ 11,200,845 |
Stock Options (Details)
Stock Options (Details) - $ / shares | Aug. 02, 2017 | Jun. 02, 2017 |
Stock Options [Abstract] | ||
Exercise Price | $ 0.001 | $ 0.001 |
Fair value of company's common stock | $ 4.20 | $ 4.42 |
Dividend yield | 0.00% | 0.00% |
Expected volatility | 179.90% | 181.20% |
Risk Free interest rate | 1.52% | 1.42% |
Expected life (years) | 2 years 8 months 2 days | 2 years 8 months 2 days |
Stock Options (Details 1)
Stock Options (Details 1) | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Stock Options [Abstract] | |
Beginning Outstanding, Shares Underlying Options | shares | |
Granted, Shares Underlying Options | shares | 414,854 |
Forfeited and expired, Shares Underlying Options | shares | |
Exercised, Shares Underlying Options | shares | |
Ending Outstanding, Shares Underlying Options | shares | 414,854 |
Vested options, Shares Underlying Options | shares | 414,854 |
Beginning Outstanding, Weighted Average Exercise Price | $ / shares | |
Granted, Weighted Average Exercise Price | $ / shares | 0.001 |
Forfeited and expired, Weighted Average Exercise Price | $ / shares | |
Exercised, Weighted Average Exercise Price | $ / shares | |
Ending Outstanding, Weighted Average Exercise Price | $ / shares | 0.001 |
Vested options, Weighted Average Exercise Price | $ / shares | $ 0.001 |
Granted, Weighted Average Remaining Contractual Term (in years) | 3 years |
Outstanding, Weighted Average Remaining Contractual Term (in years) | 2 years 8 months 2 days |
Vested options, Weighted Average Remaining Contractual Term (in years) | 2 years 8 months 2 days |
Stock Options (Details Textual)
Stock Options (Details Textual) - $ / shares | Jun. 02, 2017 | Sep. 30, 2017 |
Stock Options (Textual) | ||
Options to purchase on shares | 414,854 | |
Common stock at price per share | $ 0.001 | |
Options to purchase issued shares | 207,427 | |
Vesting of remaining shares | 207,427 | 207,427 |
Options term, description | The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant. |
Warrants (Details)
Warrants (Details) | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Summary of warrant activity | |
Warrant Shares, Balance at beginning of period | shares | 1,920,000 |
Warrant Shares, Warrants granted | shares | 637,195 |
Warrant Shares, Balance at end of period | shares | 2,557,195 |
Weighted Average Exercise Price, Balance at beginning of period | $ / shares | $ 0.16 |
Weighted Average Exercise Price, Warrants granted | $ / shares | 0.51 |
Weighted Average Exercise Price, Balance at end of period | $ / shares | $ 0.25 |
Warrants (Detail 1)
Warrants (Detail 1) - USD ($) | 1 Months Ended | 9 Months Ended | ||
May 17, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
Schedule of fair value of the warrants Black-Scholes model | ||||
Fair value of company's common stock | $ 3.98 | $ 3.10 | ||
Dividend yield | 0.00% | 0.00% | ||
Expected volatility | 181.20% | 243.50% | ||
Risk Free interest rate | 1.42% | 1.62% | ||
Expected life (years) | 3 years | 2 years 7 months 17 days | ||
Fair value of financial instruments - warrants | $ 1,839,133 | $ 1,432,529 | $ 1,963,924 |
Warrants (Details 2)
Warrants (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
Summary of warrants | |||
Begining Balance | $ 1,963,924 | ||
Fair value of warrants at date of inception | 1,839,133 | ||
Change in fair value of obligation to issue warrants | (531,395) | (406,604) | |
Ending Balance | $ 1,432,529 | $ 1,432,529 |
Warrants (Details Textual)
Warrants (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Feb. 13, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Warrants (Textual) | |||||
Warrant issued to purchase shares of common stock | 150,000 | ||||
Warrants exercise price | $ 1 | ||||
Change in fair value of obligation to issue warrants | $ 531,395 | $ 406,604 | |||
Warrant [Member] | |||||
Warrants (Textual) | |||||
Warrant issued to purchase shares of common stock | 462,195 | ||||
Warrants exercise price | $ 0.325 | ||||
Warrant exercisable, description | In connection with the issuance of the Note Seven the Company issued a warrant (the "Warrant") to the Purchaser to purchase 150,000 shares of Common Stock pursuant to the terms and provisions thereunder. The Warrant is exercisable at any time within five (5) years of issuance and entitles the Purchaser to purchase 150,000 shares of the Common Stock at an exercise price of the lesser of either i) $1.00 or ii) a 50% discount to the lowest closing bid price thirty (30) trading days immediately preceding conversion, subject to certain adjustments. | ||||
Secured Convertible Promissory Note Five [Member] | Fourth Investor [Member] | |||||
Warrants (Textual) | |||||
Secured convertible promissory note | $ 183,333 | ||||
Cash | 166,666 | ||||
Retained amount | $ 16,666 | ||||
Warrant issued to purchase shares of common stock | 25,000 | ||||
Warrants exercise price | $ 1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Income Taxes (Textual) | ||
Tax carryforward, description | Amounts are available for carryforward for use in offsetting taxable income of future years through 2035. | |
Reduced to offsetting valuation allowance | $ 0 | |
Net operating loss carry forward | $ 5,800,000 | $ 1,385,000 |
Percentage of valuation reserve deferred tax benefit | 100.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Commitments and Contingencies (Textual) | ||||
Operating lease, rent expense | $ 14,438 | $ 18,033 | $ 55,159 | $ 62,697 |
Lease agreement expires date | Feb. 28, 2021 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Events [Member] | Nov. 21, 2017 | Nov. 16, 2017USD ($)TradingDays | Oct. 11, 2017USD ($)shares | Oct. 31, 2017USD ($)shares |
Subsequent Events (Textual) | ||||
Maturity date, description | All three notes shall have maturity dates that are six months from November 16, 2017. | |||
Discount rate on convertible debt | 15 | 40 | ||
Debt conversion number of trading days | TradingDays | 30 | |||
Annual rate of interest | 5.00% | |||
Accrued interest on unpaid principal balance | 110.00% | |||
Series B Preferred Stock [Member] | ||||
Subsequent Events (Textual) | ||||
Aggregate cash payment | $ 75,000 | $ 80,000 | ||
Sale to shares of preferred stock | shares | 231,097.5 | 246,504 | ||
Seventh Series B Preferred Stock [Member] | ||||
Subsequent Events (Textual) | ||||
Aggregate cash payment | $ 477,500 | |||
Sale to shares of preferred stock | shares | 795,833 | |||
Note Five [Member] | ||||
Subsequent Events (Textual) | ||||
Principal amount | $ 281,900 | |||
Note Six [Member] | ||||
Subsequent Events (Textual) | ||||
Principal amount | 38,441 | |||
Note Seven [Member] | ||||
Subsequent Events (Textual) | ||||
Principal amount | $ 131,107 |