| 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. | Note
3. Summary of Significant Accounting Policies Basis
of Accounting The
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
("U.S. GAAP"). The Company has elected a fiscal year ending on December 31. Use
of Estimates in Financial Reporting The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements
and reported amounts of revenues and expenses 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 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. 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. Cash balances may exceed federally insured
limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to
date. As of December 31, 2018, and 2017, the Company had cash balances in excess of FDIC insured limits of $836,565 and $1,398,087,
respectively. Inventory Inventory
is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost, using the
first-in first-out and specific identification methods, 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 December 31, 2018, market values of all
of the Company’s inventory were greater than cost, and accordingly, no such valuation allowances was recognized. Research
and Development As
a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet
demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™,
Cultivation Cube™, So-Hum Living Soils™ and the HDCS™. Costs associated with the development of new products
are expensed as occurred as research and development operating expenses. During the year ended December 31, 2018, our research
and development costs were $590 as compared to $2,403 for the fiscal year ended December 31, 2017. 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 (see “Costs of Revenues” below). 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. Accounts
Receivable Accounts
receivable are recorded at the net value of face amount less an allowance for doubtful accounts. On a periodic basis, the Company
evaluates its accounts receivable and, based on a method of specific identification of any accounts receivable for which it deems
the net realizable value to be less than the gross amount of accounts receivable recorded, establishes an allowance for doubtful
accounts 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 December 31, 2018, and December 31, 2017 our allowance
for doubtful accounts and was $2,635 and $21,581, respectively. For December 31, 2018 and December 31, 2017, we recorded bad debt
expense of $2,815 and recovery of bad debt of ($89,715), respectively, which is reflected as a component of general and administrative
expenses on the consolidated statement of operations. Significant
Customers For
the year ended December 31, 2018, three customers accounted for 47.5% or more, respectively of the Company’s total product
sales revenues, and four customers accounted for 70.65% or more respectively of the Company’s total service based revenue.
For the year ended December 31, 2017, three customers accounted 48.95% or more, respectively of the Company’s total product
sales revenues, and four customers accounted for 40.18% or more respectively of the Company’s total service based revenue. 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. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins
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 had not capitalized any interest as of December 31, 2018 and 2017. Accounting
for the Impairment of Long-Lived Assets The
Company evaluates long-lived 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 long-lived 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 did not record any impairment charges related to long-lived assets during
the years ended December 31, 2018 and 2017. Beneficial
Conversion Feature If
the conversion features of conventional convertible debt provide 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 Embedded
Conversion Features The
Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to
determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative
at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment
under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration
of any beneficial conversion features. Derivative
Financial Instruments Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company
uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible
debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.
If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments
as derivative financial instruments. Once
determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease
in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair
value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model. 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. As a smaller reporting company, the Company elected to not adopt FASB ASC Topic 606, Revenue Recognition as of December
31, 2017. Currently, revenue is now recognized in accordance with FASB ASC Topic 606. 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. We intend to apply 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 realizes revenue upon shipment 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 year ended December 31, 2018, sales returns were $210 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 year ended December 31, 2018, and December 31, 2017, 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 Advertising
and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year
ended December 31, 2018 and 2017, these costs were $293,241 and $278,542, respectively.
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 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. We recognize related compensation costs
on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date.
During the years ended December 31, 2018 and 2017, stock-based compensation expense for restricted shares for Company employees
and service providers was $73,742 and $893,857, respectively. Compensation expense for warrants and options is based on the fair
value of the instruments on the grant date, which is determined using the Black-Scholes valuation model, and are expensed over
the expected term of the awards.
Income
Taxes 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 years ended December 31, 2018 and
2017, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero.
As of December 31, 2018, and 2017, we had no liabilities related to federal or state income taxes and the carrying value of our
deferred tax asset was zero. 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 earnings per share is equal to basic earnings per share because there are no potential dilutable
instruments that would have an anti-dilutive effect on earnings. 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 since that would have an anti-dilutive effect on earnings. Related
Party Transactions The
Company follows FASB ASC subtopic 850-10, Related Party Disclosures Material
related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such
other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the
dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any
change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties
as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Reclassifications 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. Recent
Accounting Pronouncements In
February 2016, the FASB issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic
842). Under the new guidance, the following will be required to be recognized for all leases (with the exception of short-term
leases) as of the commencement date:
• A
lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted
basis; and
• A
right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified
asset for the lease term.
• Under
the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary,
lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
• The
new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize
lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public
business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). The Company is currently evaluating the
effects, if any, that the application of ASU 2016-02 will have on disclosures associated with its consolidated financial statements. In
March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation —Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments
and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based
payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity
or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for
annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the
amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning
after December 15, 2018. Early adoption is permitted for any organization in any interim or annual period. In
April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance
obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in
Topic 606. This guidance became effective for annual reporting and interim periods beginning after December 15, 2017. The
Company adopted the modified standard on January 1, 2018, and has concluded that the adoption of this standard did not have a
material impact or cause the Company to make any adjustments to the Company’s consolidated financial statements and results
of operations. In
January 2017, FASB issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition
of a Business. The amendments in ASU 2017-01 became effective for public entities for annual and interim periods after December
15, 2017. The Company adopted the modified standard on January 1, 2018 and has concluded that the adoption of this standard did
not have a material impact or cause the Company to make any adjustments to the Company’s consolidated financial statements
and results of operations. In
June 2018, FASB issued Accounting Standards Update (ASU) No. 2018-7, Compensation – Stock Compensation (Topic 718): Improvement
to Non-Employee Share Based Payment Accounting. The amendments in ASU 2018-7 became effective for public entities after December
15, 2018. The Company is currently evaluating the effects, if any, that the application of ASU 2018-7 will have on disclosures
associated with fair value measurement. In
August 2018, FASB issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure of Fair
Value Measurement. The amendments in ASU 2018-13 becomes effective for public entities December 15, 2019. The Company is currently
evaluating the effects, if any, that the application of ASU 2018-13 will have on disclosures associated with fair value measurement. |
