0001721868-18-000545.txt : 20180813 0001721868-18-000545.hdr.sgml : 20180813 20180813155833 ACCESSION NUMBER: 0001721868-18-000545 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180813 DATE AS OF CHANGE: 20180813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Fraud Protection Network, Inc. CENTRAL INDEX KEY: 0001580276 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 460730562 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-222586 FILM NUMBER: 181012202 BUSINESS ADDRESS: STREET 1: 2500 EAST HALLANDALE BEACH BLVD. STREET 2: SUITE 404 CITY: HALLANDALE BEACH STATE: FL ZIP: 33009 BUSINESS PHONE: 855-203-0683 MAIL ADDRESS: STREET 1: 2500 EAST HALLANDALE BEACH BLVD. STREET 2: SUITE 404 CITY: HALLANDALE BEACH STATE: FL ZIP: 33009 10-Q 1 f2sfpni10q080818.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

 

For the quarterly period ended June 30, 2018 

OR

 

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____ to ____

 

Commission File Number: 333-222586

 

Fraud Protection Network, Inc.

(Exact name of registrant as specified in its charter)

 

Florida 46-0730562

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

2500 E. Hallandale Beach Blvd., Suite 404, Hallandale Beach, FL 33009

(Address of principal executive offices, including zip code)

(855) 203-0683

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]   Accelerated filer [ ]
Non-accelerated filer [ ]   Smaller reporting company [X]
(Do not check if a smaller reporting company)   Emerging growth company [X]

 

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, on August 10, 2018, which is the latest practical date prior to the filing of this report, was 10,379,567 shares.

 
 

Note Regarding Use of Certain Terms

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the following terms have the meanings assigned to them as set forth below:

 

“Fraud Protection Network”, “FPN”, “we”, “our”, and the “Company” refer to Fraud Protection Network, Inc., a Florida corporation;

“Common Stock” refers to the common stock, $.001 par value per share, of Fraud Protection Network, Inc.;

“U.S. GAAP” refers to accounting principles generally accepted in the United States of America;

“SEC” refers to the United States Securities and Exchange Commission;

“Exchange Act” refers to the United States Securities Exchange Act of 1934, as amended;

“Fiscal 2018” refers to our fiscal year ending December 31, 2018; and

“Fiscal 2017” refers to our fiscal year ended December 31, 2017.

 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

 

From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements.

 

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

 
 

  FRAUD PROTECTION NETWORK, INC.
     
   
PART I. FINANCIAL INFORMATION Page
 No.
Item 1. Financial Statements    
  Condensed Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017 4
  Condensed Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017 5
  Condensed Statement of Shareholders' Deficit (Unaudited) for the Six Months Ended June 30, 2018 6
  Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2018 and 2017 7
  Notes to Condensed Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      18
Item 3. Quantitative and Qualitative Disclosures About Market Risk     23
Item 4. Controls and Procedures     23
     
PART II. OTHER INFORMATION  
Item 1. Legal Proceedings     24
Item 1A. Risk Factors     24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     24
Item 3. Defaults Upon Senior Securities     25
Item 4. Mine Safety Disclosures     25
Item 5. Other Information     25
Item 6. Exhibits     25
  Signatures  26

 

 

 
 

FRAUD PROTECTION NETWORK, INC.

CONDENSED BALANCE SHEETS       

 

   June 30,  December 31,
   2018  2017
    (Unaudited)    (As Restated - 
         See Note 2) 
Assets          
           
Current assets:          
Cash  $61,024   $179,675 
Accounts receivable   168,633    32,069 
Deferred costs   17,080    12,276 
Prepaid expenses and other current assets   45,072    37,594 
Total current assets   291,809    261,614 
           
Property and equipment, net   107,596    120,921 
Software development costs, net   261,169    195,251 
Investment in joint venture   115,734    116,463 
Other assets   2,430    2,430 
           
Total assets  $778,738   $696,679 
           
Liabilities and shareholders' deficit          
           
Current liabilities:          
Accounts payable  $404,739   $145,523 
Accrued expenses and other current liabilities   71,514    112,663 
Deferred revenues   78,839    48,816 
Convertible notes payable, current   1,285,000    1,430,000 
Total current liabilities   1,840,092    1,737,002 
           
Long-term liabilities:          
Convertible notes payable, non-current (net of unamortized debt discount of $72,207)   427,793    —   
           
Total liabilities   2,267,885    1,737,002 
           
Commitments and contingencies - See Note 8          

          
Shareholders' deficit:          
Preferred stock, par value $0.001 per share; 1,000,000 shares authorized;          
1,000,000 shares issued and outstanding   5,000    5,000 
Common stock, par value $0.001 per share; 50,000,000 shares authorized;          
10,289,567 and 10,000,000 shares issued and outstanding          
at June 30, 2018 and December 31, 2017, respectively   10,290    10,000 
Additional paid-in capital   5,093,990    4,518,914 
Accumulated deficit   (6,598,427)   (5,574,237)
Total shareholders' deficit   (1,489,147)   (1,040,323)
           
Total liabilities and shareholders' deficit  $778,738   $696,679 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

-4

 

FRAUD PROTECTION NETWORK, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

               

   For the Three Months  Ended  For the Six Months  Ended
   June 30,  June 30,
   2018  2017  2018  2017
             
Net revenues  $475,238   $67,543   $803,113   $84,398 
                     
Operating expenses:                    
Sales and marketing   166,368    11,111    294,981    14,989 
Data   269,071    107,203    414,261    146,815 
Technology and software maintenance   51,534    49,047    97,046    79,265 
General and administrative   537,856    276,554    853,044    477,975 
Depreciation and amortization   26,822    22,098    53,729    36,158 
Total operating expenses   1,051,651    466,013    1,713,061    755,202 
                     
Operating loss   (576,413)   (398,470)   (909,948)   (670,804)
                     
Other income (expense):                    
Interest income   574    —      574    —   
Interest expense   (68,134)   (42,328)   (114,816)   (71,945)
Total other expense, net   (67,560)   (42,328)   (114,242)   (71,945)
                     
Loss before income taxes   (643,973)   (440,798)   (1,024,190)   (742,749)
                     
Provision for income taxes   —      —      —      —   
                     
Net loss  $(643,973)  $(440,798)  $(1,024,190)  $(742,749)
                     
Loss per share:                    
Basic and diluted  $(0.06)  $(0.05)  $(0.10)  $(0.08)
                     
Weighted average number of common                    
shares outstanding:                    
Basic and diluted   10,074,118    9,524,549    10,037,264    9,682,619 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

-5

 

FRAUD PROTECTION NETWORK, INC.

CONDENSED STATEMENT OF SHAREHOLDERS' DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(UNAUDITED)

                             

               Additional      
   Preferred Stock  Common Stock  Paid-In  Accumulated   
   Shares  Amount  Shares  Amount  Capital  Deficit  Total
                      
Balance - December 31, 2017   1,000,000   $5,000    10,000,000   $10,000   $4,518,914   $(5,546,902)  $(1,012,988)
                                    
Cumulative effect of change in accounting upon adoption of ASC 606   —      —      —      —      —      (27,335)   (27,335)
                                    
Balance - December 31, 2017 (As Restated)   1,000,000    5,000    10,000,000    10,000    4,518,914    (5,574,237)   (1,040,323)
                                    
Warrants issued in conjunction with convertible promissory notes   —      —      —      —      82,255    —      82,255 
                                    
Convertible debt converted into common shares   —      —      236,000    236    294,764    —      295,000 
                                    
Common shares and warrants sold through private placement   —      —      50,000    50    74,950    —      75,000 
                                    
Common shares and warrants issued to settle accounts payable   —      —      3,567    4    5,346    —      5,350 
                                    
Share-based compensation   —      —      —      —      117,761    —      117,761 
                                    
Net loss   —      —      —      —      —      (1,024,190)   (1,024,190)
                                    
Balance - June 30, 2018   1,000,000   $5,000    10,289,567   $10,290   $5,093,990   $(6,598,427)  $(1,489,147)

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

-6

 

FRAUD PROTECTION NETWORK, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

               

  For the Six Months  Ended
  June 30,
   2018  2017
Cash flows from operating activities:          
Net loss  $(1,024,190)  $(742,750)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   53,730    36,159 
Share-based compensation   117,761    —   
Amortization of debt discount   10,048    —   
Changes in operating assets and liabilities:          
Accounts receivable   (136,564)   (5,339)
Deferred costs   (4,804)   (2,395)
Prepaid expenses and other current assets   (7,478)   —   
Accounts payable   264,566    28,574 
Accrued expenses and other current liabilities   (41,149)   (47,704)
Deferred revenues   30,023    34,692 
Net cash used in operating activities   (738,057)   (698,763)
Cash flows from investing activities:          
Purchases of property and equipment   (4,820)   (49,881)
Investment return in joint venture   729    —   
Software development costs capitalized   (101,503)   (63,344)
Net cash used in investing activities   (105,594)   (113,225)
Cash flows from financing activities:          
Advances from related party   40,000    —   
Repayments of advances from related party   (40,000)   —   
Proceeds from sale of treasury shares   —      187,500 
Proceeds from issuance of convertible notes   650,000    510,000 
Procceds from issuance of common stock and warrants   75,000    —   
Liability for stock to be issued   —      40,000 
Net cash provided by financing activities   725,000    737,500 
Net decrease in cash   (118,651)   (74,488)
Cash at beginning of period   179,675    172,769 
Cash at end of period  $61,024   $98,281 
Supplemental disclosure of cash flow information:          
Cash paid for interest  $93,922   $56,826 
Cash paid for taxes  $—     $—   
Supplemental disclosure of non-cash investing and financing activities:          
Convertible debt converted into common shares  $295,000   $—   
Warrants issued in conjunction with convertible promissory notes;          
 (warrants treated as debt discount)  $82,255   $—   
Common stock and warrants issued to settle accounts payable  $5,350   $—   
Treasury shares issued to settle liability for shares to be issued  $—     $200,000 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

-7

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1 OVERVIEW

Fraud Protection Network, Inc. (the “Company”, “us”, “we” or “our”) offers a diverse portfolio of credit and identity solutions, both direct-to-consumers as well as to enterprise customers. We obtained Experian’s Independent Third-Party Assessment (EI3PA) Level I certification in 2014. We continue to maintain this security level with annual third-party audits and have also been recognized by Experian as an Authorized Technical Provider.  The Company’s consumer services include Resident-Link, RapID PRO™ and RentConnect. The Company’s enterprise solutions include Credit PreScreening, Loan PreQualification, software development, and EI3PA hosting services. The Company’s customers are located in the United States.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. As shown in the accompanying financial statements, we have sustained a net loss of $1,024,190 and have used $738,057 of cash in our operating activities during the six months ended June 30, 2018.  As of June 30, 2018, we had $61,024 of cash on hand, a stockholders’ deficit of $1,489,147 and a working capital deficit of $1,548,283. While management expects operating trends to continue to improve over the course of 2018, the Company’s ability to continue as a going concern is contingent on implementing its business plan and, if needed, securing additional debt or equity financing from outside investors. These matters raise substantial doubt about the Company's ability to continue as a going concern.

Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. Commencing in February 2017, the Company launched its Resident-Link platform, which grew quickly and became a significant revenue stream for 2017. In May 2017, the Company launched its Credit PreScreening and Loan PreQualification platforms as well. Management has focused its efforts on these three revenue streams, which we expect will increase the amount of gross profits from operations going forward. During the six months ended June 30, 2018, the Company received proceeds of $650,000 from the issuance of convertible promissory notes (See Note 6) and $75,000 from the issuance of Units (consisting of common shares and warrants) (See Note 7). Subsequent to June 30, 2018, the Company received aggregate gross proceeds of $20,000 from the issuance of additional convertible promissory notes and $135,000 from the issuance of additional Units (See Note 11).

The estimated costs of operations while we ramp up our revenues is substantially greater than the amount of funds we had available on June 30, 2018. The Company’s future existence is dependent upon management’s ability to implement its business plan and/or obtain additional funding. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. Even if the Company is able to obtain additional financing, it may include undue restrictions on our operations in the case of indebtedness, or cause substantial dilution for our stockholders in the case of equity financing. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

NOTE 2 ACCOUNTING POLICIES

Use of Estimates

The preparation of our condensed financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Significant estimates in the accompanying condensed financial statements include the allowance for doubtful accounts, depreciable lives and valuation of property and equipment, amortization periods and the valuation of capitalized software costs, deferred revenues and deferred costs, share-based compensation, fair value of financial instruments, income taxes and the valuation allowance on deferred tax assets, and contingent liabilities.

-8

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

Basis of Presentation

The interim condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, the condensed financial statements reflect all adjustments (consisting of normal recurring adjustments, reclassifications and non-recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for the periods presented herein, but are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2018.

 

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2017, included in its Form S-1/A, as filed with the SEC on April 30, 2018. The December 31, 2017 balance sheet is derived from those audited financial statements.

 

Income Taxes

 

The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. As of June 30, 2018, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards.

Share-Based Compensation Expense

Share-based compensation expense is measured at the grant-date fair value of the award and is expensed over the requisite service period. For employee share-based awards, the grant-date fair value of the award is estimated using the Black-Scholes option pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the grant-date fair value of the award in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the share-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Net Loss Per Share

Net loss per share is based on the weighted average number of common shares outstanding during each period. The following table summarizes common stock equivalents at June 30, 2018 and 2017, respectively. Common stock equivalents were not included in the computation of diluted loss per share for the periods presented because the effects would have been anti-dilutive. Common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive.

   For the Six Months  Ended
   June 30,
   2018  2017
Options   500,000    —   
Warrants   238,392    —   
Convertible notes payable   1,428,000    1,090,000 
Total potentially dilutive shares   2,166,392    1,090,000 

-9

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company adopted ASU 2014-09 in the first quarter of 2018 utilizing the modified retrospective approach. The impact of this standard relates to our accounting for a set-up fee that is charged only to Resident-Link customers electing our baseline subscription package. Specifically, the set-up fees collected are now deferred and recognized pro rata over the expected term of the subscription. Revenue from all other products and services remains substantially unchanged. Adoption of the standard using the modified retrospective method required us to restate our December 31, 2017 balance sheet with an increase in deferred revenues of $27,335 and a corresponding increase in our accumulated deficit.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. This ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented.  The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted.  The Company is currently evaluating the potential impact of adopting this guidance on its financial statements. The Company expects that it will recognize right-of-use assets and related obligations on its balance sheet upon adoption.

NOTE 3         PROPERTY AND EQUIPMENT 

Property and equipment consisted of the following at June 30, 2018 and December 31, 2017:

   June 30,  December 31,
   2018  2017
Furniture, computers and equipment  $262,775   $257,956 
Leasehold improvements   2,700    2,700 
Property and equipment, cost   265,475    260,656 
Less: accumulated depreciation   (157,879)   (139,735)
Property and equipment, net  $107,596   $120,921 

Depreciation and amortization expense was $9,031 and $6,236 for the three months ended June 30, 2018 and 2017, respectively. Depreciation and amortization expense was $18,145 and $11,109 for the six months ended June 30, 2018 and 2017, respectively.

NOTE 4        SOFTWARE DEVELOPMENT COSTS 

During the six months ended June 30, 2018 and 2017, the Company capitalized $101,503 and $63,344, respectively, relating to the development of multiple software platforms that utilize credit data for monitoring, lead generation and decisioning capabilities. These software products were developed internally and had passed the preliminary project stage prior to capitalization.

-10

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

Software development costs consisted of the following at June 30, 2018 and December 31, 2017:

   June 30,  December 31,
   2018  2017
Software development costs  $389,285   $287,782 
Less: accumulated amortization   (128,116)   (92,531)
Software development costs, net  $261,169   $195,251 

Amortization expense of software development costs for the three months ended June 30, 2018 and 2017 was $17,793 and $15,862, respectively. Amortization expense of software development costs for the six months ended June 30, 2018 and 2017 was $35,585 and $25,050, respectively.

The following is a schedule of estimated future amortization expense of capitalized software development costs at June 30, 2018:

Year Ending December 31,   
 2018   $61,061 
 2019    104,668 
 2020    67,535 
 2021    27,905 
     $261,169 

NOTE 5        INVESTMENT IN JOINT VENTURE

During 2017, the Company entered into a joint venture agreement (the “JV Agreement”) with a customer for the development of a product designed to help consumers make better decisions regarding their credit.  Under the JV Agreement, the Company contributed certain legacy software and development services to the JV entity for a 32% interest, and the customer agreed to make a cash contribution (up to a maximum of $400,000) for the development of the online platform for a 68% interest.  The contributed intellectual property is included in Investment in joint venture on the accompanying balance sheet.  Under the JV Agreement, the Company and the joint venture entity entered into a hosting and development services agreement (the ''Services Agreement”) pursuant to which the Company receives fees for software development.  These fees are recognized as services are provided, net of the costs incurred, and net of the 32% ownership interest in the joint venture.  During the three months ended June 30, 2018 and 2017, the Company recognized software development revenue under the Services Agreement of $0. During the six months ended June 30, 2018 and 2017, the Company recognized software development revenue (net of its ownership interest of $729 and $0 in such revenues) under the Services Agreement of $1,577 and $0, respectively. Under the JV Agreement, the Company shall share in any future profits of the joint venture on the equity method based on its 32% ownership interest. 

NOTE 6        CONVERTIBLE NOTES PAYABLE 

On February 5, 2018, the Company issued a one-year convertible promissory note in exchange for cash proceeds of $150,000. The note is convertible into shares of the Company’s common stock at any time from the date of issuance through the maturity date on February 5, 2019 at the option of the holder at a fixed conversion price of $1.25 per share. The note bears interest at the rate of 10% per annum and requires quarterly interest payments through maturity.

During April 2018, the Company issued five (5) two-year convertible promissory notes in exchange for aggregate cash proceeds of $500,000. The notes are convertible into shares of the Company’s common stock at any time from the date of issuance through the maturity date in April 2020 at the option of the holder at a fixed conversion price of $1.25 per share. The notes bear interest at the rate of 10% per annum and require quarterly interest payments through maturity. As an inducement to enter into the convertible promissory notes, the holders were issued 5-year warrants to purchase an aggregate of 125,000 shares of the Company’s common stock at an exercise price of $2.50 per share expiring in April 2023. The fair value of the warrants and associated beneficial conversion right of $82,255 is being treated as a discount to the face value of the promissory notes and amortized to interest expense over the original term of the convertible promissory notes (See Note 7).

-11

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

On June 6, 2018, certain holders of the Company’s convertible promissory notes converted an aggregate of $295,000 of their convertible notes into 236,000 shares of the Company’s common stock, at a conversion price of $1.25 per share. Upon conversion, all accrued interest on the converted promissory notes was paid (See Note 7).

During the six months ended June 30, 2017, the Company issued one-year convertible promissory notes in exchange for aggregate cash proceeds of $510,000. The notes are convertible into shares of the Company’s common stock at any time from the date of issuance through the respective maturity date at the option of the holder at a fixed conversion price of $1.25 per share. The notes bear interest at rates ranging from 10% to 12% per annum and require quarterly interest payments through maturity.

Convertible notes payable consisted of the following at June 30, 2018 and December 31, 2017:

   June 30,  December 31,
   2018  2017
Note payable - originating June 10, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of June 10, 2018 [C]  $—     $12,500 
Note payable - originating July 18, 2017; quarterly payments required; bearing interest at 12%; maturity date of July 18, 2018 [A]   75,000    75,000 
Note payable - originating April 27, 2016; quarterly payments required; bearing interest at 10%; maturity date of July 27, 2018 [A]   25,000    25,000 
Note payable - originating September 22, 2017; quarterly payments required; bearing interest at 10%; maturity date of September 21, 2018 [C]   —      20,000 
Note payable - originating October 1, 2017; quarterly payments required; bearing interest at 12%; maturity date of September 26, 2018 [C]   —      100,000 
Note payable - originating September 28, 2017; quarterly payments required; bearing interest at 12%; maturity date of September 28, 2018 [C]   —      100,000 
Note payable - originating August 28, 2015; quarterly payments required; bearing interest at 13.33%; extended maturity date of November 28, 2018   100,000    100,000 
Note payable - originating December 15, 2017; quarterly payments required; bearing interest at 10%; maturity date of December 15, 2018   25,000    25,000 
Note payable - originating October 1, 2015; monthly payments required; bearing interest at 13.33%; extended maturity date of February 1, 2019   600,000    600,000 
Note payable - originating February 5, 2018; quarterly payments required; bearing interest at 10%; maturity date of February 5, 2019   150,000    —   
Note payable - originating February 28, 2017; quarterly payments required; bearing interest at 12%; maturity date of February 28, 2019   60,000    60,000 
Note payable - originating December 16, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of March 19, 2019 [C]   —      12,500 
Note payable - originating April 7, 2017; quarterly payments required; bearing interest at 12%; extended maturity date of April 7, 2019   150,000    150,000 
Note payable - originating April 18, 2017; quarterly payments required; bearing interest at 10%; extended maturity date of April 18, 2019   100,000    100,000 
Note payable - originating April 26, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of April 26, 2019 [C]   —      25,000 
Note payable - originating May 2, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of May 2, 2019 [C]   —      12,500 
Note payable - originating August 26, 2015; quarterly payments required; bearing interest at 13.33%; extended maturity date of May 26, 2019 [C]   —      12,500 

 

-12

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

 

Note payable - originating April 1, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 1, 2020   50,000    —   
Note payable - originating April 1, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 1, 2020   100,000    —   
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020   50,000    —   
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020   250,000    —   
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020   50,000    —   
Total convertible notes payable, gross   1,785,000    1,430,000 
Less: Debt discount   (72,207)   —   
Total convertible notes payable, net   1,712,793    1,430,000 
Less: Current maturities   (1,285,000)   (1,430,000)
Net amount due after one year  $427,793   $—   

 

[A] - subsequent to June 30, 2018, note was extended for an additional 12 months.      
[B] - note was in default from August 26, 2016 to February 26, 2018, at which time the note regained compliance.      
[C] - note converted into common shares in June 2018.      

During the three months ended June 30, 2018 and 2017, interest expense of $67,758 (includes $10,048 of amortization of debt discount) and $43,356, respectively, was recognized on outstanding convertible notes payable. During the six months ended June 30, 2018 and 2017, interest expense of $114,084 (includes $10,048 of amortization of debt discount) and $71,211, respectively, was recognized on outstanding convertible notes payable. As of June 30, 2018 and December 31, 2017, accrued interest payable was $31,773 and $20,928, respectively, which is included in accrued expenses and other current liabilities on the accompanying condensed balance sheet.

NOTE 7        SHAREHOLDERS’ DEFICIT

Common Stock

In June 2018, the Company began its efforts to raise up to $990,000 from a private placement, to accredited investors, of up to 66 Units at a price of $15,000 per Unit, each Unit consisting of: (i) 10,000 shares of the Company's common stock; and (ii) 2,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share. From commencement of the offering through June 30, 2018, the Company sold 5 Units (comprising 50,000 common shares and 12,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share) to various investors for gross proceeds of $75,000 (See Note 11).

On June 6, 2018, certain holders of the Company’s convertible promissory notes converted an aggregate of $295,000 of their convertible notes into 236,000 shares of the Company’s common stock, at a conversion price of $1.25 per share. Upon conversion, all accrued interest on the converted promissory notes was paid (See Note 6).

On June 27, 2018, the Company issued 3,567 common shares and 892 five-year warrants to purchase shares of the Company’s common stock at an exercise price of $2.50 per share to settle $5,350 of accounts payable owed to an officer for services performed prior to becoming an officer of the Company.

On June 6, 2018, certain holders of the Company’s convertible promissory notes converted an aggregate of $295,000 of their convertible notes into 236,000 shares of the Company’s common stock, at a conversion price of $1.25 per share. Upon conversion, all accrued interest on the converted promissory notes was paid (See Note 6).

On June 27, 2018, the Company issued 3,567 common shares and 892 five-year warrants to purchase shares of the Company’s common stock at an exercise price of $2.50 per share to settle $5,350 of accounts payable owed to an officer for services performed prior to becoming an officer of the Company.

-13

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

Treasury Stock

During the six months ended June 30, 2017, the Company’s Chief Executive Officer contributed 500,000 common shares to the Company. The Company recognized $564,846 of treasury stock with a corresponding increase in additional paid-in capital.

During the six months ended June 30, 2017, the Company sold an aggregate of 150,000 treasury shares in exchange for aggregate proceeds of $187,500.

In January 2017, 210,000 treasury shares were issued to settle the $200,000 liability for stock to be issued that existed at December 31, 2016.

In February 2017, the Company received proceeds of $40,000 for the sale of treasury shares, which were physically issued in August 2017. Accordingly, the proceeds were reflected as a liability for stock to be issued until August 2017.

 

Warrants

 

In addition to the warrants issued with shares of common stock (see above), on June 1, 2018, as part of a consulting agreement, the Company issued to a consultant seven-year warrants to purchase 100,000 shares of common stock at an exercise price of $1.65 per share, which vest monthly over a 12-month period. Accordingly, the Company has recognized share-based compensation of $28,101 for the six months ended June 30, 2018.

 

During the six months ended June 30, 2018, the Company issued five (5) two-year convertible promissory notes and an aggregate of 125,000 5-year warrants to purchase common shares at an exercise price of $2.50 per share in exchange for aggregate cash proceeds of $500,000. The fair value of the warrants of $82,255 is treated as debt discount that is being amortized over the term of the promissory notes (See Note 6).

 

 

The following table summarizes warrant activity during the six months ended June 30, 2018:

 

          Weighted    
      Weighted    Average    
      Average   Remaining    
  Number of   Exercise   Life   Intrinsic
  Options   Price   In Years   Value
Outstanding, December 31, 2017                        -                             -           
Granted               238,392    $                 2.14        
Exercised                        -                             -           
Forfeited                        -                             -           
Expired                        -                             -           
Outstanding, June 30, 2018               238,392    $                 2.14                         5.7    $                    -   
               
Exercisable, June 30, 2018               146,725    $                 2.45                         4.9    $                    -   

Stock Options

Effective March 6, 2018, the Company granted stock options to purchase 500,000 shares of Common Stock at an exercise price of $1.25 per share to its Chief Financial Officer, pursuant to an Employment Agreement. The stock options vest as follows: (i) 200,000 options vest in twelve equal monthly increments on the last calendar day of each month with the first vesting date being March 31, 2018, subject to continued employment on each applicable vesting date; and (ii) 300,000 options vest in thirty-six equal monthly increments on the last calendar day of each month with the first vesting date being March 31, 2018, subject to continued employment on each applicable vesting date.

-14

 

FRAUD PROTECTION NETWORK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

  

The aggregate grant-date fair value of the stock options of $389,212 (weighted average grant-date fair value of $0.78 per option) was estimated using the Black-Scholes option-pricing formula applying the following assumptions for each respective period:

   For the Six Months  Ended
   June 30,
   2018  2017
Expected term (years)  4.0 - 4.5  n/a
Expected volatility   81.43%    n/a  
Risk free interest rate    2.42 - 2.65%      n/a  
Expected dividends   —       n/a  
Estimated annual forfeiture rate   —       n/a  

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the following assumptions. The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. As the Company’s stock is not yet listed on any exchange, the expected volatility used is based on the historical price of a similar company’s stock over the most recent period commensurate with the expected term of the award. The risk-free interest rate used is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The Company historically has not paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted. The estimated annual forfeiture rate is based on management’s expectations and will reduce expense ratably over the vesting period. The forfeiture rate will be adjusted periodically based on the extent to which actual option forfeitures differ, or are expected to differ, from the previous estimate, when it is material.

 

The Company recognized compensation expense of $58,180 and $0 for the three months ended June 30, 2018 and 2017 and $74,163 and $0 during the six months ended June 30, 2018 and 2017, respectively, for stock option awards in its condensed statements of operations.

 

As of June 30, 2018, there was $315,049 of total unrecognized compensation cost related to nonvested stock option awards. That cost is expected to be recognized over a weighted average period of 1.1 years.

 

The following table summarizes stock option activity during the six months ended June 30, 2018:

 

          Weighted    
      Weighted    Average    
      Average   Remaining    
  Number of   Exercise   Life   Intrinsic
  Options   Price   In Years   Value
Outstanding, December 31, 2017                        -                             -           
Granted               500,000    $                 1.25        
Exercised                        -                             -           
Forfeited                        -                             -           
Expired                        -                             -           
Outstanding, June 30, 2018               500,000    $                 1.25                         6.7    $           125,000
               
Exercisable, June 30, 2018               100,000    $                 1.25                         6.7    $             25,000

-15

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS 

 

Restricted Stock Awards

 

The Company recognized compensation expense of $7,791 and $0 for the three months ended June 30, 2018 and 2017 and $15,497 and $0 during the six months ended June 30, 2018 and 2017, respectively, for restricted stock awards in its condensed statements of operations.

 

As of June 30, 2018, there was $13,699 of total unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted average period of 0.4 years.

 

The following table summarizes restricted stock activity during the six months ended June 30, 2018:

      Weighted    
      Average   Total
  Number of   Grant Date   Grant Date
  Shares   Fair Value   Fair Value
Non-vested, December 31, 2017                 25,000    $                 1.25    $             31,250
Granted                        -                             -                             -   
Vested                        -                             -                             -   
Forfeited                        -                             -                             -   
Non-vested, June 30, 2018                 25,000    $                 1.25    $             31,250

NOTE 8        COMMITMENTS AND CONTINGENCIES

Employment Agreement

Effective March 6, 2018, the Company entered into a three-year Employment Agreement with its Chief Financial Officer. The Employment Agreement provides for base cash salary and stock options.

Consulting Agreement

Effective June 1, 2018, the Company entered into a one-year consulting agreement with a consultant whereby the consultant shall provide strategic investor relations to the Company in exchange for: (i) a monthly retainer of $5,500 (subsequently reduced to $1,500); and (ii) 100,000 seven-year warrants to purchase common shares at an exercise price of $1.65 per share, which vest monthly over a 12-month period.

NOTE 9        RELATED PARTY TRANSACTIONS

Consulting Arrangement

The Company utilizes the services of an entity owned by the father of the Company’s Chief Executive Officer, on an as needed basis. During the six months ended June 30, 2018 and 2017, the Company paid the entity $4,200 and $5,000, respectively, for services rendered. As of June 30, 2018 and December 31, 2017, there was no outstanding balance due to the entity.

Loans from Officer

During the six months ended June 30, 2018, the Company borrowed and repaid $40,000 from its Chief Executive Officer. The loans were non-interest bearing and due on demand.

NOTE 10        LEGAL PROCEEDINGS

From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. As of June 30, 2018, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.

-16

 

FRAUD PROTECTION NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS 

NOTE 11        SUBSEQUENT EVENTS

Subsequent to June 30, 2018 through July 31, 2018, as part of the Company’s efforts to raise up to $990,000 from a private placement commencing in June 2018, to accredited investors, of up to 66 Units at a price of $15,000 per Unit, each Unit consisting of: (i) 10,000 shares of the Company's common stock; and (ii) 2,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share, the Company sold an additional 9 Units (comprising 90,000 common shares and 22,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share) to various investors for gross proceeds of $135,000 (See Note 7).

On August 8, 2018, the Company issued a one-year convertible promissory notes in exchange for cash proceeds of $20,000. The note is convertible into shares of the Company’s common stock at any time from the date of issuance through the maturity date in August 2019 at the option of the holder at a fixed conversion price of $1.50 per share. The note bears interest at the rate of 10% per annum and requires quarterly interest payments through maturity.

-17

 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read in conjunction with our unaudited condensed financial statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements for the year ended December 31, 2017 and notes thereto included in Form S-1/A, as filed with the SEC on April 30, 2018.  The following discussion and analysis compares our results of operations for the three and six months ended June 30, 2018 (the “2018 Quarter” and “2018 Period”, respectively) with those for the three and six months ended June 30, 2017 (the “2017 Quarter” and “2017 Period”, respectively).  All dollar amounts and percentages presented herein have been rounded to approximate values.

 

Business Overview

 

Fraud Protection Network, Inc. (“us”, “we”, “our” or the “Company”) offers a diverse portfolio of credit and identity solutions, both direct-to-consumers as well as to enterprise customers. We maintain our infrastructure and software at the highest security clearance required by any credit bureau, originally obtaining Experian’s Independent Third-Party Assessment (EI3PA) Level I certification in 2014. We continue to maintain this security level with annual third-party audits and have also been recognized by Experian as an Authorized Technical Provider. Our consumer services include Resident-Link, RapID PRO™ and RentConnect. Our enterprise solutions include Credit PreScreening, Loan PreQualification, software development, and EI3PA hosting services. Our customers are located in the United States.

 

We were incorporated in Florida on August 4, 2012 and our principal place of business is in Hallandale Beach, Florida.

 

Critical Accounting Policies and Estimates

 

We discuss the material accounting policies that are critical in making the estimates and judgments in Form S-1/A for the year ended December 31, 2017, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”. There has been no material change in critical accounting policies or estimates during the period covered by this report.

 

Recent Accounting Pronouncements

 

For information on recent accounting pronouncements, see Note 2 to the unaudited condensed financial statements.

-18

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2018 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2017

 

Net Revenues

 

Net revenues increased $407,695, or 604%, to $475,238 in the 2018 Quarter from $67,543 in the 2017 Quarter, resulting primarily from increased revenues from PreScreen Services by $219,733, Resident-Link by $165,529, and PreQual Solutions by $21,251. For the remainder of 2018, we plan to continue to focus our efforts on increasing revenues derived from these three revenue streams as we believe these revenues shall continue to grow for the foreseeable future.

 

Sales and Marketing Expenses

 

Sales and marketing expenses increased $155,257, or 1,397%, to $166,368 in the 2018 Quarter from $11,111 in the 2017 Quarter, resulting from the increase in revenues that occurred in the current year, primarily due to referral fees and commissions increased by $136,157 and merchant fees increased by $18,211.

 

Data Expenses

 

Data expenses increased $161,868, or 151%, to $269,071 in the 2018 Quarter from $107,203 in the 2017 Quarter, primarily due to the increase in data purchased from a major credit repository and resulted from our increase in revenues.

     

Technology and Software Maintenance Expenses

 

Technology and software maintenance expenses increased $2,487, or 5%, to $51,534 in the 2018 Quarter from $49,047 in the 2017 Quarter, primarily due to increased computer supplies and networking costs, partially offset by decreased time spent by our programmers on maintenance of our various software platforms.

 

General and Administrative Expenses

 

General and administrative expenses increased $261,302, or 94%, to $537,856 in the 2018 Quarter from $276,554 in the 2017 Quarter, primarily due to share-based compensation increased by $94,072, professional fees increased by $63,393, payroll and related costs increased by $60,766, travel costs increased by $12,085 and insurance expenses increased by $10,806. General and administrative expenses during the 2018 Quarter consisted primarily of payroll and related costs, share-based compensation, professional fees, insurance, travel, telephone expense and colocation services.

 

Depreciation and Amortization Expenses

 

Depreciation and amortization expenses increased $4,724, or 21%, to $26,822 in the 2018 Quarter from $22,098 in the 2017 Quarter, primarily due to the commencement of amortization of our Resident-Link and Loan PreQualification software platforms in February 2017 and May 2017, respectively.

 

Other Income (Expense)

 

Other income (expense) increased $25,232, or 60%, to ($67,560) in the 2018 Quarter from ($42,328) in the 2017 Quarter, primarily due to increased interest expense resulting from the issuance of convertible promissory notes payable, bearing interest from 10% to 12%, in the aggregate amounts of $320,000 during the last six months of 2017 and $650,000 during the first six months of 2018. At the holders’ option, the promissory notes can be converted into shares of our common stock at a conversion price of $1.25 per share.

 

-19

 

Net Loss

 

We generated a net loss of $643,973 in the 2018 Quarter compared to a net loss of $440,798 in the 2017 Quarter. The increase in the net loss by $203,175 is due to the increase in operating expenses by $585,638 and the increase in other income (expense) by $25,232, partially offset by the increase in net revenues by $407,695.

 

Income Taxes

 

The Company generated a net loss of $643,973 in the 2018 Quarter. While the Company maintains significant net operating loss carryforwards, no income tax expense (benefit) was recognized as the Company’s deferred tax provision is completely offset by a full valuation allowance. As a result of The 2017 Tax Cuts and Jobs Act, we expect no tax impact to the financial statements stemming from the change in the corporate income tax rate.

 

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2018 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2017

 

Net Revenues

 

Net revenues increased $718,715, or 852%, to $803,113 in the 2018 Period from $84,398 in the 2017 Period, resulting primarily from increased revenues from PreScreen Services by $366,060, Resident-Link by $306,413, and PreQual Solutions by $43,502. For the remainder of 2018, we plan to continue to focus our efforts on increasing revenues derived from these three revenue streams as we believe these revenues shall continue to grow for the foreseeable future.

 

Sales and Marketing Expenses

 

Sales and marketing expenses increased $279,992, or 1,868%, to $294,981 in the 2018 Period from $14,989 in the 2017 Period, resulting from the increase in revenues that occurred in the current year, primarily due to referral fees and commissions increased by $239,022 and merchant fees increased by $37,605.

 

Data Expenses

 

Data expenses increased $267,446, or 182%, to $414,261 in the 2018 Period from $146,815 in the 2017 Period, primarily due to the increase in data purchased from a major credit repository and resulted from our increase in revenues.

     

Technology and Software Maintenance Expenses

 

Technology and software maintenance expenses increased $17,781, or 22%, to $97,046 in the 2018 Period from $79,265 in the 2017 Period, primarily due to increased computer supplies and networking costs, partially offset by decreased time spent by our programmers on maintenance of our various software platforms.

 

General and Administrative Expenses

 

General and administrative expenses increased $375,069, or 78%, to $853,044 in the 2018 Period from $477,975 in the 2017 Period, primarily due to share-based compensation increased by $117,761, professional fees increased by $92,393, payroll and related costs increased by $84,381, insurance expenses increased by $21,981, travel costs increased by $21,946 and telephone expense increased by $13,901. General and administrative expenses during the 2018 Period consisted primarily of payroll and related costs, share-based compensation, professional fees, insurance, travel, colocation services, telephone expense and rent.

 

Depreciation and Amortization Expenses

 

Depreciation and amortization expenses increased $17,571, or 49%, to $53,729 in the 2018 Period from $36,158 in the 2017 Period, primarily due to the commencement of amortization of our Resident-Link and Loan PreQualification software platforms in February 2017 and May 2017, respectively.

 

-20

 

Other Income (Expense)

 

Other income (expense) increased $42,297, or 59%, to ($114,242) in the 2018 Period from ($71,945) in the 2017 Period, primarily due to increased interest expense resulting from the issuance of convertible promissory notes payable, bearing interest from 10% to 12%, in the aggregate amounts of $320,000 during the last six months of 2017 and $650,000 during the first six months of 2018. At the holders’ option, the promissory notes can be converted into shares of our common stock at a conversion price of $1.25 per share.

 

Net Loss

 

We generated a net loss of $1,024,190 in the 2018 Period compared to a net loss of $742,749 in the 2017 Period. The increase in the net loss by $281,441 is due to the increase in operating expenses by $957,859 and the increase in other income (expense) by $42,297, partially offset by the increase in net revenues by $718,715.

 

Income Taxes

 

The Company generated a net loss of $1,024,190 in the 2018 Period. While the Company maintains significant net operating loss carryforwards, no income tax expense (benefit) was recognized as the Company’s deferred tax provision is completely offset by a full valuation allowance. As a result of The 2017 Tax Cuts and Jobs Act, we expect no tax impact to the financial statements stemming from the change in the corporate income tax rate.

 

LIQUIDITY AND CAPITAL RESOURCES

 

A summary of our cash flows is as follows:

 

   For the Six Months  Ended
   June 30,
   2018  2017
Net cash used in operating activities  $(738,057)  $(698,763)
Net cash used in investing activities   (105,594)   (113,225)
Net cash provided by financing activities   725,000    737,500 
Net decrease in cash  $(118,651)  $(74,488)

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities in the 2018 Period resulted primarily from a net loss of $1,024,190, an increase in accounts receivable of $136,564 and a decrease in accrued expenses and other current liabilities of $41,149, partially offset by an increase in accounts payable by $264,566, share-based compensation of $117,761, depreciation and amortization of $53,730 and an increase in deferred revenues of $30,023.

 

Net cash used in operating activities in the 2017 Period resulted primarily from a net loss of $742,750 and a decrease in accrued expenses and other current liabilities of $47,704, partially offset by depreciation and amortization of $36,159, an increase in deferred revenues of $34,692 and an increase in accounts payable of $28,574.

 

-21

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities in the 2018 Period resulted primarily from the capitalization of software development costs of $101,503.

 

Net cash used in investing activities in the 2017 Period resulted primarily from the capitalization of software development costs of $63,344 and purchases of property and equipment of $49,881.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities in the 2018 Period resulted from proceeds of $650,000 from the sale of convertible promissory notes and $75,000 from the sale of Units consisting of common shares and warrants.

 

Net cash provided by financing activities in the 2017 Period resulted from proceeds of $510,000 from the sale of convertible promissory notes and proceeds from the sale of treasury shares of $227,500 (of which $40,000 was for shares to be issued).

 

Liquidity and Capital Resource Considerations

 

Historically, our primary source of liquidity is proceeds from issuances of debt and equity securities. The primary uses of cash are payroll and related expenses, data costs, referral fees and commissions, professional fees and software development costs

 

During 2018 to date, we issued convertible promissory notes in exchange for aggregate cash proceeds of $670,000. $650,000 and $20,000 of the notes are convertible into shares of our common stock at any time from the date of issuance through the respective maturity date at the option of the holder at a fixed conversion price of $1.25 and $1.50 per share, respectively. The notes bear interest at 10% per annum and require quarterly interest payments through maturity. As an inducement to enter into the April 2018 convertible promissory notes payable agreements, the holders were issued 5-year warrants to purchase an aggregate of 125,000 shares of the Company’s common stock at an exercise price of $2.50 per share expiring in April 2023. The fair value of the warrants and associated beneficial conversion right is being treated as a discount to the face value of the promissory notes and amortized to interest expense over the original term of the convertible promissory notes.

 

Our existence is dependent upon management’s ability to grow our revenues and/or obtain additional funding. If our Board determines to raise capital and is unsuccessful and we are unable to increase revenues, we believe that we will need to reduce operating expenses or cease operations. There can be no assurance that our efforts will result in profitable operations or the resolution of our liquidity problems.

 

In their report dated April 16, 2018, our independent registered public accounting firm included an emphasis-of-matter paragraph with respect to our financial statements for the year ended December 31, 2017 concerning our assumption that we will continue as a going concern. Our ability to continue as a going concern is an issue raised because of our recurring losses from operations and working capital deficit.

 

Required Capital Over the Next Fiscal Year

 

As of August 10, 2018, we had a cash balance of approximately $186,000. Given our current cash on hand and the growth in our revenues, we believe that we do not have sufficient cash on hand to allow us to implement our long-term business plan and we believe we will need to raise at least $500,000 to be able to fund operations for the remainder of 2018. For 2019, we believe we will need to raise an additional $500,000 to $1,000,000 to have sufficient cash to allow us to continue to implement our long-term business plan.

 

Our cash balances are kept liquid to support our growing infrastructure needs. The majority of our cash is concentrated in large financial institutions.

 

-22

 

Related Party Transactions

 

For information on related party transactions and their financial impact, see Note 9 to the unaudited condensed financial statements contained herein.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

ITEM 4.CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on their evaluation, our management has concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting.

 

There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations of the Effectiveness of Controls and Procedures.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

-23

 

 

PART II. OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. As of June 30, 2018, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.

 

ITEM 1A.RISK FACTORS

 

Not applicable to smaller reporting companies.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

From April 1, 2018, to the date of this Form 10-Q, we sold the securities below. The securities were offered and sold in reliance upon the exemption from registration contained in Rule 506(b) of the Securities Act of 1933, as amended (the “Securities Act”). We believed that Rule 506(c) was available because each investor was an accredited investor as defined by Rule 501 of Regulation D of the Securities Act.

 

Note Offerings

 

·On April 1, 2018 and April 2, 2018, we sold an aggregate of $500,000 of two-year promissory notes to five (5) accredited investors. Each note bears interest at the rate of 10% per annum. The principal and interest due under the notes are convertible at the option of the holder into our common stock at the price of $1.25 per share in whole or in part at any time until the earlier of: (i) repayment of the notes; or (ii) the maturity date of the notes. In connection with the sale of these notes, we issued to the investors 125,000 five-year warrants to purchase shares of our common stock at the price of $2.50 per share. The warrants are exercisable at any time until April 2023.
·On August 8, 2018, we sold a $20,000 convertible promissory note to one (1) accredited investor. The note bears interest at the rate of 10% per annum. The principal and interest due under the note are convertible at the option of the holder into our common stock at the price of $1.50 per share in whole or in part at any time until the earlier of: (i) repayment of the note; or (ii) the maturity date of the note.

Conversions of Outstanding Promissory Notes into Common Shares

On June 6, 2018, three (3) holders of outstanding convertible promissory notes converted an aggregate of $295,000 of their convertible notes into 236,000 shares of our common stock, at a conversion price of $1.25 per share. Upon conversion, all accrued interest on the converted promissory notes was paid.

2018 Unit Offering

From June 11, 2018 to July 31, 2018, we sold 14 Units to seven (7) accredited investors at the price of $15,000 per Unit or an aggregate of $210,000. Each Unit consists of: (i) 10,000 shares of the Company's common stock; and (ii) 2,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share.

Common Shares and Warrants Issued for Services

 

On June 1, 2018, as part of a consulting agreement, we issued to a consultant seven-year warrants to purchase 100,000 shares of common stock at an exercise price of $1.65 per share, having an aggregate fair value of $108,933, which vest monthly over a 12-month period.

 

On June 27, 2018, we issued 3,567 shares of the Company’s common stock and five-year warrants to purchase 892 shares of common stock at an exercise price of $2.50 per share, having an aggregate fair value of $5,350, to David Hexter, our Chief Financial Officer, for services rendered to us prior to his appointment as Chief Financial Officer.

-24

 

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5.OTHER INFORMATION

 

None.

 

ITEM 6.EXHIBITS

 

The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.

-25

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Dated:  August 13, 2018

 

FRAUD PROTECTION NETWORK, INC.
 
 

By: /s/ Edward Margolin

Edward Margolin

Chief Executive Officer

(Principal Executive Officer)

 

 

By: /s/ David Hexter
David Hexter

Chief Financial Officer
(Principal Financial and Accounting Officer)

-26

 

INDEX TO EXHIBITS

 

        Incorporated by Reference  

Filed or

Furnished

No.   Exhibit Description   Form   Date   Number   Herewith
                     
31.1   Certification of Principal Executive Officer (Section 302)               Filed
31.2   Certification of Principal Financial Officer (Section 302)               Filed
32.1   Certification of Principal Executive Officer and Principal Financial Officer (Section 906)               Furnished*
101 INS   XBRL Instance Document               Filed
101 SCH   XBRL Taxonomy Extension Schema               Filed
101 CAL   XBRL Taxonomy Extension Calculation Linkbase               Filed
101 LAB   XBRL Taxonomy Extension Label Linkbase               Filed
101 PRE   XBRL Taxonomy Extension Presentation Linkbase               Filed
101 DEF   XBRL Taxonomy Extension Definition Linkbase               Filed
 

* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

 

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Fraud Protection Network, Inc., 2500 E. Hallandale Beach Blvd., Suite 404, Hallandale Beach, Florida 33009, Attention: Corporate Secretary.

-27

 

EX-31.1 2 f2sfpni10q080818ex31_1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 

I, Edward Margolin, certify that:

 

1.       I have reviewed this quarterly report on Form 10-Q of Fraud Protection Network, Inc.;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 13, 2018

 

/s/ Edward Margolin

Edward Margolin

Chief Executive Officer

(Principal Executive Officer)

EX-31.2 3 f2sfpni10q080818ex31_2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 

I, David Hexter, certify that:

 

1.       I have reviewed this quarterly report on Form 10-Q of Fraud Protection Network, Inc.;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 13, 2018

 

/s/ David Hexter

David Hexter

Chief Financial Officer

(Principal Financial Officer)

EX-32.1 4 f2sfpni10q080818ex32_1.htm CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

 

In connection with the quarterly report of Fraud Protection Network, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof, I, Edward Margolin, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

 

2.The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/ Edward Margolin

Edward Margolin

Chief Executive Officer

(Principal Executive Officer)

Dated: August 13, 2018

 

 

In connection with the quarterly report of Fraud Protection Network, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof, I, David Hexter, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

 

2.The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ David Hexter

David Hexter

Chief Financial Officer

(Principal Financial Officer)

Dated: August 13, 2018

 

 

 

 

 

 

 

 

 

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(the &#8220;Company&#8221;, &#8220;us&#8221;, &#8220;we&#8221; or &#8220;our&#8221;) offers a diverse portfolio of credit and identity solutions, both direct-to-consumers as well as to enterprise customers. <font style="background-color: white">We obtained Experian&#8217;s Independent Third-Party Assessment (EI3PA) Level I certification in 2014. We continue to maintain this security level with annual third-party audits and have also been recognized by Experian as an Authorized Technical Provider.&#160; </font>The Company&#8217;s consumer services include Resident-Link, RapID PRO&#8482; and RentConnect. The Company&#8217;s enterprise solutions include Credit PreScreening, Loan PreQualification, software development, and EI3PA hosting services. 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While management expects operating trends to continue to improve over the course of 2018, the Company&#8217;s ability to continue as a going concern is contingent on implementing its business plan and, if needed, securing additional debt or equity financing from outside investors. These matters raise substantial doubt about the Company's ability to continue as a going concern.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0pt 0 12pt; text-align: justify">Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. Commencing in February 2017, the Company launched its Resident-Link platform, which grew quickly and became a significant revenue stream for 2017. In May 2017, the Company launched its Credit PreScreening and Loan PreQualification platforms as well. Management has focused its efforts on these three revenue streams, which we expect will increase the amount of gross profits from operations going forward. During the six months ended June 30, 2018, the Company received proceeds of $650,000 from the issuance of convertible promissory notes (See Note 6) and $75,000 from the issuance of Units (consisting of common shares and warrants) (See Note 7). Subsequent to June 30, 2018, the Company received aggregate gross proceeds of $20,000 from the issuance of additional convertible promissory notes and $135,000 from the issuance of additional Units (See Note 11).</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The estimated costs of operations while we ramp up our revenues is substantially greater than the amount of funds we had available on June 30, 2018. 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Actual results could differ from those estimates and assumptions. Significant estimates in the accompanying condensed financial statements include the allowance for doubtful accounts, depreciable lives and valuation of property and equipment, amortization periods and the valuation of capitalized software costs, deferred revenues and deferred costs, share-based compensation, fair value of financial instruments, income taxes and the valuation allowance on deferred tax assets, and contingent liabilities.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><b>Basis of Presentation</b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The interim condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the &#8220;SEC&#8221;). In the opinion of the Company&#8217;s management, the condensed financial statements reflect all adjustments (consisting of normal recurring adjustments, reclassifications and non-recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for the periods presented herein, but are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2018.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the Company&#8217;s audited financial statements for the year ended December 31, 2017, included in its Form S-1/A, as filed with the SEC on April 30, 2018. 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Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Aug. 10, 2018
Document And Entity Information    
Entity Registrant Name Fraud Protection Network, Inc.  
Entity Central Index Key 0001580276  
Document Type 10-Q  
Trading Symbol FPNI  
Document Period End Date Jun. 30, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity a Well-known Seasoned Issuer No  
Entity a Voluntary Filer No  
Entity's Reporting Status Current Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   10,379,567
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2018  
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CONDENSED BALANCE SHEETS (Unaudited) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Current assets:    
Cash $ 61,024 $ 179,675
Accounts receivable 168,633 32,069
Deferred costs 17,080 12,276
Prepaid expenses and other current assets 45,072 37,594
Total current assets 291,809 261,614
Property and equipment, net 107,596 120,921
Software development costs, net 261,169 195,251
Investment in joint venture 115,734 116,463
Other assets 2,430 2,430
Total assets 778,738 696,679
Current liabilities:    
Accounts payable 404,739 145,523
Accrued expenses and other current liabilities 71,514 112,663
Deferred revenues 78,839 48,816
Convertible notes payable, current 1,285,000 1,430,000
Total current liabilities 1,840,092 1,737,002
Long-term liabilities:    
Convertible notes payable, non-current (net of unamortized debt discount of $72,207) 427,793
Total liabilities 2,267,885 1,737,002
Shareholders' deficit:    
Preferred stock, par value $0.001 per share; 1,000,000 shares authorized; 1,000,000 shares issued and outstanding 5,000 5,000
Common stock, par value $0.001 per share; 50,000,000 shares authorized; 10,289,567 and 10,000,000 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively 10,290 10,000
Additional paid-in capital 5,093,990 4,518,914
Accumulated deficit (6,598,427) (5,574,237)
Total shareholders' deficit (1,489,147) (1,040,323)
Total liabilities and shareholders' deficit $ 778,738 $ 696,679
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Preferred stock, per share (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 1,000,000 1,000,000
Preferred stock, shares outstanding 1,000,000 1,000,000
Common stock, per share (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 10,289,567 10,000,000
Common stock, shares outstanding 10,289,567 10,000,000
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Net revenues $ 475,238 $ 67,543 $ 803,113 $ 84,398
Operating expenses:        
Sales and marketing 166,368 11,111 294,981 14,989
Data 269,071 107,203 414,261 146,815
Technology and software maintenance 51,534 49,047 97,046 79,265
General and administrative 537,856 276,554 853,044 477,975
Depreciation and amortization 26,822 22,098 53,729 36,158
Total operating expenses 1,051,651 466,013 1,713,061 755,202
Operating loss (576,413) (398,470) (909,948) (670,804)
Other income (expense):        
Interest income 574 574
Interest expense (68,134) (42,328) (114,816) (71,945)
Total other expense (67,560) (42,328) (114,242) (71,945)
Loss before income taxes (643,973) (440,798) (1,024,190) (742,749)
Provision for income taxes
Net loss $ (643,973) $ (440,798) $ (1,024,190) $ (742,749)
Loss per share:        
Basic and diluted $ (0.06) $ (0.05) $ (0.10) $ (0.08)
Weighted average number of common shares outstanding:        
Basic and diluted (in shares) 10,074,118 9,524,549 10,037,264 9,682,619
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED STATEMENT OF SHAREHOLDERS' DEFICIT (UNAUDITED) - 6 months ended Jun. 30, 2018 - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Total
Balance - beginning at Dec. 31, 2017 $ 5,000 $ 10,000 $ 4,518,914 $ (5,546,902) $ (1,012,988)
Balance - beginning (in shares) at Dec. 31, 2017 1,000,000 10,000,000      
Cumulative effect of change in accounting upon adoption of ASC 606 at Jun. 30, 2018       (27,335) (27,335)
Balance - beginning (As Restated) at Dec. 31, 2017 $ 5,000 $ 10,000 4,518,914 (5,574,237) (1,040,323)
Balance - beginning (As Restated) (in shares) at Dec. 31, 2017 1,000,000 10,000,000      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Warrants issued in conjunction with convertible promissory notes     82,255   82,255
Convertible debt converted into common shares   $ 236 294,764   295,000
Convertible debt converted into common shares (in shares)   236,000      
Common shares and warrants sold through private placement   $ 50 74,950   75,000
Common shares and warrants sold through private placement (in shares)   50,000      
Common shares and warrants issued to settle accounts payable   $ 4 5,346   5,350
Common shares and warrants issued to settle accounts payable (in shares)   3,567      
Share-based compensation     117,761   117,761
Net loss       (1,024,190) (1,024,190)
Balance - end at Jun. 30, 2018 $ 5,000 $ 10,290 $ 5,093,990 $ (6,598,427) $ (1,489,147)
Balance - beginning (in shares) at Jun. 30, 2018 1,000,000 10,289,567      
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash flows from operating activities:    
Net loss $ (1,024,190) $ (742,749)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 18,145 6,236
Share-based compensation 117,761
Amortization of debt discount 10,048
Changes in operating assets and liabilities:    
Accounts receivable (136,564) (5,339)
Deferred costs (4,804) (2,395)
Prepaid expenses and other current assets (7,478)
Accounts payable 264,566 28,574
Accrued expenses and other current liabilities (41,149) (47,704)
Deferred revenues 30,023 34,692
Net cash used in operating activities (738,057) (698,763)
Cash flows from investing activities:    
Purchases of property and equipment (4,820) (49,881)
Investment return in joint venture 729
Software development costs capitalized (101,503) (63,344)
Net cash used in investing activities (105,594) (113,225)
Cash flows from financing activities:    
Advances from related party 40,000
Repayments of advances from related party (40,000)
Proceeds from sale of treasury shares 187,500
Proceeds from issuance of convertible notes 650,000 510,000
Procceds from issuance of common stock and warrants 75,000
Liability for stock to be issued 40,000
Net cash provided by financing activities 725,000 737,500
Net decrease in cash (118,651) (74,488)
Cash at beginning of period 179,675 172,769
Cash at end of period 61,024 98,281
Supplemental disclosure of cash flow information:    
Cash paid for interest 93,922 56,826
Cash paid for taxes
Supplemental disclosure of non-cash investing and financing activities:    
Convertible debt converted into common shares 295,000
Warrants issued in conjunction with convertible promissory notes; (warrants treated as debt discount)
Common stock and warrants issued to settle accounts payable 5,350
Treasury shares issued to settle liability for shares to be issued $ 200,000
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
OVERVIEW
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
OVERVIEW

NOTE 1 OVERVIEW

Fraud Protection Network, Inc. (the “Company”, “us”, “we” or “our”) offers a diverse portfolio of credit and identity solutions, both direct-to-consumers as well as to enterprise customers. We obtained Experian’s Independent Third-Party Assessment (EI3PA) Level I certification in 2014. We continue to maintain this security level with annual third-party audits and have also been recognized by Experian as an Authorized Technical Provider.  The Company’s consumer services include Resident-Link, RapID PRO™ and RentConnect. The Company’s enterprise solutions include Credit PreScreening, Loan PreQualification, software development, and EI3PA hosting services. The Company’s customers are located in the United States.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. As shown in the accompanying financial statements, we have sustained a net loss of $1,024,190 and have used $738,057 of cash in our operating activities during the six months ended June 30, 2018.  As of June 30, 2018, we had $61,024 of cash on hand, a stockholders’ deficit of $1,489,147 and a working capital deficit of $1,548,283. While management expects operating trends to continue to improve over the course of 2018, the Company’s ability to continue as a going concern is contingent on implementing its business plan and, if needed, securing additional debt or equity financing from outside investors. These matters raise substantial doubt about the Company's ability to continue as a going concern.

Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. Commencing in February 2017, the Company launched its Resident-Link platform, which grew quickly and became a significant revenue stream for 2017. In May 2017, the Company launched its Credit PreScreening and Loan PreQualification platforms as well. Management has focused its efforts on these three revenue streams, which we expect will increase the amount of gross profits from operations going forward. During the six months ended June 30, 2018, the Company received proceeds of $650,000 from the issuance of convertible promissory notes (See Note 6) and $75,000 from the issuance of Units (consisting of common shares and warrants) (See Note 7). Subsequent to June 30, 2018, the Company received aggregate gross proceeds of $20,000 from the issuance of additional convertible promissory notes and $135,000 from the issuance of additional Units (See Note 11).

The estimated costs of operations while we ramp up our revenues is substantially greater than the amount of funds we had available on June 30, 2018. The Company’s future existence is dependent upon management’s ability to implement its business plan and/or obtain additional funding. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. Even if the Company is able to obtain additional financing, it may include undue restrictions on our operations in the case of indebtedness, or cause substantial dilution for our stockholders in the case of equity financing. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
ACCOUNTING POLICIES

NOTE 2 ACCOUNTING POLICIES

Use of Estimates

The preparation of our condensed financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Significant estimates in the accompanying condensed financial statements include the allowance for doubtful accounts, depreciable lives and valuation of property and equipment, amortization periods and the valuation of capitalized software costs, deferred revenues and deferred costs, share-based compensation, fair value of financial instruments, income taxes and the valuation allowance on deferred tax assets, and contingent liabilities.

Basis of Presentation

The interim condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, the condensed financial statements reflect all adjustments (consisting of normal recurring adjustments, reclassifications and non-recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for the periods presented herein, but are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2018.

 

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2017, included in its Form S-1/A, as filed with the SEC on April 30, 2018. The December 31, 2017 balance sheet is derived from those audited financial statements.

 

Income Taxes

 

The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. As of June 30, 2018, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards.

Share-Based Compensation Expense

Share-based compensation expense is measured at the grant-date fair value of the award and is expensed over the requisite service period. For employee share-based awards, the grant-date fair value of the award is estimated using the Black-Scholes option pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the grant-date fair value of the award in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the share-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Net Loss Per Share

Net loss per share is based on the weighted average number of common shares outstanding during each period. The following table summarizes common stock equivalents at June 30, 2018 and 2017, respectively. Common stock equivalents were not included in the computation of diluted loss per share for the periods presented because the effects would have been anti-dilutive. Common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive.

    For the Six Months  Ended
    June 30,
    2018   2017
Options     500,000       —    
Warrants     238,392       —    
Convertible notes payable     1,428,000       1,090,000  
Total potentially dilutive shares     2,166,392       1,090,000  

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company adopted ASU 2014-09 in the first quarter of 2018 utilizing the modified retrospective approach. The impact of this standard relates to our accounting for a set-up fee that is charged only to Resident-Link customers electing our baseline subscription package. Specifically, the set-up fees collected are now deferred and recognized pro rata over the expected term of the subscription. Revenue from all other products and services remains substantially unchanged. Adoption of the standard using the modified retrospective method required us to restate our December 31, 2017 balance sheet with an increase in deferred revenues of $27,335 and a corresponding increase in our accumulated deficit.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. This ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented.  The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted.  The Company is currently evaluating the potential impact of adopting this guidance on its financial statements. The Company expects that it will recognize right-of-use assets and related obligations on its balance sheet upon adoption.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
PROPERTY AND EQUIPMENT
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 3         PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at June 30, 2018 and December 31, 2017:

    June 30,   December 31,
    2018   2017
Furniture, computers and equipment   $ 262,775     $ 257,956  
Leasehold improvements     2,700       2,700  
Property and equipment, cost     265,475       260,656  
Less: accumulated depreciation     (157,879 )     (139,735 )
Property and equipment, net   $ 107,596     $ 120,921  

 

Depreciation and amortization expense was $9,031 and $6,236 for the three months ended June 30, 2018 and 2017, respectively. Depreciation and amortization expense was $18,145 and $11,109 for the six months ended June 30, 2018 and 2017, respectively.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
SOFTWARE DEVELOPMENT COSTS
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
SOFTWARE DEVELOPMENT COSTS

NOTE 4        SOFTWARE DEVELOPMENT COSTS

During the six months ended June 30, 2018 and 2017, the Company capitalized $101,503 and $63,344, respectively, relating to the development of multiple software platforms that utilize credit data for monitoring, lead generation and decisioning capabilities. These software products were developed internally and had passed the preliminary project stage prior to capitalization.

Software development costs consisted of the following at June 30, 2018 and December 31, 2017:

    June 30,   December 31,
    2018   2017
Software development costs   $ 389,285     $ 287,782  
Less: accumulated amortization     (128,116 )     (92,531 )
Software development costs, net   $ 261,169     $ 195,251  

Amortization expense of software development costs for the three months ended June 30, 2018 and 2017 was $17,793 and $15,862, respectively. Amortization expense of software development costs for the six months ended June 30, 2018 and 2017 was $35,585 and $25,050, respectively.

The following is a schedule of estimated future amortization expense of capitalized software development costs at June 30, 2018:

Year Ending December 31,    
  2018     $ 61,061  
  2019       104,668  
  2020       67,535  
  2021       27,905  
        $ 261,169  

 

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
INVESTMENT IN JOINT VENTURE
6 Months Ended
Jun. 30, 2018
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN JOINT VENTURE

NOTE 5        INVESTMENT IN JOINT VENTURE

 

During 2017, the Company entered into a joint venture agreement (the “JV Agreement”) with a customer for the development of a product designed to help consumers make better decisions regarding their credit.  Under the JV Agreement, the Company contributed certain legacy software and development services to the JV entity for a 32% interest, and the customer agreed to make a cash contribution (up to a maximum of $400,000) for the development of the online platform for a 68% interest.  The contributed intellectual property is included in Investment in joint venture on the accompanying balance sheet.  Under the JV Agreement, the Company and the joint venture entity entered into a hosting and development services agreement (the ''Services Agreement”) pursuant to which the Company receives fees for software development.  These fees are recognized as services are provided, net of the costs incurred, and net of the 32% ownership interest in the joint venture.  During the three months ended June 30, 2018 and 2017, the Company recognized software development revenue under the Services Agreement of $0. During the six months ended June 30, 2018 and 2017, the Company recognized software development revenue (net of its ownership interest of $729 and $0 in such revenues) under the Services Agreement of $1,577 and $0, respectively. Under the JV Agreement, the Company shall share in any future profits of the joint venture on the equity method based on its 32% ownership interest.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONVERTIBLE NOTES PAYABLE
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 6        CONVERTIBLE NOTES PAYABLE

On February 5, 2018, the Company issued a one-year convertible promissory note in exchange for cash proceeds of $150,000. The note is convertible into shares of the Company’s common stock at any time from the date of issuance through the maturity date on February 5, 2019 at the option of the holder at a fixed conversion price of $1.25 per share. The note bears interest at the rate of 10% per annum and requires quarterly interest payments through maturity.

During April 2018, the Company issued five (5) two-year convertible promissory notes in exchange for aggregate cash proceeds of $500,000. The notes are convertible into shares of the Company’s common stock at any time from the date of issuance through the maturity date in April 2020 at the option of the holder at a fixed conversion price of $1.25 per share. The notes bear interest at the rate of 10% per annum and require quarterly interest payments through maturity. As an inducement to enter into the convertible promissory notes, the holders were issued 5-year warrants to purchase an aggregate of 125,000 shares of the Company’s common stock at an exercise price of $2.50 per share expiring in April 2023. The fair value of the warrants and associated beneficial conversion right of $82,255 is being treated as a discount to the face value of the promissory notes and amortized to interest expense over the original term of the convertible promissory notes (See Note 7).

On June 6, 2018, certain holders of the Company’s convertible promissory notes converted an aggregate of $295,000 of their convertible notes into 236,000 shares of the Company’s common stock, at a conversion price of $1.25 per share. Upon conversion, all accrued interest on the converted promissory notes was paid (See Note 7).

During the six months ended June 30, 2017, the Company issued one-year convertible promissory notes in exchange for aggregate cash proceeds of $510,000. The notes are convertible into shares of the Company’s common stock at any time from the date of issuance through the respective maturity date at the option of the holder at a fixed conversion price of $1.25 per share. The notes bear interest at rates ranging from 10% to 12% per annum and require quarterly interest payments through maturity.

Convertible notes payable consisted of the following at June 30, 2018 and December 31, 2017:

    June 30,   December 31,
    2018   2017
Note payable - originating June 10, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of June 10, 2018 [C]   $ —       $ 12,500  
Note payable - originating July 18, 2017; quarterly payments required; bearing interest at 12%; maturity date of July 18, 2018 [A]     75,000       75,000  
Note payable - originating April 27, 2016; quarterly payments required; bearing interest at 10%; maturity date of July 27, 2018 [A]     25,000       25,000  
Note payable - originating September 22, 2017; quarterly payments required; bearing interest at 10%; maturity date of September 21, 2018 [C]     —         20,000  
Note payable - originating October 1, 2017; quarterly payments required; bearing interest at 12%; maturity date of September 26, 2018 [C]     —         100,000  
Note payable - originating September 28, 2017; quarterly payments required; bearing interest at 12%; maturity date of September 28, 2018 [C]     —         100,000  
Note payable - originating August 28, 2015; quarterly payments required; bearing interest at 13.33%; extended maturity date of November 28, 2018     100,000       100,000  
Note payable - originating December 15, 2017; quarterly payments required; bearing interest at 10%; maturity date of December 15, 2018     25,000       25,000  
Note payable - originating October 1, 2015; monthly payments required; bearing interest at 13.33%; extended maturity date of February 1, 2019     600,000       600,000  
Note payable - originating February 5, 2018; quarterly payments required; bearing interest at 10%; maturity date of February 5, 2019     150,000       —    
Note payable - originating February 28, 2017; quarterly payments required; bearing interest at 12%; maturity date of February 28, 2019     60,000       60,000  
Note payable - originating December 16, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of March 19, 2019 [C]     —         12,500  
Note payable - originating April 7, 2017; quarterly payments required; bearing interest at 12%; extended maturity date of April 7, 2019     150,000       150,000  
Note payable - originating April 18, 2017; quarterly payments required; bearing interest at 10%; extended maturity date of April 18, 2019     100,000       100,000  
Note payable - originating April 26, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of April 26, 2019 [C]     —         25,000  
Note payable - originating May 2, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of May 2, 2019 [C]     —         12,500  
Note payable - originating August 26, 2015; quarterly payments required; bearing interest at 13.33%; extended maturity date of May 26, 2019 [C]     —         12,500  

Note payable - originating April 1, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 1, 2020     50,000       —    
Note payable - originating April 1, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 1, 2020     100,000       —    
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020     50,000       —    
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020     250,000       —    
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020     50,000       —    
Total convertible notes payable, gross     1,785,000       1,430,000  
Less: Debt discount     (72,207 )     —    
Total convertible notes payable, net     1,712,793       1,430,000  
Less: Current maturities     (1,285,000 )     (1,430,000 )
Net amount due after one year   $ 427,793     $ —    

 

[A] - subsequent to June 30, 2018, note was extended for an additional 12 months.      
[B] - note was in default from August 26, 2016 to February 26, 2018, at which time the note regained compliance.      
[C] - note converted into common shares in June 2018.      

 

During the three months ended June 30, 2018 and 2017, interest expense of $67,758 (includes $10,048 of amortization of debt discount) and $43,356, respectively, was recognized on outstanding convertible notes payable. During the six months ended June 30, 2018 and 2017, interest expense of $114,084 (includes $10,048 of amortization of debt discount) and $71,211, respectively, was recognized on outstanding convertible notes payable. As of June 30, 2018 and December 31, 2017, accrued interest payable was $31,773 and $20,928, respectively, which is included in accrued expenses and other current liabilities on the accompanying condensed balance sheet.

 

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
SHAREHOLDERS' DEFICIT
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
SHAREHOLDERS' DEFICIT

NOTE 7        SHAREHOLDERS’ DEFICIT

 

Common Stock

In June 2018, the Company began its efforts to raise up to $990,000 from a private placement, to accredited investors, of up to 66 Units at a price of $15,000 per Unit, each Unit consisting of: (i) 10,000 shares of the Company's common stock; and (ii) 2,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share. From commencement of the offering through June 30, 2018, the Company sold 5 Units (comprising 50,000 common shares and 12,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share) to various investors for gross proceeds of $75,000 (See Note 11).

On June 6, 2018, certain holders of the Company’s convertible promissory notes converted an aggregate of $295,000 of their convertible notes into 236,000 shares of the Company’s common stock, at a conversion price of $1.25 per share. Upon conversion, all accrued interest on the converted promissory notes was paid (See Note 6).

On June 27, 2018, the Company issued 3,567 common shares and 892 five-year warrants to purchase shares of the Company’s common stock at an exercise price of $2.50 per share to settle $5,350 of accounts payable owed to an officer for services performed prior to becoming an officer of the Company.

Treasury Stock

During the six months ended June 30, 2017, the Company’s Chief Executive Officer contributed 500,000 common shares to the Company. The Company recognized $564,846 of treasury stock with a corresponding increase in additional paid-in capital.

During the six months ended June 30, 2017, the Company sold an aggregate of 150,000 treasury shares in exchange for aggregate proceeds of $187,500.

In January 2017, 210,000 treasury shares were issued to settle the $200,000 liability for stock to be issued that existed at December 31, 2016.

In February 2017, the Company received proceeds of $40,000 for the sale of treasury shares, which were physically issued in August 2017. Accordingly, the proceeds were reflected as a liability for stock to be issued until August 2017.

 

Warrants

 

In addition to the warrants issued with shares of common stock (see above), on June 1, 2018, as part of a consulting agreement, the Company issued to a consultant seven-year warrants to purchase 100,000 shares of common stock at an exercise price of $1.65 per share, which vest monthly over a 12-month period. Accordingly, the Company has recognized share-based compensation of $28,101 for the six months ended June 30, 2018.

 

During the six months ended June 30, 2018, the Company issued five (5) two-year convertible promissory notes and an aggregate of 125,000 5-year warrants to purchase common shares at an exercise price of $2.50 per share in exchange for aggregate cash proceeds of $500,000. The fair value of the warrants of $82,255 is treated as debt discount that is being amortized over the term of the promissory notes (See Note 6).

 

The following table summarizes warrant activity during the six months ended June 30, 2018:

 

          Weighted    
      Weighted    Average    
      Average   Remaining    
  Number of   Exercise   Life   Intrinsic
  Options   Price   In Years   Value
Outstanding, December 31, 2017                        -                             -           
Granted               238,392    $                 2.14        
Exercised                        -                             -           
Forfeited                        -                             -           
Expired                        -                             -           
Outstanding, June 30, 2018               238,392    $                 2.14                         5.7    $                    -   
               
Exercisable, June 30, 2018               146,725    $                 2.45                         4.9    $                    -   

Stock Options

Effective March 6, 2018, the Company granted stock options to purchase 500,000 shares of Common Stock at an exercise price of $1.25 per share to its Chief Financial Officer, pursuant to an Employment Agreement. The stock options vest as follows: (i) 200,000 options vest in twelve equal monthly increments on the last calendar day of each month with the first vesting date being March 31, 2018, subject to continued employment on each applicable vesting date; and (ii) 300,000 options vest in thirty-six equal monthly increments on the last calendar day of each month with the first vesting date being March 31, 2018, subject to continued employment on each applicable vesting date.

The aggregate grant-date fair value of the stock options of $389,212 (weighted average grant-date fair value of $0.78 per option) was estimated using the Black-Scholes option-pricing formula applying the following assumptions for each respective period:

    For the Six Months  Ended
    June 30,
    2018   2017
Expected term (years)   4.0 - 4.5   n/a
Expected volatility     81.43%        n/a   
Risk free interest rate      2.42 - 2.65%         n/a   
Expected dividends     —          n/a   
Estimated annual forfeiture rate     —          n/a   

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the following assumptions. The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. As the Company’s stock is not yet listed on any exchange, the expected volatility used is based on the historical price of a similar company’s stock over the most recent period commensurate with the expected term of the award. The risk-free interest rate used is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The Company historically has not paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted. The estimated annual forfeiture rate is based on management’s expectations and will reduce expense ratably over the vesting period. The forfeiture rate will be adjusted periodically based on the extent to which actual option forfeitures differ, or are expected to differ, from the previous estimate, when it is material.

The Company recognized compensation expense of $58,180 and $0 for the three months ended June 30, 2018 and 2017 and $74,163 and $0 during the six months ended June 30, 2018 and 2017, respectively, for stock option awards in its condensed statements of operations.

 

As of June 30, 2018, there was $315,049 of total unrecognized compensation cost related to nonvested stock option awards. That cost is expected to be recognized over a weighted average period of 1.1 years.

 

The following table summarizes stock option activity during the six months ended June 30, 2018:

 

          Weighted    
      Weighted    Average    
      Average   Remaining    
  Number of   Exercise   Life   Intrinsic
  Options   Price   In Years   Value
Outstanding, December 31, 2017                        -                             -           
Granted               500,000    $                 1.25        
Exercised                        -                             -           
Forfeited                        -                             -           
Expired                        -                             -           
Outstanding, June 30, 2018               500,000    $                 1.25                         6.7    $           125,000
               
Exercisable, June 30, 2018               100,000    $                 1.25                         6.7    $             25,000

 

Restricted Stock Awards

 

The Company recognized compensation expense of $7,791 and $0 for the three months ended June 30, 2018 and 2017 and $15,497 and $0 during the six months ended June 30, 2018 and 2017, respectively, for restricted stock awards in its condensed statements of operations.

 

As of June 30, 2018, there was $13,699 of total unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted average period of 0.4 years.

 

The following table summarizes restricted stock activity during the six months ended June 30, 2018:

      Weighted    
      Average   Total
  Number of   Grant Date   Grant Date
  Shares   Fair Value   Fair Value
Non-vested, December 31, 2017                 25,000    $                 1.25    $             31,250
Granted                        -                             -                             -   
Vested                        -                             -                             -   
Forfeited                        -                             -                             -   
Non-vested, June 30, 2018                 25,000    $                 1.25    $             31,250

 

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
COMMITMENTS AND CONTINGENCIES
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 8        COMMITMENTS AND CONTINGENCIES

Employment Agreement

Effective March 6, 2018, the Company entered into a three-year Employment Agreement with its Chief Financial Officer. The Employment Agreement provides for base cash salary and stock options.

Consulting Agreement

Effective June 1, 2018, the Company entered into a one-year consulting agreement with a consultant whereby the consultant shall provide strategic investor relations to the Company in exchange for: (i) a monthly retainer of $5,500 (subsequently reduced to $1,500); and (ii) 100,000 seven-year warrants to purchase common shares at an exercise price of $1.65 per share, which vest monthly over a 12-month period.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
RELATED PARTY TRANSACTIONS
6 Months Ended
Jun. 30, 2018
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 9        RELATED PARTY TRANSACTIONS

Consulting Arrangement

The Company utilizes the services of an entity owned by the father of the Company’s Chief Executive Officer, on an as needed basis. During the six months ended June 30, 2018 and 2017, the Company paid the entity $4,200 and $5,000, respectively, for services rendered. As of June 30, 2018 and December 31, 2017, there was no outstanding balance due to the entity.

Loans from Officer

During the six months ended June 30, 2018, the Company borrowed and repaid $40,000 from its Chief Executive Officer. The loans were non-interest bearing and due on demand.

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
LEGAL PROCEEDINGS
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
LEGAL PROCEEDINGS

NOTE 10        LEGAL PROCEEDINGS

From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. As of June 30, 2018, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 11        SUBSEQUENT EVENTS

Subsequent to June 30, 2018 through July 31, 2018, as part of the Company’s efforts to raise up to $990,000 from a private placement commencing in June 2018, to accredited investors, of up to 66 Units at a price of $15,000 per Unit, each Unit consisting of: (i) 10,000 shares of the Company's common stock; and (ii) 2,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share, the Company sold an additional 9 Units (comprising 90,000 common shares and 22,500 five-year warrants to purchase shares of common stock at an exercise price of $2.50 per share) to various investors for gross proceeds of $135,000 (See Note 7).

On August 8, 2018, the Company issued a one-year convertible promissory notes in exchange for cash proceeds of $20,000. The note is convertible into shares of the Company’s common stock at any time from the date of issuance through the maturity date in August 2019 at the option of the holder at a fixed conversion price of $1.50 per share. The note bears interest at the rate of 10% per annum and requires quarterly interest payments through maturity.

 

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
ACCOUNTING POLICIES (Policies)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Use of Estimates

Use of Estimates

The preparation of our condensed financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Significant estimates in the accompanying condensed financial statements include the allowance for doubtful accounts, depreciable lives and valuation of property and equipment, amortization periods and the valuation of capitalized software costs, deferred revenues and deferred costs, share-based compensation, fair value of financial instruments, income taxes and the valuation allowance on deferred tax assets, and contingent liabilities.

Basis of Presentation

Basis of Presentation

The interim condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, the condensed financial statements reflect all adjustments (consisting of normal recurring adjustments, reclassifications and non-recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for the periods presented herein, but are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2018.

 

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2017, included in its Form S-1/A, as filed with the SEC on April 30, 2018. The December 31, 2017 balance sheet is derived from those audited financial statements.

Income Taxes

Income Taxes

 

The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. As of June 30, 2018, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards.

Share-Based Compensation Expense

Share-Based Compensation Expense

Share-based compensation expense is measured at the grant-date fair value of the award and is expensed over the requisite service period. For employee share-based awards, the grant-date fair value of the award is estimated using the Black-Scholes option pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the grant-date fair value of the award in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the share-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Net Loss Per Share

Net Loss Per Share

Net loss per share is based on the weighted average number of common shares outstanding during each period. The following table summarizes common stock equivalents at June 30, 2018 and 2017, respectively. Common stock equivalents were not included in the computation of diluted loss per share for the periods presented because the effects would have been anti-dilutive. Common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive.

    For the Six Months  Ended
    June 30,
    2018   2017
Options     500,000       —    
Warrants     238,392       —    
Convertible notes payable     1,428,000       1,090,000  
Total potentially dilutive shares     2,166,392       1,090,000  
Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company adopted ASU 2014-09 in the first quarter of 2018 utilizing the modified retrospective approach. The impact of this standard relates to our accounting for a set-up fee that is charged only to Resident-Link customers electing our baseline subscription package. Specifically, the set-up fees collected are now deferred and recognized pro rata over the expected term of the subscription. Revenue from all other products and services remains substantially unchanged. Adoption of the standard using the modified retrospective method required us to restate our December 31, 2017 balance sheet with an increase in deferred revenues of $27,335 and a corresponding increase in our accumulated deficit.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. This ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented.  The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted.  The Company is currently evaluating the potential impact of adopting this guidance on its financial statements. The Company expects that it will recognize right-of-use assets and related obligations on its balance sheet upon adoption.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
ACCOUNTING POLICIES (Tables)
6 Months Ended
Jun. 30, 2018
Accounting Policies  
Schedule of dilutive earnings per share
    For the Six Months  Ended
    June 30,
    2018   2017
Options     500,000       —    
Warrants     238,392       —    
Convertible notes payable     1,428,000       1,090,000  
Total potentially dilutive shares     2,166,392       1,090,000  
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
PROPERTY AND EQUIPMENT (Tables)
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment
    June 30,   December 31,
    2018   2017
Furniture, computers and equipment   $ 262,775     $ 257,956  
Leasehold improvements     2,700       2,700  
Property and equipment, cost     265,475       260,656  
Less: accumulated depreciation     (157,879 )     (139,735 )
Property and equipment, net   $ 107,596     $ 120,921  
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
SOFTWARE DEVELOPMENT COSTS (Tables)
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of software development costs
    June 30,   December 31,
    2018   2017
Software development costs   $ 389,285     $ 287,782  
Less: accumulated amortization     (128,116 )     (92,531 )
Software development costs, net   $ 261,169     $ 195,251  
Schedule of estimated future amortization expense of capitalized software development costs
Year Ending December 31,    
  2018     $ 61,061  
  2019       104,668  
  2020       67,535  
  2021       27,905  
        $ 261,169  
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONVERTIBLE NOTES PAYABLE (Tables)
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Schedule of convertible notes payable

    June 30,   December 31,
    2018   2017
Note payable - originating June 10, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of June 10, 2018 [C]   $ —       $ 12,500  
Note payable - originating July 18, 2017; quarterly payments required; bearing interest at 12%; maturity date of July 18, 2018 [A]     75,000       75,000  
Note payable - originating April 27, 2016; quarterly payments required; bearing interest at 10%; maturity date of July 27, 2018 [A]     25,000       25,000  
Note payable - originating September 22, 2017; quarterly payments required; bearing interest at 10%; maturity date of September 21, 2018 [C]     —         20,000  
Note payable - originating October 1, 2017; quarterly payments required; bearing interest at 12%; maturity date of September 26, 2018 [C]     —         100,000  
Note payable - originating September 28, 2017; quarterly payments required; bearing interest at 12%; maturity date of September 28, 2018 [C]     —         100,000  
Note payable - originating August 28, 2015; quarterly payments required; bearing interest at 13.33%; extended maturity date of November 28, 2018     100,000       100,000  
Note payable - originating December 15, 2017; quarterly payments required; bearing interest at 10%; maturity date of December 15, 2018     25,000       25,000  
Note payable - originating October 1, 2015; monthly payments required; bearing interest at 13.33%; extended maturity date of February 1, 2019     600,000       600,000  
Note payable - originating February 5, 2018; quarterly payments required; bearing interest at 10%; maturity date of February 5, 2019     150,000       —    
Note payable - originating February 28, 2017; quarterly payments required; bearing interest at 12%; maturity date of February 28, 2019     60,000       60,000  
Note payable - originating December 16, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of March 19, 2019 [C]     —         12,500  
Note payable - originating April 7, 2017; quarterly payments required; bearing interest at 12%; extended maturity date of April 7, 2019     150,000       150,000  
Note payable - originating April 18, 2017; quarterly payments required; bearing interest at 10%; extended maturity date of April 18, 2019     100,000       100,000  
Note payable - originating April 26, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of April 26, 2019 [C]     —         25,000  
Note payable - originating May 2, 2016; quarterly payments required; bearing interest at 10%; extended maturity date of May 2, 2019 [C]     —         12,500  
Note payable - originating August 26, 2015; quarterly payments required; bearing interest at 13.33%; extended maturity date of May 26, 2019 [C]     —         12,500  

Note payable - originating April 1, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 1, 2020     50,000       —    
Note payable - originating April 1, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 1, 2020     100,000       —    
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020     50,000       —    
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020     250,000       —    
Note payable - originating April 2, 2018; quarterly payments required; bearing interest at 10%; maturity date of April 2, 2020     50,000       —    
Total convertible notes payable, gross     1,785,000       1,430,000  
Less: Debt discount     (72,207 )     —    
Total convertible notes payable, net     1,712,793       1,430,000  
Less: Current maturities     (1,285,000 )     (1,430,000 )
Net amount due after one year   $ 427,793     $ —    

 

[A] - subsequent to June 30, 2018, note was extended for an additional 12 months.      
[B] - note was in default from August 26, 2016 to February 26, 2018, at which time the note regained compliance.      
[C] - note converted into common shares in June 2018.      

 

XML 33 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
SHAREHOLDERS' DEFICIT (Tables)
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
Schedule of warrant activity

          Weighted    
      Weighted    Average    
      Average   Remaining    
  Number of   Exercise   Life   Intrinsic
  Options   Price   In Years   Value
Outstanding, December 31, 2017                        -                             -           
Granted               238,392    $                 2.14        
Exercised                        -                             -           
Forfeited                        -                             -           
Expired                        -                             -           
Outstanding, June 30, 2018               238,392    $                 2.14                         5.7    $                    -   
               
Exercisable, June 30, 2018               146,725    $                 2.45                         4.9    $                    -   

Schedule of valuation assumptions
    For the Six Months  Ended
    June 30,
    2018   2017
Expected term (years)   4.0 - 4.5   n/a
Expected volatility     81.43 %      n/a   
Risk free interest rate      2.42 - 2.65%         n/a   
Expected dividends     —          n/a   
Estimated annual forfeiture rate     —          n/a   

Schedule of stock option activity

          Weighted    
      Weighted    Average    
      Average   Remaining    
  Number of   Exercise   Life   Intrinsic
  Options   Price   In Years   Value
Outstanding, December 31, 2017                        -                             -           
Granted               500,000    $                 1.25        
Exercised                        -                             -           
Forfeited                        -                             -           
Expired                        -                             -           
Outstanding, June 30, 2018               500,000    $                 1.25                         6.7    $           125,000
               
Exercisable, June 30, 2018               100,000    $                 1.25                         6.7    $             25,000

Schedule of restricted stock activity
      Weighted    
      Average   Total
  Number of   Grant Date   Grant Date
  Shares   Fair Value   Fair Value
Non-vested, December 31, 2017                 25,000    $                 1.25    $             31,250
Granted                        -                             -                             -   
Vested                        -                             -                             -   
Forfeited                        -                             -                             -   
Non-vested, June 30, 2018                 25,000    $                 1.25    $             31,250
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
ACCOUNTING POLICIES (Details) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Accounting Policies Details Abstract    
Options $ 500,000
Warrants 238,392
Convertible notes payable 1,428,000 1,090,000
Total potentially dilutive shares $ 2,166,392 $ 1,090,000
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
PROPERTY AND EQUIPMENT (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Property, Plant and Equipment [Line Items]    
Property and equipment, cost $ 265,475 $ 260,656
Less: accumulated depreciation (157,879) (139,735)
Property and equipment, net 107,596 120,921
Furniture, Computers and Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, cost 262,775 257,956
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, cost $ 2,700 $ 2,700
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Property, Plant and Equipment [Abstract]        
Depreciation and amortization expense $ 9,031 $ 11,109 $ 18,145 $ 6,236
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
SOFTWARE DEVELOPMENT COSTS (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
Software development costs $ 389,285 $ 287,782
Less: accumulated amortization (128,116) (92,531)
Software development costs, net $ 261,169 $ 195,251
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
SOFTWARE DEVELOPMENT COSTS (Details 1) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
2018 $ 61,061  
2019 104,668  
2020 67,535  
2021 27,905  
Software development costs, net $ 261,169 $ 195,251
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
SOFTWARE DEVELOPMENT COSTS (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]        
Software development costs capitalized     $ 101,503 $ 63,344
Amortization expense of software development costs $ 17,793 $ 15,862 $ 35,585 $ 25,050
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONVERTIBLE NOTES PAYABLE (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Debt Disclosure [Abstract]    
Total convertible notes payable, gross $ 1,785,000 $ 1,430,000
Less: Debt discount (72,207)
Total 1,712,793 1,430,000
Less: Current maturities (1,285,000) (1,430,000)
Amount due after one year $ 427,793
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
SHAREHOLDERS' DEFICIT (Details 1) - Restricted Stocks
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]  
Granted | shares 238,392
Outstanding balance at end | shares 238,392
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]  
Granted | $ / shares $ 2.14
Outstanding balance at end | $ / shares $ 2.14
Weighted average remaining life, Outstanding at end 5 years 8 months 12 days
Weighted average remaining life, Exercisable at end 4 years 10 months 25 days
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
SHAREHOLDERS' DEFICIT (Details 2) - Stock Option [Member]
6 Months Ended
Jun. 30, 2018
Expected volatility 81.43%
Expected dividends
Estimated annual forfeiture rate
Minimum [Member]  
Expected term (years) 4 years
Risk free interest rate 2.42%
Maximum [Member]  
Expected term (years) 4 years 6 months
Risk free interest rate 2.65%
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
SHAREHOLDERS' DEFICIT (Details 3) - Stock Option [Member]
6 Months Ended
Jun. 30, 2018
USD ($)
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]  
Outstanding balance at beginning | shares
Granted | shares 500,000
Exercised | shares
Forfeited | shares
Expired | shares
Outstanding balance at end | shares 500,000
Exercisable at end | shares 25,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]  
Outstanding balance at beginning | $ / shares
Granted | $ / shares 1.25
Exercised | $ / shares
Forfeited | $ / shares
Expired | $ / shares
Outstanding balance at end | $ / shares 1.25
Exercisable at end | $ / shares $ 1.25
Weighted average remaining life, Outstanding at end 6 years 8 months 12 days
Weighted average remaining life, Exercisable at end 6 years 8 months 12 days
Intrinsic value, Outstanding at end | $
Intrinsic value, Exercisable at end | $
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
SHAREHOLDERS' DEFICIT (Details 4) - Restricted Stock [Member]
6 Months Ended
Jun. 30, 2018
USD ($)
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]  
Outstanding balance at beginning | shares 25,000
Granted | shares
Vested | shares
Forfeited | shares
Outstanding balance at end | shares 25,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]  
Outstanding balance at beginning | $ / shares $ 1.25
Granted | $ / shares
Vested | $ / shares
Forfeited | $ / shares
Outstanding balance at end | $ / shares $ 1.25
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value [Abstract]  
Outstanding balance at beginning | $ $ 31,250
Granted | $
Vested | $
Forfeited | $
Outstanding balance at end | $ $ 31,250
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