1. UNAUDITED INTERIM FINANCIAL STATEMENTS

3 Months Ended

Mar. 31, 2019

Notes

1. UNAUDITED INTERIM FINANCIAL STATEMENTS

1.     UNAUDITED INTERIM FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended December 31, 2018.

Certain reclassifications have been made to prior period balances to conform with the presentation for the current period.  These reclassifications did not impact the net income (loss).

The information furnished reflects, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of the interim periods presented. Operating results of the interim period are not necessarily indicative of the amounts that will be reported for the year ending December 31, 2019.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which requires lessees to record assets and liabilities reflecting the leased assets and lease obligations, respectively, while following the dual model for recognition in statements of income requiring leases to be classified as either operating or finance.  Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases).  We adopted the new standard effective January 1, 2019, as allowed, using the modified retrospective approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods.  The only lease that we have is the real estate lease for our headquarters facility.  As of January 1, 2019, the adoption of the standard resulted in recognition of an operating right-of-use, or ROU, liability of approximately $1,077,123 and an operating ROU asset of $1,077,123.  These amounts are based on the present value of such commitments using the Company's incremental borrowing rate.  The standard does not materially affect our results of operations, cash flows and liquidity.  See Note 8 for further information.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

Income (Loss) Per Share

Income (loss) per share – basic is calculated by dividing net income (loss) by the weighted average number of shares of stock outstanding during the year, including shares issuable without additional consideration. Income per share – assuming dilution is calculated by dividing net income by the weighted average number of shares outstanding during the year adjusted for the effect of dilutive potential shares calculated using the treasury stock method.

Schedule of Income (Loss) Per Share
	Three Months Ended
	March 31, 2019	March 31, 2018
Net income (loss):
Income (loss) from continuing operations	$119,005	$(95,518)
Income (loss) from discontinued operations – See Note 10	(479)	201,956
Net income	$118,526	$106,438
Preferred stock dividends	(3,362)	(6,724)
Net income available to common shareholders	115,164	99,714
Basic income (loss) per share:
Weighted average common shares outstanding used in income (loss) per share	13,741,009	11,871,009
Basic income (loss) per share:
Continuing operations	0.01	(0.01)
Discontinued operations – See Note 10	(0.00)	0.02
Basic income (loss) per share	0.01	0.01
Diluted income (loss) per share:
Shares used in diluted income (loss) per share	17,235,723	11,871,009
Diluted income (loss) per share:
Continuing operations	0.01	(0.01)
Discontinued operations – See Note 10	(0.00)	0.02
Diluted income (loss) per share	0.01	0.01
Computation of shares used in income (loss) per share:
Weighted average shares and share equivalents outstanding – basic	13,741,009	11,871,009
Effect of preferred stock	987,102	-
Effect of dilutive stock options	2,245,133	-
Effect of dilutive warrants	262,479	-
Weighted average shares and share equivalents outstanding – diluted	17,235,723	11,871,009

Schedule of Anti-dilutive Securities Excluded
	Three Months Ended
	March 31, 2019	March 31, 2018
Preferred stock	-	987,102
Stock options	3,000	4,120,834
Warrants	-	250,000
Convertible promissory notes	27,888	31,933
Total anti-dilutive securities excluded	30,888	5,389,869

Anti-dilutive securities consist of stock options and convertible promissory notes whose exercise price or conversion price, respectively, was greater than the average market price of the common stock.