Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 12, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | American Cannabis Company, Inc. | |
Entity Central Index Key | 0000945617 | |
Document Type | 10-Q | |
Emerging Growth Company | false | |
Entity Small Business | true | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 52,737,772 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
Balance Sheets
Balance Sheets - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 918,127 | $ 1,086,565 |
Accounts Receivable, net | 236,825 | 58,884 |
Deposits | 4,500 | 4,500 |
Inventory | 40,396 | 61,005 |
Prepaid expenses and other current assets | 61,432 | 56,376 |
Total current assets | 1,261,280 | 1,267,331 |
Property and Equipment - net | 9,446 | 8,037 |
TOTAL ASSETS | 1,270,726 | 1,275,369 |
Current liabilities | ||
Accounts payable | 23,888 | 32,931 |
Advances from clients | 146,422 | 147,349 |
Accrued and other current liabilities | 72,614 | 89,768 |
Total current liabilities | 242,925 | 270,048 |
Stockholders equity | ||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2109 and December 31, 2018, respectively | ||
Common stock, $0.00001 par value; 100,000,000 shares authorized; 52,137,772 and 51,513,064 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | 521 | 515 |
Additional paid-in capital | 8,222,657 | 8,178,919 |
Accumulated deficit | (7,195,377) | (7,174,113) |
Total Shareholder's equity | 1,027,801 | 1,005,321 |
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | $ 1,270,726 | $ 1,275,369 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock Par Value | $ 0.01 | $ 0.01 |
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | $ 0 | $ 0 |
Common stock Par Value | $ 0.00001 | $ 0.00001 |
Common Stock Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock Shares Issued | 52,137,772 | 51,513,064 |
Common Stock Shares Outstanding | 52,137,772 | 51,513,064 |
Statements of Operations
Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues | ||||
Consulting services | $ 492,184 | $ 97,090 | $ 653,838 | $ 182,692 |
Shipping services | 13,127 | 3,461 | 23,122 | 30,383 |
Products and equipment | 225,657 | 77,705 | 464,321 | 241,130 |
Total revenues | 730,968 | 178,256 | 1,141,281 | 454,205 |
Costs of revenues | ||||
Cost of consulting services | 79,324 | 24,711 | 113,251 | 81,772 |
Cost of products and equipment | 150,741 | 53,829 | 343,163 | 140,839 |
Total cost of revenues | 230,064 | 78,540 | 456,414 | 222,611 |
Gross profit | 500,903 | 99,716 | 684,867 | 235,055 |
Operating expenses | ||||
General and administrative | 207,182 | 199,794 | 450,265 | 431,039 |
Investor Relations | 14,085 | 4,895 | 31,932 | 10,824 |
Selling and marketing | 78,399 | 71,711 | 153,738 | 127,079 |
Research and development | 196 | 590 | ||
Total Operating expenses | 299,667 | 276,400 | 636,130 | 569,532 |
Income (Loss) from Operations | 201,236 | (176,684) | 48,737 | (334,477) |
Other Income (expense) | ||||
Interest (expense) | 86 | 121 | ||
Stock Based Compensation | (25,242) | (43,744) | (25,242) | |
Bad Debt (expense) | (41,481) | (3,553) | (43,774) | (19,985) |
Settlement (expense) | ||||
Warranty (expense) | ||||
Other Income | 13,267 | 635 | 17,517 | 3,641 |
Total Other Income (expense) | (28,214) | (28,074) | (70,001) | (41,465) |
Net Income (Loss) before taxes | 173,023 | (204,758) | (21,264) | (375,942) |
Income Tax expense (benefit) | ||||
NET INCOME (LOSS) | $ 173,023 | $ (204,758) | $ (21,264) | $ (375,942) |
Basic and diluted net loss per common share | $ 0 | $ 0 | $ 0 | $ (0.01) |
Basic and diluted weighted average common shares outstanding | 51,611,448 | 51,452,174 | 52,074,072 | 51,452,174 |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2017 | 51,434,050 | |||
Beginning Balance, Value at Dec. 31, 2017 | $ 514 | $ 7,004,363 | $ (6,223,422) | $ 781,455 |
Shares issued for services, Shares | 29,014 | |||
Shares issued for services, Amount | 25,242 | 25,542 | ||
Warrants to employees, Amount | $ 1 | 895,859 | 895,860 | |
Net loss | (375,942) | (375,942) | ||
Ending Balance, Shares at Jun. 30, 2018 | 51,463,064 | |||
Ending Balance, Value at Jun. 30, 2018 | $ 515 | 7,925,464 | (6,599,364) | 1,326,615 |
Beginning Balance, Shares at Dec. 31, 2018 | 51,463,064 | |||
Beginning Balance, Value at Dec. 31, 2018 | $ 515 | 8,178,919 | (7,174,113) | 1,005,321 |
Shares issued for services, Shares | 89,708 | |||
Shares issued for services, Amount | $ 1 | 43,743 | 43,743 | |
Warrants to employees, Shares | 535,000 | |||
Warrants to employees, Amount | $ 5 | (5) | ||
Net loss | (21,264) | (21,264) | ||
Ending Balance, Shares at Jun. 30, 2019 | 52,137,772 | |||
Ending Balance, Value at Jun. 30, 2019 | $ 521 | $ 8,222,657 | $ (7,195,377) | $ 1,027,801 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOW FROM OPERATING ACTIVITIES: | ||
Net loss | $ (21,264) | $ (375,942) |
Adjustments to reconcile net income (loss) to net cash (used in) operating activities: | ||
Bad Debt Expense | 43,774 | 19,985 |
Depreciation | 1,893 | 1,998 |
Stock-based compensation to service providers | 43,743 | 25,542 |
Changes in operating assets and liabilities | ||
Accounts receivable | (221,714) | 22,826 |
Inventory | 20,609 | (58,531) |
Prepaid expenses and other current assets | (5,056) | 1,327 |
Advances from clients | (926) | 26,575 |
Accrued and other current liabilities | (17,153) | (5,943) |
Accounts payable | (9,043) | (6,173) |
Net Cash provided by (used in) Operating Activities | (165,136) | (348,635) |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (3,302) | |
Net cash used in Investing Activities | (3,302) | |
CASH FLOW FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common shares | ||
Net cash Provided by Financing Activities | ||
NET (DECREASE) IN CASH | (168,438) | (348,635) |
CASH AT BEGINNING OF PERIOD | 1,086,565 | 1,648,087 |
CASH AT END OF YEAR | 918,127 | 1,299,452 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | ||
Cash paid during the period for income taxes, net | ||
Common Stock issued for debt converted in prior year |
Description of the Business
Description of the Business | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Description of the Business | Note 1. Description of the Business American Cannabis Company, Inc. and its subsidiary Company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting (“American Cannabis Consulting”), (collectively “the “Company”) are based in Denver, Colorado and operate a fully integrated business model that features end-to-end solutions for businesses operating in the regulated cannabis industry in states and countries where cannabis is regulated and/or has been decriminalized for medical use and/or legalized for recreational use. The Company provides advisory and consulting services specific to this industry, designs industry specific products and facilities, and manages a strategic group partnership that offers both exclusive and nonexclusive customer products commonly used in the industry. American Cannabis Company, Inc. is a publicly listed company quoted on the OTC Pink Tier under the symbol “AMMJ”. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Basis of Accounting The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the interim periods presented. These financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2018 included in our Annual Report on Form 10-K. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of results to be expected for the full fiscal year or any other periods. The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make a number of estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures. Actual results may differ from these estimates. Certain balance sheet reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets. Use of Estimates in Financial Reporting The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the financial statements during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period in which they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the financial statements. Unaudited Interim Financial Statements The accompanying unaudited financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Regulation SX. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. Accounts Receivable Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of June 30, 2019, and December 31, 2018, the Company’s allowance for doubtful accounts was $43,116 and $2,635, respectively. The Company recorded bad debt expense during the six months ended June 30, 2019 of $43,774 and $19,985 during the six months ended June 30, 2018. Deposits Deposits is comprised of advance payments made to third parties, primarily for inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale. Inventory Inventory is comprised of products and equipment owned by the Company to be sold to end customers. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of June 30, 2019, and December 31, 2018, market values of all of the Company’s inventory were greater than cost, and accordingly, no such valuation allowances were recognized. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. Significant Clients and Customers For the three months ended June 30, 2019, three customers individually accounted for $222,125 of the Company’s total revenues equaling approximately 30.4% of the Company’s total revenues for the period. Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Costs associated with in progress construction are capitalized as incurred and depreciation is consummated once the underlying asset is placed into service. Property and equipment is reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize any interest as of June 30, 2019. Accounting for the Impairment of LongLived Assets The Company evaluates longlived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For longlived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company had not recorded any impairment charges related to longlived assets as of June 30, 2019 or December 31, 2018. Beneficial Conversion Feature If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt using the effective interest method. Revenue Recognition For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The guidance presents a single five-step model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We determined to implement the cumulative effect adjustment approach to our implementation of FASB ASC Topic 606, with no restatement of the comparative periods presented for reporting periods after January 1, 2018. We applied this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606. In accordance with FASB ASC Topic 606, Revenue Recognition, we will recognize revenue when persuasive evidence of a significant financing component exists in our consulting and product sales contracts. We examine and evaluate when our customers become liable to pay for goods and services; how much consideration is paid as compared to the cash selling price of the goods or services; and, the length of time between our performance and the receipt of payment. Product Sales Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is shipped, title has transferred and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with shipping-point or destination terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. During the six months ended June 30, 2019, sales returns were $15,528 comprised of product returns and replacement. Consulting Services We also generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for a fixed-fee; or, (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services. For hourly based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services are performed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients” account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606. Occasionally, our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement as a whole. These engagements do not generally exceed a one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment and performance is one year or less. As, our fixed fee hourly engagements do not exceed one year, no significant customer-based financing is implicated under FASB ASC Topic 606. During the six months ended June 30, 2019 and the year ended December 31, 2018, we have incurred no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided. We occasionally enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Our arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice and do not include provisions for refunds relating to services provided. Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are presented in the statement of operations on a net basis. Costs of Revenues The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. Advertising and Promotion Costs Selling and Marketing costs are included as a component of selling and marketing expense and are expensed as incurred. During the three months ended June 30, 2019 and June 30, 2018, these costs were $78,399 and $71,711, respectively. Shipping and Handling Costs For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. StockBased Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. The Company recognizes related compensation costs on a straightline basis over the requisite vesting period of the award. During the three months ended June 30, 2019 and June 30, 2018, the Company had stockbased compensation expense of $0 and $25,242, respectively. During six months ended June 30, 2019 and June 30, 2018, there was $43,744 and $25,242 in stock based compensation expense respectively. Income Taxes The Company’s corporate status changed from an SCorporation, which it had been since inception, to a CCorporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, SCorporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the SCorporation’s taxable income. Accordingly, we were not subject to income taxes for the three months ended June 30, 2019. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the three months ended June 30, 2019, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of June 30, 2019, and December 31, 2018, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10– 15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. Net Income (Loss) Per Common Share The Company reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. Due to the Company’s net losses for the three months ended June 30, 2019, any potentially dilutive shares outstanding for these periods, respectively, were not presented in the EPS computations, as their effect would have been antidilutive. Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented, or as permitted by ASU 2018-11, at the beginning of the period in which it is adopted. We adopted this standard using a modified retrospective approach on January 1, 2019. The modified retrospective approach includes a number of optional practical expedients relating to the identification and classification of leases that commenced before the adoption date; initial direct costs for leases that commenced before the adoption date; and, the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The Company elected the package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842. In considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly rent with no variable lease payments and no options to extend. The lease is for an office space with no right of use assets. The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease components for our facility lease, as we determined our right of use asset to be zero. Consistent with ASC 842-20-50-4, for the Company's June 30, 2019, quarterly financial statements, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate. The adoption of this guidance resulted in no significant impact to our results of operations or cash flows. Reclassifications Prior year amounts have been reclassified to conform to the current year presentation. |
Accounts Receivable, net
Accounts Receivable, net | 6 Months Ended |
Jun. 30, 2019 | |
Receivables [Abstract] | |
Accounts Receivable, net | Note 3. Accounts Receivable, net Accounts receivable, net, was comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Gross accounts receivable $ 279,941 $ 61,519 Less: allowance for doubtful accounts (43,116 ) (2,635 ) Accounts receivable, net $ 236,825 $ 58,884 The Company had bad debt expense during the three months ended June 30, 2019 of $41,481, whereas bad debt expense during the three months ended June 30, 2018 was $3,553. |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 4. Inventory Inventory as of June 30, 2019 and December 31, 2018 consisted of the following: June 30, December 31, 2019 2018 Raw materials $ 800 $ 1,646 Demo — — Finished goods 39,595 59,359 Total $ 40,396 $ 61,005 |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 5. Property and Equipment Property and equipment, net, was comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Office equipment $ 11,324 $ 8,482 Furniture and fixtures 7,240 7,240 Machinery and equipment 7,795 7,336 Property and equipment, gross 26,360 23,058 Less: accumulated depreciation (16,914 ) (15,020 ) Property and equipment, net $ 9,446 $ 8,037 |
Deposits
Deposits | 6 Months Ended |
Jun. 30, 2019 | |
Deposits [Abstract] | |
Deposits | Note 6. Deposits Deposits were comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Deposits $ 4,500 $ 4,500 Deposits $ 4,500 $ 4,500 Deposits as of June 30, 2019 and December 31, 2018 reflect down payments made to vendors and service providers. |
Prepaid Expenses and Other Asse
Prepaid Expenses and Other Assets | 6 Months Ended |
Jun. 30, 2019 | |
Supplemental disclosure of non-cash transactions | |
Prepaid Expenses and Other Assets | Note 7. Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets were comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Prepaid Expenses $ 61,432 $ 56,376 Other Current Assets $ 0 $ 0 Total $ 61,432 $ 56,376 |
Accrued and Other Current Liabi
Accrued and Other Current Liabilities | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
Accrued and Other Current Liabilities | Note 8. Accrued and Other Current Liabilities Accrued and other current liabilities was comprised of the following at June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Accrued payroll liabilities 10,821 10,924 Other accruals 61,793 78,884 Accrued and other current liabilities $ 72,614 $ 89,768 |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 9. Related Party Transactions During the six months ended June 30, 2019, the Company incurred no related party expenses. |
Stock-based Compensation
Stock-based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Stock-based Compensation | Note 10. Stockbased Compensation Restricted Shares From time to time, the Company grants certain employees restricted shares of its common stock to provide further compensation in lieu of wages and to align the employee’s interests with the interests of its stockholders. Because vesting is based on continued employment, these equitybased incentives are also intended to attract, retain and motivate personnel upon whose judgment, initiative and effort the Company’s success is largely dependent. During the six months ended June 30, 2019 and 2018, the Company granted 89,708 and 29,014 restricted shares, and incurred total stock based compensation expense of $43,744 and $25,242 respectively. Warrants As of June 30, 2019, and December 31, 2018, the Company issued fullyvested warrants to the Company’s independent board member to purchase up to two hundred and fifty thousand (250,000) shares of common stock at an exercise price of sixty-three cents ($0.63) per share were outstanding, exercisable within five (5) years of the date of issuance on November 19, 2014. The grant date fair value of the warrants, as calculated based on the BlackScholes valuation model, was $0.59 per share. There were no outstanding unvested warrants or new issuances of warrants during the three months ended June 30, 2019; consequently, no stockbased compensation expense associated with warrants was recorded during the three months ended June 30, 2019. As of June 30, 2019, and December 31, 2018, as the exercise price per share exceeded the price per share of our common shares, there was no aggregate intrinsic value of outstanding warrants. As of June 30, 2019, and December 31, 2018, the warrants had 1.4 years and 1.9 years remaining until expiration respectively. No warrants were issued or outstanding during or preceding the three months ended June 30, 2019. As of December 31, 2018, the Company issued cashless warrants to employees to purchase an aggregate of 895,000 shares. The warrants exercisable within three (3) years of the date of issuance, expiring February 23, 2021. The grant date fair value of the warrants, as calculated based on the BlackScholes valuation model, was $0.23 per share. As of June 30, 2019, and December 31, 2018, as the exercise price per share exceeded the price per share of our common shares, there was no aggregate intrinsic value of outstanding warrants. Stock Options In addition to the warrants as described above, on November 19, 2014, the Company granted its independent board member, Vincent “Tripp” Keber an option to purchase three hundred thousand (300,000) shares of common stock at an exercise price of sixty-three cents ($0.63) per share. The warrants and options expire on November 19, 2019. None have been exercised. Stock Issuable in Compensation for Professional Services From time to time, the Company enters into agreements whereby a professional service provider will be compensated for services rendered to the Company by shares of common stock in lieu of cash. During the three months ended June 30, 2019, no common stock was issued. |
Stockholders Equity
Stockholders Equity | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Stockholders Equity | Note 11. Stockholders’ Equity Preferred Stock American Cannabis Company, Inc. is authorized to issue 5,000,000 shares of preferred stock at $0.01 par value. No shares of preferred stock were issued and outstanding during the three months ended June 30, 2019, and 2017 respectively. Common Stock American Cannabis Company, Inc. is authorized to issue 100,000,000 common shares at $0.00001 par value per share. For the three months ended June 30, 2019, the Company did not issue any stock based compensation. For the six months ended June 30, 2019, the Company issued 50,000 common shares to Tyler A. Schloesser as a signing bonus valued at $22,500 and 39,708 common shares to Gayle Barr for services rendered valued at $21,244. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments And Contingencies | |
Commitments and Contingencies | Note 12. Commitments and Contingencies The Company rents space for its corporate offices paying a monthly rent of $4,500. The monthly rent is fixed and is for office space only. Our lease provides for no other right of use assets. There is no residual value guarantee associated with the lease. There are no restrictions or covenants providing for dividends, or imposing additional financial obligations by the Company. We elected to apply a short-term lease exception and accounting policy to not separate lease and non-lease components from our office lease, as we determined our right of use asset to be zero. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 13. Subsequent Events On July 9, 2019, the Terry L. Buffalo Revocable Living Trust delivered elections to exercise two cashless warrants: one for 400,000 shares and one for 100,000 shares. The Company issued a total of 500,000 common shares to the Terry L. Buffalo Revocable Living Trust. On July 10, 2019, Tyler A. Schloesser delivered elections to exercise two cashless warrants: one for 100,000 shares and one for 102,500 shares. On July 13, 2019 the Company issued a total of 202,500 shares to Tyler A. Schloesser. On July 13, 2019, Jon Workman delivered an election to exercise a cashless warrant for 100,000 shares. The Company issued 100,000 shares to Jon Workman on July 13, 2019. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include normal recurring adjustments that are necessary for a fair presentation of the results for the interim periods presented. These financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2018 included in our Annual Report on Form 10-K. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of results to be expected for the full fiscal year or any other periods. The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make a number of estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures. Actual results may differ from these estimates. Certain balance sheet reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets. |
Use of Estimates in Financial Reporting | Use of Estimates in Financial Reporting The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the financial statements during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period in which they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the financial statements. |
Unaudited Interim Financial Statements | Unaudited Interim Financial Statements The accompanying unaudited financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Regulation SX. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. |
Accounts Receivable | Accounts Receivable Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of June 30, 2019, and December 31, 2018, the Company’s allowance for doubtful accounts was $43,116 and $2,635, respectively. The Company recorded bad debt expense during the six months ended June 30, 2019 of $43,774 and $19,985 during the six months ended June 30, 2018. |
Deposits | Deposits Deposits is comprised of advance payments made to third parties, primarily for inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale. |
Inventory | Inventory Inventory is comprised of products and equipment owned by the Company to be sold to end customers. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of June 30, 2019, and December 31, 2018, market values of all of the Company’s inventory were greater than cost, and accordingly, no such valuation allowances were recognized. |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. |
Significant Clients and Customers | Significant Clients and Customers For the three months ended June 30, 2019, three customers individually accounted for $222,125 of the Company’s total revenues equaling approximately 30.4% of the Company’s total revenues for the period. |
Property and Equipment, net | Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Costs associated with in progress construction are capitalized as incurred and depreciation is consummated once the underlying asset is placed into service. Property and equipment is reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize any interest as of June 30, 2019. |
Accounting for the Impairment of Long-Lived Assets | Accounting for the Impairment of LongLived Assets The Company evaluates longlived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For longlived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company had not recorded any impairment charges related to longlived assets as of June 30, 2019 or December 31, 2018. |
Beneficial Conversion Feature | Beneficial Conversion Feature If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt using the effective interest method. |
Revenue Recognition | Revenue Recognition For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The guidance presents a single five-step model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We determined to implement the cumulative effect adjustment approach to our implementation of FASB ASC Topic 606, with no restatement of the comparative periods presented for reporting periods after January 1, 2018. We applied this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606. In accordance with FASB ASC Topic 606, Revenue Recognition, we will recognize revenue when persuasive evidence of a significant financing component exists in our consulting and product sales contracts. We examine and evaluate when our customers become liable to pay for goods and services; how much consideration is paid as compared to the cash selling price of the goods or services; and, the length of time between our performance and the receipt of payment. Product Sales Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is shipped, title has transferred and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with shipping-point or destination terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. During the six months ended June 30, 2019, sales returns were $15,528 comprised of product returns and replacement. Consulting Services We also generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for a fixed-fee; or, (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services. For hourly based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services are performed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients” account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component under FASB ASC Topic 606. Occasionally, our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement as a whole. These engagements do not generally exceed a one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment and performance is one year or less. As, our fixed fee hourly engagements do not exceed one year, no significant customer-based financing is implicated under FASB ASC Topic 606. During the six months ended June 30, 2019 and the year ended December 31, 2018, we have incurred no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided. We occasionally enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Our arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice and do not include provisions for refunds relating to services provided. Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are presented in the statement of operations on a net basis. |
Costs of Revenues | Costs of Revenues The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. |
Advertising and Promotion Costs | Advertising and Promotion Costs Selling and Marketing costs are included as a component of selling and marketing expense and are expensed as incurred. During the three months ended June 30, 2019 and June 30, 2018, these costs were $78,399 and $71,711, respectively. |
Shipping and Handling Costs | Shipping and Handling Costs For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. |
Stock-Based Compensation | StockBased Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. The Company recognizes related compensation costs on a straightline basis over the requisite vesting period of the award. During the three months ended June 30, 2019 and June 30, 2018, the Company had stockbased compensation expense of $0 and $25,242, respectively. During six months ended June 30, 2019 and June 30, 2018, there was $43,744 and $25,242 in stock based compensation expense respectively. |
Income Taxes | Income Taxes The Company’s corporate status changed from an SCorporation, which it had been since inception, to a CCorporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, SCorporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the SCorporation’s taxable income. Accordingly, we were not subject to income taxes for the three months ended June 30, 2019. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the three months ended June 30, 2019, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of June 30, 2019, and December 31, 2018, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. |
Related Party Transactions | Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10– 15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share The Company reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. Due to the Company’s net losses for the three months ended June 30, 2019, any potentially dilutive shares outstanding for these periods, respectively, were not presented in the EPS computations, as their effect would have been antidilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented, or as permitted by ASU 2018-11, at the beginning of the period in which it is adopted. We adopted this standard using a modified retrospective approach on January 1, 2019. The modified retrospective approach includes a number of optional practical expedients relating to the identification and classification of leases that commenced before the adoption date; initial direct costs for leases that commenced before the adoption date; and, the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The Company elected the package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842. In considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly rent with no variable lease payments and no options to extend. The lease is for an office space with no right of use assets. The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease components for our facility lease, as we determined our right of use asset to be zero. Consistent with ASC 842-20-50-4, for the Company's June 30, 2019, quarterly financial statements, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate. The adoption of this guidance resulted in no significant impact to our results of operations or cash flows. |
Reclassifications | Reclassifications Prior year amounts have been reclassified to conform to the current year presentation. |
Accounts Receivable, net (Table
Accounts Receivable, net (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivable, net, was comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Gross accounts receivable $ 279,941 $ 61,519 Less: allowance for doubtful accounts (43,116 ) (2,635 ) Accounts receivable, net $ 236,825 $ 58,884 |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Tables Abstract | |
Inventory | Inventory as of June 30, 2019 and December 31, 2018 consisted of the following: June 30, December 31, 2019 2018 Raw materials $ 800 $ 1,646 Demo — — Finished goods 39,595 59,359 Total $ 40,396 $ 61,005 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | Property and equipment, net, was comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Office equipment $ 11,324 $ 8,482 Furniture and fixtures 7,240 7,240 Machinery and equipment 7,795 7,336 Property and equipment, gross 26,360 23,058 Less: accumulated depreciation (16,914 ) (15,020 ) Property and equipment, net $ 9,446 $ 8,037 |
Deposits (Tables)
Deposits (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Recension and cancellation of common shares, Amount | |
Deposits | Deposits were comprised of the following as of June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Deposits $ 4,500 $ 4,500 Deposits $ 4,500 $ 4,500 |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Prepaid Expenses And Other Current Assets | |
Schedule of Prepaid Expenses and Other Current Assets | June 30, December 31, 2019 2018 Prepaid Expenses $ 61,432 $ 56,376 Other Current Assets $ 0 $ 0 Total $ 61,432 $ 56,376 |
Accrued and Other Current Lia_2
Accrued and Other Current Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
Accrued and Other Current Liabilities | Note 8. Accrued and Other Current Liabilities Accrued and other current liabilities was comprised of the following at June 30, 2019 and December 31, 2018: June 30, December 31, 2019 2018 Accrued payroll liabilities 10,821 10,924 Other accruals 61,793 78,884 Accrued and other current liabilities $ 72,614 $ 89,768 |
Accounts Receivable, net - Acco
Accounts Receivable, net - Accounts Receivable (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Receivables [Abstract] | ||
Gross accounts receivable | $ 279,941 | $ 61,519 |
Less: allowance for doubtful accounts | (43,116) | (2,635) |
Accounts receivable, net | $ 236,825 | $ 58,884 |
Accounts Receivable, net (Detai
Accounts Receivable, net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Receivables [Abstract] | ||||
Bad Debt Expense | $ (41,481) | $ (3,553) | $ (43,774) | $ (19,985) |
Inventory (Details)
Inventory (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 800 | $ 1,646 |
Demo | ||
Finished Goods | 39,595 | 59,359 |
Total | $ 40,396 | $ 61,005 |
Property and Equipment, net - P
Property and Equipment, net - Property and Equipment, Net (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 26,360 | $ 23,058 |
Less: accumulated depreciation | (16,914) | (15,020) |
Property and equipment, net | 9,446 | 8,037 |
Office Equipment | ||
Property and equipment, gross | 11,324 | 8,482 |
Furniture and Fixtures | ||
Property and equipment, gross | 7,240 | 7,240 |
Machinery and Equipment | ||
Property and equipment, gross | $ 7,795 | $ 7,336 |
Deposits (Details)
Deposits (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 |
Founders Shares issued on Incorporation, Value | |||
Deposits | $ 4,500 | $ 4,500 | $ 4,500 |
Prepaid Expenses and Other Cu_2
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Other Assets Details Abstract | ||
Prepaid Expenses | $ 61,432 | $ 56,376 |
Other current assets | 0 | 0 |
Total | $ 61,432 | $ 56,376 |
Accrued and Other Current Lia_3
Accrued and Other Current Liabilities - Accrued and Other Current Liabilities (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Accrued payroll liabilities | $ 10,821 | $ 10,924 |
Other accruals | 61,793 | 78,884 |
Accrued and other current liabilities | $ 72,614 | $ 89,768 |