Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 16, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | urban-gro, Inc. | |
Entity Central Index Key | 1,706,524 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 24,808,000 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash | $ 1,023,284 | $ 1,656,791 |
Accounts receivable, net | 896,797 | 642,553 |
Inventory | 1,183,032 | 1,124,714 |
Related party receivable | 31,804 | 13,540 |
Prepayments and advances | 1,165,347 | 859,277 |
Total current assets | 4,300,264 | 4,296,875 |
Non current assets | ||
Property, plant, and equipment, net | 284,770 | 224,824 |
Investments | 539,771 | 400,000 |
Other assets | 65,028 | 44,693 |
Total non current assets | 889,569 | 669,517 |
Total assets | 5,189,833 | 4,966,392 |
Current liabilities | ||
Accounts payable | 1,207,931 | 1,338,661 |
Accrued expenses | 1,177,051 | 1,256,115 |
Related party payable | 63,597 | 93,394 |
Customer deposits | 4,508,894 | 3,151,250 |
Short term notes payable | 476,606 | 188,000 |
Total current liabilities | 7,434,079 | 6,027,420 |
Non-current liabilities | ||
Long term notes payable | 0 | 300,000 |
Total long-term liabilities | 0 | 300,000 |
Total liabilities | 7,434,079 | 6,327,420 |
Commitments and contingencies, note 10 | ||
Equity | ||
Preferred stock, $0.1 par value; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2018 and December 31, 2017 | 0 | 0 |
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,808,000 and 25,046,000 shares issued and outstanding as of June 30, 2018, and December 31, 2017 respectively | 24,808 | 25,036 |
Additional Paid in Capital | 3,656,823 | 3,258,116 |
Retained earnings / (deficit) | (5,925,877) | (4,644,180) |
Total equity (deficit) | (2,244,246) | (1,361,028) |
Total liabilities and equity | $ 5,189,833 | $ 4,966,392 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ .10 | $ .10 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ .001 | $ .001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares outstanding | 24,808,000 | 25,046,000 |
Common stock, shares issued | 24,808,000 | 25,046,000 |
Statements of Operations and Co
Statements of Operations and Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | ||
Income Statement [Abstract] | |||||
Revenue | $ 5,897,300 | $ 3,368,570 | $ 9,343,664 | $ 4,795,114 | |
Cost of sales | 4,030,852 | 2,530,055 | 6,473,345 | 3,637,794 | |
Gross profit | 1,866,448 | 838,515 | 2,870,319 | 1,157,320 | |
Operating expenses | |||||
Marketing | 310,756 | 123,169 | 433,193 | 183,423 | |
General and administrative | 2,030,100 | 1,087,992 | 3,679,557 | 1,831,104 | |
Total operating expenses | 2,340,856 | 1,211,161 | 4,112,750 | 2,014,527 | |
Loss from operations | (474,408) | (372,646) | (1,242,431) | (857,207) | |
Other Income (Expenses) | |||||
Other income | (80) | 540 | 4,007 | 540 | |
Interest expense | (24,561) | (75,269) | (43,274) | (162,421) | |
Total other expenses | (24,641) | (74,729) | (39,267) | (161,881) | |
Net income (loss) | (499,049) | (447,375) | (1,281,698) | (1,019,088) | |
Comprehensive income (loss) | $ (499,049) | $ (447,375) | $ (1,281,698) | $ (1,019,088) | |
Earnings per share, Net loss per share - basic and diluted | $ (0.02) | $ (0.02) | $ (0.05) | $ (0.04) | |
Weighted average outstanding shares for the periods ended June 30, 2018 and June 30, 2017* | [1] | 24,672,505 | 22,826,154 | 24,856,149 | 22,663,978 |
[1] | Weighted shares outstanding for the period ended June 30, 2017 were recalculated from partnership units to common stock shares with a conversion rate of 193.3936722 shares for each LLC unit. |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Flows from Operating Activities | ||
Net Loss | $ (1,281,698) | $ (1,019,088) |
Adjustment to reconcile net loss from operations: | ||
Depreciation and amortization | 77,112 | 34,446 |
Warrant expense | 1,131 | 0 |
Inventory write-offs | 58,310 | 12,552 |
Bad debt expense | 39,963 | 112,783 |
Stock compensation expense | 213,955 | 8,690 |
Changes in Operating Assets and Liabilities | ||
Accounts receivable | (312,471) | (250,630) |
Inventory | (116,627) | (345,811) |
Prepayments and advances | (306,072) | (486,981) |
Other assets | 0 | (3,645) |
Accounts payable | (160,527) | 15,867 |
Accrued expenses | 20,934 | 224,239 |
Customer deposits | 1,357,645 | 1,963,614 |
Net Cash Provided by (Used in) Operating Activities | (408,344) | 266,036 |
Cash Flows from Investing Activities | ||
Purchase of investment | (139,771) | 0 |
Purchases of property and equipment | (136,721) | (30,670) |
Purchases of intangible assets | (20,671) | 0 |
Net Cash Used Provided By (Used In) Investing Activities | (297,163) | (30,670) |
Cash Flows from Financing Activities | ||
Issuance of capital stock | 80,000 | 185,000 |
Proceeds from issuance of notes payable | 0 | 294,546 |
Repayment of related party loan | 0 | (132,792) |
Repayment of notes payable | (8,000) | (42,000) |
Net Cash Provided by (Used In) Financing Activities | 72,000 | 304,754 |
Net Increase (Decrease) in Cash | (633,507) | 540,120 |
Cash at Beginning of Period | 1,656,791 | 17,463 |
Cash at End of Period | 1,023,284 | 557,583 |
Supplemental Cash Flow Information: | ||
Interest Paid | 43,274 | 162,421 |
Income Tax Paid | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Common stock issued to convert membership units | 0 | 742,313 |
Common stock issued to reduce convertible and promissory notes payable | 0 | 500,000 |
Common stock retired | $ 375 | $ 0 |
1. Organization, Basis of Prese
1. Organization, Basis of Presentation and Liquidity | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Basis of Presentation and Liquidity | NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND LIQUIDITY Urban-gro Inc., a Colorado corporation (the “Company”), was founded in 2014 as a limited liability company. On March 10, 2017, the Company was converted into a corporation. The Company provides product solutions to the commercial Cannabis cultivation industry, including commercial grade LED and HPS grow light systems, integrated pest management, automated fertilization / irrigation solutions, and a complete line of water treatment solutions in the State of Colorado and throughout the US and Canada. The Company’s products are integrated to ensure a cohesive approach to cultivation that is economical and legal. Basis of Presentation These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. Business Plan The Company’s diversification plans have led to the strategic decision to focus on brand as an ancillary national market leader delivering the best in class value added product solutions to cannabis cultivators. Management has implemented the following actions to increase profit margins and generate positive operating cash flow; 1) Establish strategic partnerships with our vendors to increase our margins for benches and control systems. 2) Implement fees to the customer for the design of their grow systems 3) Create a commissioning team and charge commissioning fees 4) Create and implement integrated pest management plans for our customers and increase sales of the biological controls and pesticides. Management believes these objectives will increase the Company’s gross profit and increase cash provided by operations. Liquidity Since inception, the Company has incurred operating losses and has funded its operations primarily through issuance of equity securities, unsecured debt, and operating revenue. As of June 30, 2018, the Company had an accumulated deficit of $(5,925,877) working capital of $(3,113,815) and stockholders’ equity of $(2,244,246). The Company has evaluated its projected cash flows and believes that its cash and cash equivalents of $1,023,284 as of June 30, 2018, will be sufficient to fund the Company’s operations through at least twelve months from the issuance date of these financial statements, or at least through June 30, 2019. Future financings, if necessary, may not be available to the Company at acceptable terms, or at all. Sales of additional equity securities would result in the dilution of interests of current shareholders. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, inventory write offs, and allowance for bad debt. Going Concern Assessment With the implementation of FASB’s new standard on going concern, ASC No. 205-40, beginning with the year ended December 31, 2016 and all annual and interim periods thereafter, we will assess going concern uncertainty for our financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital to operate for a period of at least one year from the date the financial statements are issued or are available to be issued, which is referred to as the “look - forward period” as defined by ASC No. 205-40. As part of this assessment, based on conditions that are known and reasonably knowable to us, we will consider various scenarios, forecasts, projections, and estimates, and we will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, among other factors, if necessary, within the look-forward period in accordance with ASC No 205-40. Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, notes payable and other current assets and liabilities. We value our financial assets and liabilities using fair value measurements. Fair value is based on 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. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level 1 Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2017 and 2016 approximates their fair values based on our incremental borrowing rates. There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the period ended June 30, 2018 and year ended December 31, 2017. Cash and Cash Equivalents The Company considers all highly liquid short term cash investments with an original maturity of three months or less to be cash equivalents. As of June 30, 2018 and December 31, 2017, the Company did not maintain any cash equivalents. The Company maintains cash with financial institutions that may from time to time exceed federally-insured limits. The Company has not experienced any losses related to these balances and believes the risk to be minimal. Accounts Receivable, Net Trade accounts receivables are carried at the original invoiced amounts less an allowance for doubtful accounts. As of June 30, 2018 and December 31, 2017 the balance of allowance for doubtful accounts was $91,737 and $63,455 respectively. The allowances for doubtful accounts are calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit to the customer. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. Bad debt expense for the three months ended June 30, 2018 and 2017 was $23,099 and $94,145 respectively. Bad debt expense for the six months ended June 30, 2018 and 2017 was $39,963 and $112,783 respectively. Inventory Inventories are stated at the lower of cost or net realizable value. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. All inventory is finished goods and no raw products or work in progress is recorded on the balance sheet. Write-downs and write-offs are charged to cost of goods sold at the realization of change in value. Once written down, inventories are carried at this lower cost basis until sold or scrapped. Property, Plant and Equipment, Net Property and equipment is stated at cost less accumulated depreciation and impairment. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. No impairment charges were recorded for period ended June 30, 2018 and 2017. The estimated useful lives for significant property and equipment categories are as follows: Computer and technology equipment 3 years Furniture and Equipment 5 years Leasehold Improvements Lease term Molds and Tooling 3 years Vehicles 3 years Warehouse Equipment 3 years Software 3 years Intangible Assets The Company’ intangible assets, consisting of legal fees for application of patents and trademarks are recorded at cost, and once approved will be amortized using the straight-line method over an estimated life, generally 5 years for patents and 10 to 20 years for trademarks. Intangible assets are included in “other assets” on the balance sheet. The net balance of intangible assets for June 30, 2018 and December 31, 2017 was $51,389 and $31,054 respectively. Amortization expense totaled $270 and $0 for the three months ended June 30, 2018 and 2017, respectively and $337 and $0 for the six months ended June 30, 2018 and 2017, respectively. Equity Investments In the first quarter of 2018, the Company adopted the ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10). Under the new ASC, entities no longer use the cost method of accounting as it was applied before, but it can elect a measurement alternative for equity investments that do not have readily determinable fair values and do not qualify for the practical expedient in ASC 820 to estimate fair value using the NAV per share. After management’s assessment of each of these two equity investments, management concluded that these two investments should be accounted for using measurement alternative. Under the alternative, the Company measures these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, and the Company has to make a separate election to use the alternative for each eligible investment and has to apply the alternative consistently from period to period until the investment’s fair value becomes readily determinable. ASU further requires that the Company should use prospective method for all equity investments without readily determinable fair values. Revenue Recognition The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers Customer Deposit The Company’s policy is to collect deposits from customers at the beginning of the project prior to the design phase. The customer payments received are recorded as a customer deposit liability on the balance sheet. When the project is complete and meets all the criteria for revenue recognition, the deposit is recorded against the customer’s Accounts Receivable Balance. In certain situations when the customer has paid the deposit and design work has been completed but the customer chooses not to proceed with the project, the Company may keep the deposit and book it to revenue. Cost of Goods Sold The Company’s policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition. The Company’s cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of our products, fees for third-party commissions and shipping costs. Total shipping costs included in the cost of goods sold was $81,568 for the three months ended June 30, 2018 and $59,227 for the three months ended June 30, 2017 and $157,768 for the six months ended June 30, 2018 and $101,725 for the six months ended June 30, 2017. Income Taxes The Company accounts for income taxes in accordance with the asset and liability method. Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established, as needed to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. There were no such interest or penalty for the periods ended June 30, 2018 and 2017. On December 22, 2017 the U.S. Tax Reform, which among other effects, reduces the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years, makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. The Company’s provisional estimate is that no tax will be due under this provision. The Company continues to gather information relating to this estimate. Deferred tax is provided in full on timing differences that exist at the balance sheet date and that result in an obligation to pay more tax, or a right to pay less tax in the future. The deferred tax is measured at the rate expected to apply in the periods in which the timing differences are expected to reverse, based on the tax rates and laws that are enacted or substantively enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Company’s financial statements. Deferred tax assets are recognized to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. There was no deferred tax asset as of June 30, 2018 and December 31, 2017. Advertising Costs The Company expenses advertisings costs in the periods the costs are incurred. Prepayments made under contracts are included in prepaid expenses and expensed when the advertisement is run. Total advertising expense incurred was $73,086 for the three months ended June 30, 2018 and $9,267 for the three months ended June 30, 2017 and $95,356 for the six months ended June 30, 2018 and $15,274 for the six months ended June 30, 2017. Share Based Compensation The Company periodically issue shares of its common stock to employees and consultants in non-capital raising transactions for fees and services. The Company accounts for stock issued to non-employees in accordance with ASC 505, Equity The Company accounts for stock grants issued and vesting to employees based on ASC 718, Compensation – Stock Compensation Earnings (Loss) Per Share The Company computes net earnings (loss) per share under Accounting Standards Codification subtopic 260-10, “Earnings Per Share” (“ASC 260-10”). Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period. Recently Issued Accounting Pronouncements From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our financial statements upon adoption. FASB ASU No. 2016-02, (Topic 842) “Leases” Leases (Topic 842), There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. |
3. Related Party Transactions
3. Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 3 – RELATED PARTY TRANSACTIONS The Company purchases lighting products from Bravo Lighting (“Bravo”) and Enviro-Glo, distributors of customized lighting solutions with common control by the Company’s CEO, Bradley Nattrass and CDO Octavio Gutierrez. Purchases from Bravo and Enviro-Glo were $72,432 and $222,339 for the three months ended June 30, 2018 and 2017, respectively and $142,410 and $332,525 for the six months ended June 30, 2018 and 2017 respectively. Outstanding receivables from Bravo and Enviro-Glo totaled $31,804 on June 30, 2018 and $13,540 on December 31, 2017. Net outstanding payables incurred for purchases of inventory and other services to Bravo and Enviro-Glo totaled $63,597 at June 30, 2018 and $93,394 at December 31, 2017. The Company also entered into a lease agreement with Bravo Lighting a related party, to sublease office space for 12 months commencing in September 2017. Minimum lease payments are $9,000 for the remainder of 2018. |
4. Prepayments and Advances
4. Prepayments and Advances | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepayments and Advances | NOTE 4 – PREPAYMENTS & ADVANCES Prepayments and Advances is comprised of advances paid to employees, prepaid services and fees and prepayments paid to vendors to initiate orders. The prepaid balances are summarized as follows: June 30, December 31, 2018 2017 Advances to Employees $ – $ 4,960 Prepaid Services and Fees 123,379 8,875 Vendor Prepayments 1,041,968 845,442 $ 1,165,347 $ 859,277 |
5. Property Plant and Equipment
5. Property Plant and Equipment, net | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property Plant and Equipment, net | NOTE 5 - PROPERTY PLANT & EQUIPMENT, NET Property Plant and Equipment balances are summarized as follows: June 30, December 31, 2018 2017 Computers & Technology Equip $ 53,714 $ 37,366 Furniture and Fixtures 28,690 24,825 Leasehold Improvements 143,215 143,215 Molds & Tooling 14,144 11,421 Marketing 15,386 – Vehicles 154,028 149,028 Warehouse Equipment 7,733 9,232 Software 18,950 6,550 R&D Assets 82,499 – Accumulated depreciation (233,589 ) (156,813 ) Property plant and equipment, net $ 284,770 $ 224,824 Depreciation expense totaled $41,961 and $17,499 for the three months ending June 30, 2018 and 2017, respectively and $76,775 and $34,446 for the six months ended June 30, 2018 and 2017, respectively. |
6. Investment
6. Investment | 6 Months Ended |
Jun. 30, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investment | NOTE 6 – INVESTMENT In August 2017, the Company entered into an agreement with Edyza Sensors, Inc., (”Edyza”), wherein the Company became Edyza’s exclusive agricultural partner in the attempt to provide wireless sensors to the cultivation solutions offered by the Company to the cannabis industry. As part of the terms of this agreement, Edyza has assigned the Company all of their global rights to two patent pending applications for sensor rods and moisture and salinity measurements, along with any additional patent rights that may arise as a result of this collaboration. In addition, Edyza issued the Company a Simple Agreement for Future Equity, to provide the Company with an ownership interest in Edyza in the principal amount of $400,000, to be issued when Edyza engages in a priced round of investment or liquidation occurs. As of June 30, 2018, the Company determined that no impairment is necessary given the recent valuations and no change in qualitative factors. In February 2018, the Company entered into an agreement with Total Grow Controls to purchase 5% on a fully diluted basis of Total Growth Holdings for $125,000. This agreement provides the Company with the right to purchase an additional 5% on a fully diluted basis at the same valuation on or before August 31, 2018. As of June 30, 2018, the Company determined that no impairment is necessary given the recent valuations and no change in qualitative factors. As of June 30, 2018 the Company’s current ownership percentage of Total Grow Controls was 5%. |
7. Cost of Patents
7. Cost of Patents | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Cost of Patents | NOTE 7 –COST OF PATENTS Costs of patents, which consist of legal costs paid to third parties to establish a patent, are capitalized until such time that the patents are approved and issued or rejected. If approved, capitalized costs are amortized using the straight-line method over the estimated lives of the patents, generally five years. There are no issued patents for the six months ended June 30, 2018 and December 31, 2017. |
8. Accrued Expenses
8. Accrued Expenses | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | NOTE 8 – ACCRUED EXPENSES Accrued expenses are summarized as follows: June 30, December 31, 2018 2017 Accrued operating expenses 219,336 153,946 Accrued stock compensation expense – 100,000 Accrued wages and related expenses 360,427 377,305 Accrued sales tax payable 597,288 624,864 $ 1,177,051 $ 1,256,115 Accrued sales tax payable is comprised of prior period sales tax payable to various states for the years ended December 2015, 2016, and 2017. The Company has set up payment plans with the various taxing agencies to relieve the obligation. The payment plans require monthly payments in various amounts for a period of 12 months or less. Additionally, as of June 30, 2018, the Company has a $166,224 receivable from customers for sales tax obligations. The Company believes it is more likely than not that the majority of the balance can be relieved by the customers providing the Company with resellers permits. This will also reduce the amount of the liability the Company owes to the taxing agencies. Additionally, the company has increased its allowance for doubtful accounts for customers that do not pay their outstanding tax liability. |
9. Notes Payable and Current Po
9. Notes Payable and Current Portion of Notes Payable | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable and Current Portion of Notes Payable | NOTE 9 – NOTES PAYABLE AND CURRENT PORTION OF NOTES PAYABLE Unsecured notes payable balances totaled $476,606 and $488,000 at June 30, 2018 and December 31, 2017, respectively. In March 2018, the Company extended the loan with Michael S. Bank for 1 year As of December 31, 2017, the Company deemed the loan long term due to the lender agreeing to extend the loan and not call the loan before the new expiration of March 23, 2019. As of June 30, 2018, the loan was classified as short term. Interest expense incurred on the unsecured notes payable is $24,561 and $75,269 for the three months ended June 30, 2018 and 2017, respectively. Interest expense incurred on the unsecured notes payable is $43,274 and $162,421 for the six months ended June 30, 2018 and 2017, respectively. The following is a summary of notes payable excluding related party notes payable: June 30, December 31, 2018 2017 Unsecured, interest-free, note payable with JW Properties, LLC. Principal is re-paid monthly with a maturity date of May 31, 2018. $ – $ 8,000 Unsecured note payable with Chris Parkes. Interest payments due monthly at an annual rate of 20.4%. Note payable revised in May 2017 amending principal due and extending maturity date to December 31, 2018. On May 9, 2017, as part of the private placement offering of the Company's common stock, the individual has converted part of this note into 300,000 common shares of the Company at $1.00 per share. 80,000 80,000 Unsecured note payable with David Parkes. Interest payments due monthly at an annual rate of 18%. Note payable revised in May 2017 amending principal due and extending maturity date to December 31, 2018. On May 9, 2017, as part of the private offering of the Company's common stock, the individual has converted part of this note into 200,000 common shares of the Company at $1.00 per share. 100,000 100,000 Unsecured note payable with Michael S. Bank. Interest at 19.8% per year is paid twice per month. The note contains a demand re-payment provision that can be executed by individual at any time by providing a one-time notice. The Company may re-pay any part or the entire principal sum at any time with penalty and abatement of interest expense from date of early payment. The note includes six thousand warrants, each exercisable to purchase shares of the Company's common stock at a price of $1 per share. The loan matures on March 23, 2019. 296,606 300,000 Total $ 476,606 $ 488,000 Less current maturities (476,606 ) (188,000 ) Long Term $ – $ 300,000 |
10. Commitments and Contingenci
10. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 10 – COMMITMENTS AND CONTINGENCIES The Company leases an office and warehouse in Lafayette, Colorado. The lease ends on August 31, 2020. Future minimum lease payments are $46,000 in 2018. The Company entered into a lease agreement with Bravo Lighting a related party, to sublease office space for 12 months commencing in September 2017. Minimum lease payments are $9,000 for the remainder of 2018. The Company leased two cars for the use of its employees in December 2017. The leases end December 2020. The future minimum payments for the car leases are $5,775 for the remainder of 2018. The following is a schedule showing future minimum lease payments: Year ending Total Minimum December 31, Lease Payments 2018 $ 60,775 2019 98,775 2020 67,775 2021 – 2022 – From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no legal proceedings for which management believes the ultimate outcome would have a material adverse effect on the Company’s results of operations and cash flows. |
11. Risks and Uncertainties
11. Risks and Uncertainties | 6 Months Ended |
Jun. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
Risks and Uncertainties | NOTE 11 – RISKS AND UNCERTAINTIES Concentration Risk During the three months ended June 30, 2018, one vendor composed 15% of total purchases and two unrelated vendors composed 11% each. During three months ended June 30, 2017, one vendor composed 44% of total purchases. During the six months ended June 30, 2018 one vendor composed 10% of total purchases. During the six months ended June 30, 2017, one vendor composed 37% of total purchases. See note 3 for discussion of related party transactions that represent the 2% of purchases from Bravo Lighting during the three months ending June 30, 2018 and 7% during the three months ending June 30, 2017. For the six months ending June 30, 2018 and 2017 the purchases from bravo represented 8% and 2% of total purchases, respectively. The Company’s primary suppliers of automated fertigation controls represented 30% and 16% of total accounts payable outstanding as of June 30, 2018 and December 31, 2017, respectively. The Company’s primary suppliers of benching represented 2% and 0% of total accounts payable outstanding as of June 30, 2018 and December 31, 2017, respectively. During the three months ended June 30, 2018 and 2017, one customer represented 27% and one customer 12% of total revenue respectively. During the six months ended June 30, 2018, one customer represented 17% of total revenue respectively. During the 6 months ended June 30, 2017, no customer represented more than 10% of total revenue. |
12. Stock Compensation
12. Stock Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Compensation | NOTE 12 - STOCK COMPENSATION In June 2017, the Company implemented a stock grant program to reward and attract employees with Common Stock. Stock grants are offered as part of the employment offer package or as a reward for performance. During the six months ended June 30, 2018, the Company reserved 446,500 shares of Common Stock to employees which will vest after a period of 1, 2 or 3 years of employment. The fair value of the stock is $446,500 based on the average share price of $1. The following schedule shows stock grant activity for the period ended June 30, 2018. Total Grants awarded as of December 31, 2017 310,000 Grants awarded 446,500 Forfeiture/Cancelled – Grants vested 137,000 Total Grants awarded as of June 30, 2018 619,500 The following table summarizes stock grant vesting periods. Year Ending Amount of Shares December 31, 295,167 2018 207,667 2019 116,666 2020 619,500 In January 2018, the Company implemented a stock options plan to reward and attract employees and compensate vendors for services. Stock options are offered as part of the employment offer package or as a reward for performance. Number of Shares Weighted Average Remaining Life (Years) Weighted Average Exercise Price Stock options outstanding as of December 31, 2017 – – – Issued 100,000 Exercised – Expired – Stock options outstanding at June 30, 2018 100,000 9.9 $ 1.00 Stock options exercisable at June 30, 2018 0 The following table summarizes stock option vesting periods. Year Ending Amount of Shares December 31, 50,000 2018 25,000 2019 25,000 2020 100,000 |
13. Shareholder's Equity and Me
13. Shareholder's Equity and Member's Deficit | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Shareholder's Equity and Member's Deficit | NOTE 13 – SHAREHOLDER’S EQUITY AND MEMBER’S DEFICIT The Company was formed by Bradley Nattrass and Octavio Gutierrez on March 20, 2014, as a Colorado limited liability company with equity contributions totaling $100 from each member. In August 2016, when still an LLC, the Company undertook a private offering of member interests wherein the Company received subscriptions of $575,107 in the form of 6,392 member interests to three (3) accredited investors (approximately $90 per member interest). On December 31, 2016, the Company issued 8,008 membership units to key employees. On December 31, 2016 the Company issued 1,943 membership units to vendors for services provided. Total outstanding membership units at December 31, 2016 were 116,343. In February 2017 under a 351 Exchange Agreement, the members converted an aggregate of 116,343 membership interests into 22,500,000 shares of Common Stock (193.3936722 to 1). The effective date for the exchange was February 23, 2017. In March 2017, the Company’s authorized capital consisted of 100,000,000 shares of Common Stock, $0.001 par value per share, and 10,000,000 shares of Preferred Stock, par value $0.10 per share. In June 2017, the Company implemented a stock grant program to reward and attract employees with Common Stock. Stock grants are offered as part of the employment offer package or as a reward for performance. As of December 31, 2017 there were 25,046,000 shares of Common Stock issued and outstanding. In March 2018, an executive left the Company and returned 375,000 Common Shares as part the separation agreement. The Company retired the shares and reduced its issued and outstanding stock by 375,000 shares. In June 2018, 137,000 shares of Common Stock previously reserved for issuance to employees, vested and were issued. As of June 30, 2018 there were no shares of Preferred Stock issued or outstanding and 24,808,000 shares of Common Stock issued and outstanding. |
14. Income Taxes
14. Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 14 - INCOME TAXES The Tax Cuts and Jobs Acts (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35% to 21%. ASC 740, “Income Taxes”, requires that effects of changes in tax rates to be recognized in the period enacted. Recognizing the late enactment of the Act and complexity of accurately accounting for its impact, the Securities and Exchange Commission in SAB 118 provides guidance that allows registrants to provide a reasonable estimate of the Act in their financial statements and adjust the reported impact in a measurement period not to exceed one year. The Company has not completed its accounting for the tax effects of the Act; however, a reasonable estimate was made to measure tax liabilities based on the rates at which they are expected to reverse in the future as a result of the reduction on the federal tax rate, and the Company has estimated no tax liability as of December 31, 2017 due to operating losses. The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax position that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. Management has filed an extension with the IRS and has not determined if it is more likely or not to recognize a loss carryforward. The Company had no tax positions relating to open income tax returns that were considered to be uncertain. The company utilizes FASB ASC 740, “Income Taxes” 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 or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company had no tax provisions as of June 30, 2018 and December 31, 2017. The Company had a net loss during the quarter ended June 30, 2018, resulting in no tax liability incurred in the current quarter. |
15. Warrants
15. Warrants | 6 Months Ended |
Jun. 30, 2018 | |
Warrants | |
Warrants | NOTE 15 – WARRANTS The Company issued one round of warrants related to a debt transactions that were issued on April 19, 2018. These were valued on this date per the signed agreements and issuance on April 19, 2018. The Company accounts for its warrants issued in accordance with the US GAAP accounting guidance under ASC 480. We estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option pricing based on the estimated market value of the underlying common stock at the valuation measurement date of $1.00, the remaining contractual term of the warrant of 5 years, risk-free interest rate of 2.75% and expected volatility of the price of the underlying common stock of 100%. There is a moderate degree of subjectivity involved when using option pricing models to estimate the warrants and the assumptions used in the Black Scholes option-pricing model are moderately judgmental. The following table summarizes our share warrants as of June 30, 2018 and December 31, 2017: June 30, December 31, 2018 2017 Number of shares Weighted Average Exercise Price Number of shares Weighted Average Exercise Price Warrants outstanding, beginning of period – – – – Warrants issued 6,000 $ 1.00 – Warrants exercised – – – – Warrants outstanding, end of period 6,000 $ 1.00 – – Warrants exercisable, end of period 6,000 $ 1.00 – – The weighted-average remaining contractual life for warrants outstanding and exercisable at June 30, 2018 is 4.8 years, and the aggregate intrinsic value of the warrants outstanding and exercisable at June 30, 2018 is $0. |
16. Subsequent Events
16. Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 16 – SUBSEQUENT EVENTS Management has evaluated subsequent events through August 16, 2018, which is the date the financial statements were available to be issued. There were no subsequent events that required adjustment to or disclosure in the consolidated financial statements. |
2. Summary of Significant Acc22
2. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, inventory write offs, and allowance for bad debt. |
Going Concern Assessment | Going Concern Assessment With the implementation of FASB’s new standard on going concern, ASC No. 205-40, beginning with the year ended December 31, 2016 and all annual and interim periods thereafter, we will assess going concern uncertainty for our financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital to operate for a period of at least one year from the date the financial statements are issued or are available to be issued, which is referred to as the “look - forward period” as defined by ASC No. 205-40. As part of this assessment, based on conditions that are known and reasonably knowable to us, we will consider various scenarios, forecasts, projections, and estimates, and we will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, among other factors, if necessary, within the look-forward period in accordance with ASC No 205-40. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, notes payable and other current assets and liabilities. We value our financial assets and liabilities using fair value measurements. Fair value is based on 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. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level 1 Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2017 and 2016 approximates their fair values based on our incremental borrowing rates. There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the period ended June 30, 2018 and year ended December 31, 2017 . |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid short term cash investments with an original maturity of three months or less to be cash equivalents. As of June 30, 2018 and December 31, 2017, the Company did not maintain any cash equivalents. The Company maintains cash with financial institutions that may from time to time exceed federally-insured limits. The Company has not experienced any losses related to these balances and believes the risk to be minimal. |
Accounts Receivable, Net | Accounts Receivable, Net Trade accounts receivables are carried at the original invoiced amounts less an allowance for doubtful accounts. As of June 30, 2018 and December 31, 2017 the balance of allowance for doubtful accounts was $91,737 and $63,455 respectively. The allowances for doubtful accounts are calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit to the customer. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required. A provision is made against accounts receivable to the extent they are considered unlikely to be collected. Bad debt expense for the three months ended June 30, 2018 and 2017 was $23,099 and $94,145 respectively. Bad debt expense for the six months ended June 30, 2018 and 2017 was $39,963 and $112,783 respectively. |
Inventory | Inventory Inventories are stated at the lower of cost or net realizable value. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. All inventory is finished goods and no raw products or work in progress is recorded on the balance sheet. Write-downs and write-offs are charged to cost of goods sold at the realization of change in value. Once written down, inventories are carried at this lower cost basis until sold or scrapped. |
Property, Plant and Equipment, Net | Property, Plant and Equipment, Net Property and equipment is stated at cost less accumulated depreciation and impairment. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. No impairment charges were recorded for period ended June 30, 2018 and 2017. The estimated useful lives for significant property and equipment categories are as follows: Computer and technology equipment 3 years Furniture and Equipment 5 years Leasehold Improvements Lease term Molds and Tooling 3 years Vehicles 3 years Warehouse Equipment 3 years Software 3 years |
Intangible Assets | Intangible Assets The Company’ intangible assets, consisting of legal fees for application of patents and trademarks are recorded at cost, and once approved will be amortized using the straight-line method over an estimated life, generally 5 years for patents and 10 to 20 years for trademarks. Intangible assets are included in “other assets” on the balance sheet. The net balance of intangible assets for June 30, 2018 and December 31, 2017 was $51,389 and $31,054 respectively. Amortization expense totaled $270 and $0 for the three months ended June 30, 2018 and 2017, respectively and $337 and $0 for the six months ended June 30, 2018 and 2017, respectively. |
Equity Investments | Equity Investments In the first quarter of 2018, the Company adopted the ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10). Under the new ASC, entities no longer use the cost method of accounting as it was applied before, but it can elect a measurement alternative for equity investments that do not have readily determinable fair values and do not qualify for the practical expedient in ASC 820 to estimate fair value using the NAV per share. After management’s assessment of each of these two equity investments, management concluded that these two investments should be accounted for using measurement alternative. Under the alternative, the Company measures these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, and the Company has to make a separate election to use the alternative for each eligible investment and has to apply the alternative consistently from period to period until the investment’s fair value becomes readily determinable. ASU further requires that the Company should use prospective method for all equity investments without readily determinable fair values. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers |
Customer Deposit | Customer Deposit The Company’s policy is to collect deposits from customers at the beginning of the project prior to the design phase. The customer payments received are recorded as a customer deposit liability on the balance sheet. When the project is complete and meets all the criteria for revenue recognition, the deposit is recorded against the customer’s Accounts Receivable Balance. In certain situations when the customer has paid the deposit and design work has been completed but the customer chooses not to proceed with the project, the Company may keep the deposit and book it to revenue. |
Cost of Goods Sold | Cost of Goods Sold The Company’s policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition. The Company’s cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of our products, fees for third-party commissions and shipping costs. Total shipping costs included in the cost of goods sold was $81,568 for the three months ended June 30, 2018 and $59,227 for the three months ended June 30, 2017 and $157,768 for the six months ended June 30, 2018 and $101,725 for the six months ended June 30, 2017. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with the asset and liability method. Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established, as needed to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. There were no such interest or penalty for the periods ended June 30, 2018 and 2017. On December 22, 2017 the U.S. Tax Reform, which among other effects, reduces the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years, makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. The Company’s provisional estimate is that no tax will be due under this provision. The Company continues to gather information relating to this estimate. Deferred tax is provided in full on timing differences that exist at the balance sheet date and that result in an obligation to pay more tax, or a right to pay less tax in the future. The deferred tax is measured at the rate expected to apply in the periods in which the timing differences are expected to reverse, based on the tax rates and laws that are enacted or substantively enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Company’s financial statements. Deferred tax assets are recognized to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. There was no deferred tax asset as of June 30, 2018 and December 31, 2017. |
Advertising Costs | Advertising Costs The Company expenses advertisings costs in the periods the costs are incurred. Prepayments made under contracts are included in prepaid expenses and expensed when the advertisement is run. Total advertising expense incurred was $73,086 for the three months ended June 30, 2018 and $9,267 for the three months ended June 30, 2017 and $95,356 for the six months ended June 30, 2018 and $15,274 for the six months ended June 30, 2017. |
Share Based Compensation | Share Based Compensation The Company periodically issue shares of its common stock to employees and consultants in non-capital raising transactions for fees and services. The Company accounts for stock issued to non-employees in accordance with ASC 505, Equity The Company accounts for stock grants issued and vesting to employees based on ASC 718, Compensation – Stock Compensation |
Earnings (Loss) Per Share | Earnings (Loss) Per Share The Company computes net earnings (loss) per share under Accounting Standards Codification subtopic 260-10, “Earnings Per Share” (“ASC 260-10”). Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our financial statements upon adoption. FASB ASU No. 2016-02, (Topic 842) “Leases” Leases (Topic 842), There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. |
4. Prepayments and Advances (Ta
4. Prepayments and Advances (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid balances | June 30, December 31, 2018 2017 Advances to Employees $ – $ 4,960 Prepaid Services and Fees 123,379 8,875 Vendor Prepayments 1,041,968 845,442 $ 1,165,347 $ 859,277 |
5. Property Plant and Equipme24
5. Property Plant and Equipment, net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment | June 30, December 31, 2018 2017 Computers & Technology Equip $ 53,714 $ 37,366 Furniture and Fixtures 28,690 24,825 Leasehold Improvements 143,215 143,215 Molds & Tooling 14,144 11,421 Marketing 15,386 – Vehicles 154,028 149,028 Warehouse Equipment 7,733 9,232 Software 18,950 6,550 R&D Assets 82,499 – Accumulated depreciation (233,589 ) (156,813 ) Property plant and equipment, net $ 284,770 $ 224,824 |
8. Accrued Expenses (Tables)
8. Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses | June 30, December 31, 2018 2017 Accrued operating expenses 219,336 153,946 Accrued stock compensation expense – 100,000 Accrued wages and related expenses 360,427 377,305 Accrued sales tax payable 597,288 624,864 $ 1,177,051 $ 1,256,115 |
9. Notes Payable and Current 26
9. Notes Payable and Current Portion of Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | June 30, December 31, 2018 2017 Unsecured, interest-free, note payable with JW Properties, LLC. Principal is re-paid monthly with a maturity date of May 31, 2018. $ – $ 8,000 Unsecured note payable with Chris Parkes. Interest payments due monthly at an annual rate of 20.4%. Note payable revised in May 2017 amending principal due and extending maturity date to December 31, 2018. On May 9, 2017, as part of the private placement offering of the Company's common stock, the individual has converted part of this note into 300,000 common shares of the Company at $1.00 per share. 80,000 80,000 Unsecured note payable with David Parkes. Interest payments due monthly at an annual rate of 18%. Note payable revised in May 2017 amending principal due and extending maturity date to December 31, 2018. On May 9, 2017, as part of the private offering of the Company's common stock, the individual has converted part of this note into 200,000 common shares of the Company at $1.00 per share. 100,000 100,000 Unsecured note payable with Michael S. Bank. Interest at 19.8% per year is paid twice per month. The note contains a demand re-payment provision that can be executed by individual at any time by providing a one-time notice. The Company may re-pay any part or the entire principal sum at any time with penalty and abatement of interest expense from date of early payment. The note includes six thousand warrants, each exercisable to purchase shares of the Company's common stock at a price of $1 per share. The loan matures on March 23, 2019. 296,606 300,000 Total $ 476,606 $ 488,000 Less current maturities (476,606 ) (188,000 ) Long Term $ – $ 300,000 |
10. Commitments and Contingen27
10. Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum operating lease payments | Year ending Total Minimum December 31, Lease Payments 2018 $ 60,775 2019 98,775 2020 67,775 2021 – 2022 – |
12. Stock Compensation (Tables)
12. Stock Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock grant activity | Total Grants awarded as of December 31, 2017 310,000 Grants awarded 446,500 Forfeiture/Cancelled – Grants vested 137,000 Total Grants awarded as of June 30, 2018 619,500 |
Schedule of stock grant vesting periods | Year Ending Amount of Shares December 31, 295,167 2018 207,667 2019 116,666 2020 619,500 |
Schedule of stock option activity | Number of Shares Weighted Average Remaining Life (Years) Weighted Average Exercise Price Stock options outstanding as of December 31, 2017 – – – Issued 100,000 Exercised – Expired – Stock options outstanding at June 30, 2018 100,000 9.9 $ 1.00 Stock options exercisable at June 30, 2018 0 |
Schedule of stock option vesting periods | Year Ending Amount of Shares December 31, 50,000 2018 25,000 2019 25,000 2020 100,000 |
15. Warrants (Tables)
15. Warrants (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Schedule of warrant activity | June 30, December 31, 2018 2017 Number of shares Weighted Average Exercise Price Number of shares Weighted Average Exercise Price Warrants outstanding, beginning of period – – – – Warrants issued 6,000 $ 1.00 – Warrants exercised – – – – Warrants outstanding, end of period 6,000 $ 1.00 – – Warrants exercisable, end of period 6,000 $ 1.00 – – |
1. Organization, Basis of Pre30
1. Organization, Basis of Presentation and Liquidity (Details Narrative) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (5,925,877) | $ (4,644,180) |
Working capital | (3,113,815) | |
Stockholders' Equity | (2,244,246) | $ (1,361,028) |
Cash and cash equivalents | $ 1,023,284 |
2. Summary of Significant Acc31
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Allowance for doubtful accounts | $ 91,737 | $ 91,737 | $ 63,455 | ||
Bad debt expense | 23,099 | $ 94,145 | 39,963 | $ 112,783 | |
Impairment charges | 0 | 0 | |||
Intangible assets, net | 51,389 | 51,389 | $ 31,054 | ||
Amortization expense | 270 | 0 | 337 | 0 | |
Shipping expense | 4,030,852 | 2,530,055 | 6,473,345 | 3,637,794 | |
Advertising | 73,086 | 9,267 | 95,356 | 15,274 | |
Shipping and Handling [Member] | |||||
Shipping expense | $ 81,568 | $ 59,227 | $ 157,768 | $ 101,725 | |
Patents [Member] | |||||
Property useful lives | 5 years | ||||
Trademarks [Member] | |||||
Property useful lives | 10-20 years | ||||
Computer and Technology Equipment [Member] | |||||
Property useful lives | 3 years | ||||
Furniture and Fixtures [Member] | |||||
Property useful lives | 5 years | ||||
Leasehold Improvements [Member] | |||||
Property useful lives | Lease term | ||||
Molds and Tooling [Member] | |||||
Property useful lives | 3 years | ||||
Vehicles [Member] | |||||
Property useful lives | 3 years | ||||
Equipment [Member] | |||||
Property useful lives | 3 years | ||||
Software [Member] | |||||
Property useful lives | 3 years |
3. Related Party Transactions (
3. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |||||
Related party purchases | $ 72,432 | $ 222,339 | $ 142,410 | $ 332,525 | |
Related party receivables | 31,804 | 31,804 | $ 13,540 | ||
Related party payables | $ 63,597 | $ 63,597 | $ 93,394 |
4. Prepayments and Advances (De
4. Prepayments and Advances (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Prepayments and advances | $ 1,165,347 | $ 859,277 |
Advances to Employees [Member] | ||
Prepayments and advances | 0 | 4,960 |
Prepaid Services and Fees [Member] | ||
Prepayments and advances | 123,379 | 8,875 |
Vendor Prepayments [Member] | ||
Prepayments and advances | $ 1,041,962 | $ 845,442 |
5. Property Plant and Equipme34
5. Property Plant and Equipment, net (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Accumulated depreciation | $ (233,589) | $ (156,813) |
Property and equipment, net | 284,770 | 224,824 |
Computer and Technology Equipment [Member] | ||
Property and equipment, gross | 53,714 | 37,366 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 28,690 | 24,825 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 143,215 | 143,215 |
Molds and Tooling [Member] | ||
Property and equipment, gross | 14,144 | 11,421 |
Marketing [Member] | ||
Property and equipment, gross | 15,386 | 0 |
Vehicles [Member] | ||
Property and equipment, gross | 154,028 | 149,028 |
Equipment [Member] | ||
Property and equipment, gross | 7,733 | 9,232 |
Software [Member] | ||
Property and equipment, gross | 18,950 | 6,550 |
Research and Development Assets [Member] | ||
Property and equipment, gross | $ 82,499 | $ 0 |
5. Property Plant and Equipme35
5. Property Plant and Equipment, net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 41,961 | $ 76,775 | $ 17,499 | $ 34,446 |
6. Investment (Details Narrativ
6. Investment (Details Narrative) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Investments | $ 539,771 | $ 400,000 |
Edyza Sensors [Member] | ||
Investments | $ 400,000 | |
Total Grow Controls [Member] | ||
Investments | $ 125,000 | |
Equity ownership | 5.00% |
7. Cost of Patents (Details Nar
7. Cost of Patents (Details Narrative) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Patents [Member] | ||
Patent cost | $ 0 | $ 0 |
8. Accrued Expenses (Details)
8. Accrued Expenses (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Accrued expenses | $ 1,177,051 | $ 1,256,115 |
Accrued Legal Fees [Member] | ||
Accrued expenses | 0 | 0 |
Accrued Operating Expenses [Member] | ||
Accrued expenses | 219,336 | 153,946 |
Accrued Stock Compensation Expense [Member] | ||
Accrued expenses | 0 | 100,000 |
Accrued Wages and Related Expenses [Member] | ||
Accrued expenses | 360,427 | 377,305 |
Accrued Sales Tax Payable [Member] | ||
Accrued expenses | $ 597,288 | $ 624,864 |
8. Accrued Expenses (Details Na
8. Accrued Expenses (Details Narrative) | Jun. 30, 2018USD ($) |
Payables and Accruals [Abstract] | |
Sales tax receivable | $ 166,224 |
9. Notes Payable and Current 40
9. Notes Payable and Current Portion of Notes Payable (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Notes payable | $ 476,606 | $ 488,000 |
Notes payable, current maturities | (476,606) | (188,000) |
Notes payable, long term | 0 | 300,000 |
Note Payable 1 [Member] | ||
Notes payable | 0 | 8,000 |
Note Payable 2 [Member] | ||
Notes payable | 80,000 | 80,000 |
Note Payable 3 [Member] | ||
Notes payable | 100,000 | 100,000 |
Note Payable 4 [Member] | ||
Notes payable | $ 296,606 | $ 300,000 |
9. Notes Payable and Current 41
9. Notes Payable and Current Portion of Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Interest expense | $ 24,561 | $ 43,274 | $ 75,269 | $ 162,421 |
Note Payable 1 [Member] | ||||
Debt interest rate | 0.00% | 0.00% | ||
Debt maturity date | May 31, 2018 | |||
Note Payable 2 [Member] | ||||
Debt interest rate | 20.40% | 20.40% | ||
Debt maturity date | Dec. 31, 2018 | |||
Note Payable 3 [Member] | ||||
Debt interest rate | 18.00% | 18.00% | ||
Debt maturity date | Dec. 31, 2018 | |||
Note Payable 4 [Member] | ||||
Debt interest rate | 19.80% | 19.80% | ||
Debt maturity date | Mar. 23, 2019 |
10. Commitments and Contingen42
10. Commitments and Contingencies (Details) | Jun. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum future lease payment 2018 | $ 60,775 |
Minimum future lease payment 2019 | 98,775 |
Minimum future lease payment 2020 | 67,775 |
Minimum future lease payment 2021 | 0 |
Minimum future lease payment 2022 | $ 0 |
10. Commitments and Contingen43
10. Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Minimum lease payment remainder of year | $ 60,775 |
Lafayette, CO [Member] | |
Lease expiration date | Aug. 31, 2020 |
Minimum lease payment remainder of year | $ 46,000 |
Bravo Lighting [Member] | |
Minimum lease payment remainder of year | $ 9,000 |
Lease term | 12 months |
Two Cars [Member] | |
Lease expiration date | Dec. 31, 2020 |
Minimum lease payment remainder of year | $ 5,775 |
11. Risks and Uncertainties (De
11. Risks and Uncertainties (Details Narrative) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Product Concentration Risk [Member] | One Vendor [Member] | |||||
Concentration risk percentage | 15.00% | 44.00% | 10.00% | 37.00% | |
Product Concentration Risk [Member] | Another Vendor [Member] | |||||
Concentration risk percentage | 11.00% | ||||
Product Concentration Risk [Member] | Another Vendor [Member] | |||||
Concentration risk percentage | 11.00% | ||||
Product Concentration Risk [Member] | Bravo Lighting [Member] | |||||
Concentration risk percentage | 2.00% | 7.00% | 8.00% | 2.00% | |
Automated Fertigation Controls [Member] | Accounts Payable [Member] | |||||
Concentration risk percentage | 30.00% | 16.00% | |||
Benching Suppliers [Member] | Accounts Payable [Member] | |||||
Concentration risk percentage | 2.00% | 0.00% | |||
One Customer [Member] | Sales Revenue Net [Member] | |||||
Concentration risk percentage | 27.00% | 12.00% | 17.00% |
12. Stock Compensation (Details
12. Stock Compensation (Details - Grant activity) - Common Stock Grants [Member] | 6 Months Ended |
Jun. 30, 2018shares | |
Common stock grants, beginning balance | 310,000 |
Common stock grants, awards | 446,500 |
Common stock grants, vested | 137,000 |
Common stock grants, ending balance | 619,500 |
12. Stock Compensation (Detai46
12. Stock Compensation (Details - Grant vesting periods) - Common Stock Grants [Member] - shares | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Common stock grants outstanding | 619,500 | 310,000 |
Grant 1 [Member] | ||
Common stock grants outstanding | 295,167 | |
Vesting period | 91 years | |
Grant 2 [Member] | ||
Common stock grants outstanding | 207,667 | |
Vesting period | 2 years | |
Grant 3 [Member] | ||
Common stock grants outstanding | 116,666 | |
Vesting period | 3 years |
12. Stock Compensation (Detai47
12. Stock Compensation (Details - Option activity) - Options [Member] | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Stock options outstanding, beginning balance | 0 |
Stock options issued | 100,000 |
Stock options exercised | 0 |
Stock options expired | 0 |
Stock options outstanding, ending balance | 100,000 |
Stock options exercisable | 0 |
Weighted average remaining life | 9 years 10 months 24 days |
Weighted average exercise price | $ / shares | $ 1 |
12. Stock Compensation (Detai48
12. Stock Compensation (Details - Options vesting schedule) - Options [Member] - shares | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Stock options outstanding | 100,000 | 0 |
Vesting period | 9 years 10 months 24 days | |
Options 1 [Member] | ||
Stock options outstanding | 50,000 | |
Vesting period | 1 year | |
Options 2 [Member] | ||
Stock options outstanding | 25,000 | |
Vesting period | 2 years | |
Options 3 [Member] | ||
Stock options outstanding | 25,000 | |
Vesting period | 3 years |
12. Stock Compensation (Detai49
12. Stock Compensation (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Share based compensation expense | $ 213,955 | $ 8,690 | ||
Stock Option Plan [Member] | ||||
Stock authorized for issuance | 3,000,000 | 3,000,000 | ||
Common Stock Grants [Member] | ||||
Share based compensation expense | $ 114,105 | $ 8,690 | $ 213,955 | $ 8,690 |
Fair value of common stock grants | 446,500 | |||
Options [Member] | ||||
Fair value of common stock grants | $ 90,103 |
13. Shareholder's Equity and 50
13. Shareholder's Equity and Member's Deficit (Details Narrative) - shares | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Common stock outstanding | 24,808,000 | 25,046,000 |
Common Stock [Member] | ||
Common stock outstanding | 24,808,000 | 25,046,000 |
Common stock returned | 375,000 |
15. Warrants (Details)
15. Warrants (Details) - Warrants [Member] | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Warrants outstanding, beginning balance | shares | 0 |
Warrants issued | shares | 6,000 |
Warrants exercised | shares | 0 |
Warrants outstanding, ending balance | shares | 6,000 |
Warrants exercisable, end of period | shares | 6,000 |
Weighted average exercise price, beginning | $ / shares | $ 0 |
Weighted average exercise price, issued | $ / shares | 1 |
Weighted average exercise price, exercised | $ / shares | |
Weighted average exercise price, ending | $ / shares | 1 |
Weighted average exercise price, exercisable | $ / shares | $ 1 |
Weighted average remaining contractual life warrants outstanding | 4 years 9 months 18 days |
Weighted average remaining contractual life warrants exercisable | 4 years 9 months 18 days |
Intrinsic value of warrants outstanding | $ | $ 0 |
Intrinsic value of warrants exercisable | $ | $ 0 |