10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒   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 UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-55722

HELIX TCS, INC.

(Exact name of registrant as specified in its charter)

Delaware	81-4046024
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

5300 DTC Parkway, Suite 300

Greenwood Village, CO 80111

(Address of Principal Executive Offices) (Zip Code)

Telephone: (720) 328-5372

(Registrant’s telephone number)

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 12 months (or for such shorter period that the registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

As of August 13, 2018, the registrant had 70,569,647 shares of its common stock, par value $0.001 per share, outstanding.

Table of Contents

		PAGE
PART I	FINANCIAL INFORMATION	1
ITEM 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017 (audited)	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)	2
	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2018 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 (unaudited)	4
	Notes to the Condensed Consolidated Financial Statements	5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	41
ITEM 4.	Controls and Procedures	41
PART II	OTHER INFORMATION	43
ITEM 1.	Legal Proceedings	43
ITEM 1A.	Risk Factors	43
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
ITEM 3	Defaults upon Senior Securities	43
ITEM 4.	Mine Safety Disclosures	43
ITEM 5.	Other Information	43
ITEM 6.	Exhibits	44
SIGNATURES		45

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

HELIX TCS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2018			2017
ASSETS	(Unaudited)			(Audited)
Current assets:
Cash	$	444,527		$	868,554
Accounts receivable, net		1,092,095			610,313
Costs & earnings in excess of billings		9,277			40,847
Total current assets		1,545,899			1,519,714
Deposits and other assets		469,997			68,313
Property and equipment, net		250,025			110,634
Intangible assets, net		20,488,837			3,042,259
Goodwill		39,135,007			664,329
Total assets	$	61,889,765		$	5,405,249
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,403,404		$	598,637
Advances from related parties		65,250			124,750
Billings in excess of costs & earnings		61,575			20,191
Deferred rent		3,590			9,667
Notes payable, current portion		7,869			11,179
Obligation pursuant to acquisition		244,159			559,103
Convertible notes payable, net of discount		114,746			812,393
Convertible note payable - related party		125,001			243,506
Obligation to issue warrants		1,131,729			2,429,569
Total current liabilities		3,157,323			4,808,995
Long-term liabilities:
Notes payable, net of current portion		90,348			53,293
Total long-term liabilities		90,348			53,293
Total liabilities		3,247,671			4,862,288
Shareholders' equity:
Preferred stock (Class A), $0.001 par value, 3,000,000 shares authorized; 1,000,000 issued and outstanding as of June 30, 2018 and December 31, 2017		1,000			1,000
Preferred stock (Class B), $0.001 par value, 17,000,000 shares authorized; 13,784,201 issued and outstanding as of June 30, 2018 and December 31, 2017		13,784			13,784
Common stock; par value $0.001; 200,000,000 shares authorized; 69,133,410 shares issued and outstanding as of June 30, 2018; 28,771,402 shares issued and outstanding as of December 31, 2017		69,134			28,771
Additional paid-in capital		79,066,909			18,741,114
Accumulated deficit		(20,508,733	)		(18,241,708	)
Total shareholders' equity		58,642,094			542,961
Total liabilities and shareholders' equity	$	61,889,765		$	5,405,249

See accompanying notes to the unaudited condensed consolidated financial statements

1

HELIX TCS, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Security and guarding	$	1,535,638		$	1,015,662		$	2,629,412		$	1,707,399
Systems installation		100,699			-			135,263			-
Software		576,142			-			576,142			-
Total revenues	$	2,212,479		$	1,015,662		$	3,340,817		$	1,707,399
Cost of revenue		1,560,387			768,132			2,351,092			1,378,335
Gross margin		652,092			247,530			989,725			329,064
Operating expenses:
Selling, general and administrative		527,999			202,849			875,879			380,830
Salaries and wages		1,554,519			125,206			2,420,839			286,938
Professional and legal fees		268,795			252,151			888,554			380,860
Depreciation and amortization		864,375			76,783			1,063,278			98,410
Total operating expenses		3,215,688			656,989			5,248,550			1,147,038
Loss from operations		(2,563,596	)		(409,459	)		(4,258,825	)		(817,974	)
Other income (expenses):
Change in fair value of convertible note		120,630			(353,000	)		697,646			(353,000	)
Change in fair value of convertible note - related party		-			56,107			118,506			43,696
Change in fair value of obligation to issue warrants		321,161			(124,791	)		1,297,840			(124,791	)
Change in fair value of contingent consideration		-			35,264			-			35,264
Loss on induced conversion of convertible note		-			(1,503,876	)		-			(1,503,876	)
Loss on extinguishment of debt		-			-			-			(4,611,395	)
Loss on impairment of Goodwill		-			-			(664,329	)		-
Gain on reduction of obligation pursuant to acquisition		290,441			-			557,054			-
Interest expense		3,016			(125,245	)		(14,917	)		(560,594	)
Other income (expenses)		735,248			(2,015,541	)		1,991,800			(7,074,696	)
Net loss	$	(1,828,348	)	$	(2,425,000	)	$	(2,267,025	)	$	(7,892,670	)
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		(7,203,689	)		(3,155,887	)		(22,202,194	)		(3,155,887	)
Net loss attributable to common shareholders	$	(9,032,037	)	$	(5,580,887	)	$	(24,469,219	)	$	(11,048,557	)
Net loss per share attributable to common shareholders:
Basic	$	(0.21	)	$	(0.20	)	$	(0.68	)	$	(0.39	)
Diluted	$	(0.21	)	$	(0.20	)	$	(0.68	)	$	(0.39	)
Weighted average common shares outstanding:
Basic		42,673,528			28,598,843			35,907,118			28,566,127
Diluted		42,673,528			28,598,843			35,907,118			28,566,127

 See accompanying notes to the unaudited condensed consolidated financial statements.

2

HELIX TCS, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Preferred Stock (Class A)				Preferred Stock (Class B)				Additional Paid-In			Accumulated			Total Shareholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance at December 31, 2017		28,771,402	$	28,771		1,000,000	$	1,000		13,784,201	$	13,784	$	18,741,114		$	(18,241,708	)	$	542,961
Beneficial conversion feature of Series B convertible preferred stock														22,202,194
Deemed dividend on conversion of Series B convertible preferred stock to common stock														(22,202,194	)
Issuance of common stock per stock subscription agreements		1,466,666		1,467										1,318,532						1,319,999
Issuance of common stock resulting from convertible note conversion		205,974		206										174,794						175,000
Issuance of restricted common stock		157,850		158										452,821						452,979
Reduction in Additional Paid-In Capital due to Security Grade acquisition settlement agreement														(300,840	)					(300,840	)
Restricted common stock issued as part of BioTrack acquisition		38,184,985		38,185										57,513,848						57,552,033
Issuance of common stock to employees under Stock Incentive Plan		83,900		84										139,190						139,274
Issuance of common stock resulting from inducement of consulting agreement		50,000		50										84,450						84,500
Issuance of warrants pursuant to consulting agreement														943,000						943,000
Issuance of common stock resulting from exercise of stock options		212,633		213																213
Net loss																	(2,267,025	)		(2,267,025	)
Balance at June 30, 2018		69,133,410	$	69,134		1,000,000	$	1,000		13,784,201	$	13,784	$	79,066,909		$	(20,508,733	)	$	58,642,094

 See accompanying notes to the unaudited condensed consolidated financial statements.

3

HELIX TCS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,267,025	)	$	(7,892,670	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,063,278			98,410
Amortization of debt discounts		-			185,087
Share-based compensation expense		1,562,025			-
Change in fair value of convertible notes		(697,647	)		353,000
Change in fair value of obligation to issue warrants		(1,297,840	)		124,791
Change in fair value of convertible notes - related party		(118,505	)		(43,696	)
Change in fair value of contingent consideration		-			(35,264	)
Loss on induced conversion of convertible debt		-			1,503,876
Loss on extinguishment of debt		-			4,611,395
Loss on beneficial conversion feature of convertible note		-			390,666
Loss on impairment of goodwill		664,329			-
Gain on reduction of obligation pursuant to acquisition		(557,054	)		-
Change in operating assets and liabilities:
Accounts receivable		(430,951	)		(220,460	)
Prepaid expenses		-			-
Deposits		(50,069	)		(5,659	)
Costs in excess of billings		31,570			-
Accounts payable and accrued expenses		93,148			113,005
Deferred rent		(6,077	)		1,523
Billings in excess of costs		41,384			-
Net cash used in operating activities		(1,969,434	)		(815,996	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(103,032	)		(22,814	)
Payments for business combination, net of cash acquired		-			(785,863	)
Cash acquired from business combination		448,697			-
Payments for asset acquisition		(24,503	)		(46,872	)
Net cash provided by (used in) investing activities		321,162			(855,549	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of convertible notes payable		-			229,167
Proceeds from issuance of common stock pursuant to share purchase agreements		-			-
Advances from related parties		(59,500	)		60,500
Repayment to related parties		-			(32,000	)
Payments pursuant to notes payable		-			(3,466	)
Proceeds from notes payable		33,745			-
Proceeds from the issuance of a promissory note		-			255,000
Proceeds from the issuance of common stock		1,250,000			100,000
Proceeds from the issuance of Series B convertible preferred stock		-			1,517,500
Net cash provided by financing activities		1,224,245			2,126,701
Net change in cash		(424,027	)		455,156
Cash, beginning of period		868,554			57,841
Cash, end of period	$	444,527		$	512,997
Supplemental disclosure of cash and non-cash transactions:
Financing of property and equipment purchases	$	-		$	52,082
Equity issued pursuant to asset acquisition (non-cash acquisition of BioTrack)	$	57,552,033		$	-
Cost of issuance of Series B preferred shares	$	-		$	(1,941,633	)
Stock options issued pursuant to acquisition consideration	$	-		$	916,643
Warrant issuances to investors	$	-		$	93,200
Reacquisition price of convertible debt	$	-		$	4,581,395
Partial conversion of convertible note into common stock	$	175,000		$	-
Security Grade acquisition consideration settlement	$	197,804		$	-

See accompanying notes to the unaudited condensed consolidated financial statements.

4

HELIX TCS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of Business

Helix TCS, Inc. (the “Company” or “Helix”) was incorporated in Delaware on March 13, 2014. Pursuant to the acquisition of the assets of Helix TCS, LLC, as discussed below, we changed our name from Jubilee4 Gold, Inc. to Helix TCS, Inc. effective October 25, 2015.

Effective October 25, 2015, we entered into an acquisition and exchange agreement with Helix TCS LLC. We closed the transaction contemplated under that agreement on December 23, 2015 and Helix TCS, LLC was merged into and with Helix.

Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. in exchange for 20 million common shares and 1 million convertible preferred shares of the Company.

The Acquisition Agreement of Helix TCS, LLC was treated as a recapitalization for financial accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and their historical financial statements before the Acquisition Agreement were replaced with the historical financial statements of the Company. The common stock account of the Company continues post-merger, while the retained earnings of the acquiree is eliminated.

On April 11, 2016, the Company acquired the assets of Revolutionary Software, LLC (“Revolutionary”) (see Note 5).

On June 2, 2017, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (“Security Grade”), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, if within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the closing, on the 61st day following the closing, the Company was obligated to issue 207,427 additional stock options (the “Additional Stock Options”). The Company subsequently issued the 207,427 Additional Stock Options on August 1, 2017 as well as a second cash payment of $800,000 pursuant to the original terms of the agreement.

In the first quarter of 2018, the Company notified the selling members of Security Grade of their intent on exercising their right of setoff noted in the Agreement after discovering misrepresentations made by one of the selling members of Security Grade. The Company has settled with five of the six selling members and are in negotiations with the final selling member. The Company has initiated a lawsuit against the sixth selling member. See Item 1. Legal Proceedings for further detail surrounding the lawsuit.

On March 3, 2018, Helix TCS, Inc. and its wholly owned subsidiary, Helix Acquisition Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bio-Tech Medical Software, Inc. (“BioTrackTHC”) and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders. Pursuant to the Merger Agreement, Merger Sub merged with and into BioTrackTHC, with BioTrackTHC surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”).

On June 1, 2018, in connection with closing the merger, the Company issued 38,184,985 unregistered shares of its common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (“BioTrackTHC Stock Plan”), pursuant to which options exercisable in the amount of 8,132,410 shares of common stock are outstanding. As a result of the merger, BioTrackTHC stockholders and optionholders own 48% of the Company on a fully diluted basis on the closing date.

5

2. Revision of Prior Period Financial Statements

The Company corrected certain immaterial errors in its financial statements contained herein. In accordance with ASC 650-10-S99 and S55 (formerly Staff Accounting Bulletins (“SAB”) No. 99 and No. 108), Accounting Changes and Error Corrections, the Company concluded that these errors were, individually, and in the aggregate, not material, quantitatively or qualitatively, to the financial statements in these periods.

On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares is convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees and the satisfaction of the promissory notes.

On October 11, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a fifth Series B Preferred Stock Purchase Agreement (the “Fifth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 231,097 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $75,000. Upon further review of the Agreement, it was noted the total number of shares issued under the Agreement was 462,195 shares with total proceeds of $150,000.

On October 31, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a sixth Series B Preferred Stock Purchase Agreement (the “Sixth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 795,833 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $80,000. Upon further review of the Agreement, it was noted the total number of shares issued under the Agreement was 1,042,337 shares with total proceeds of $557,500.

As a result of the October 11, 2017 and October 31, 2017 transactions, the Company recorded an increase of $477, $552,023 and $552,500 to Series B Preferred Shares – par amount, additional paid-in capital and accumulated deficit, respectively.

On November 16, 2017, the Company amended Notes Five, Six, and Seven (“the Amended Notes”) with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. The amendment of Note Six and Seven included terms, permitting the Company the option to tender payment in full on or before November 21, 2017, at a 15% discount of the amended principal amounts. Note Five, Six and Seven principal amounts were amended to $281,900, $38,441 and $131,107, respectively. The Company evaluated the Amended Notes in accordance with ASC 480, Distinguishing Liabilities from Equity and determined the Amended Notes will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. At November 16, 2017, the principal amounts of Note Five, Six and Seven were $281,900, $38,441 and $131,107, respectively. As of December 31, 2017, the Company recorded the fair value of Note Five, Six and Seven at $812,393, $110,781 and $377,830, respectively. Therefore, the Company recorded a charge to the change in fair value of $(530,493), $(72,340) and $(246,723) related to Note Five, Six and Seven, respectively.

Upon further review it was noted that, on November 21, 2017, the Company paid the remaining principal balance, at the 15% discount on Notes Six and Seven in the amount of $144,259. Therefore, Notes Six and Seven did not have a balance as of December 31, 2017.

As a result of the November 21, 2017 transaction, the Company recorded a reduction to convertible notes payable, net of discount of $488,611 and a credit to the change in fair value of convertible notes of $488,611.

When taking into consideration the two transactions indicated above, the net impact to accumulated deficit was a charge of $63,889, resulting from the netting of the gain of $488,611 from the reduction in the fair value of convertible notes at December 31, 2017 offset by the $552,500 of additional expense associated with the Series B Purchase Agreement.

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s amended audited consolidated financial statements for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K/A, filed with the SEC on April 4, 2018. In addition, the Company’s future Quarterly Reports on Form 10-Q for subsequent quarterly periods during the current fiscal year will reflect the impact of the revision in the comparative prior quarter and year-to-date periods.

The following table summarizes the effects of the revisions on the financial statements for the periods reported.

	Previously Reported			Adjustments			Revised
Condensed Consolidated Balance Sheet as of December 31, 2017
Convertible notes payable, net of discount	$	1,301,004		$	(488,611	)	$	812,393
Total liabilities	$	5,350,899		$	(488,611	)	$	4,862,288
Preferred Shares (Class B) Outstanding		13,306,599			477,602			13,784,201
Preferred Shares (Class B) Par Amount	$	13,307		$	477		$	13,784
Additional Paid in Capital	$	3,923,234		$	552,023		$	4,475,257
Accumulated Deficit	$	(18,177,819	)	$	(63,889	)	$	(18,241,708	)
Total Shareholders' Equity	$	54,350		$	488,611		$	542,961
Total Liabilities and Shareholders' Equity	$	5,405,249		$	-		$	5,405,249

6

3. Going Concern Uncertainty, Financial Condition and Management’s Plans

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next 12 months. The Company believes that its ability to continue operations depends on its ability to sustain and grow revenue and results of operations as well as its ability to access capital markets when necessary to accomplish the Company’s strategic objectives. The Company believes that it will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and, depending on the results of operations, the Company may need additional equity or debt financing until the Company can achieve profitability and positive cash flows from operating activities, if ever.

At June 30, 2018, the Company had a working capital deficit of approximately $1,611,424, as compared to working capital deficit of approximately $3,289,281 at December 31, 2017. The increase of $1,677,857 in the Company’s working capital from December 31, 2017 to June 30, 2018 was primarily the result of a decrease in the Company’s obligation to issue warrants and a decrease in the balance of the Company’s convertible notes payable, partially offset by a decrease in cash and increase in accounts payable and accrued liabilities.

The Company’s future capital requirements for its operations will depend on many factors, including the profitability of its businesses, the number and cash requirements of other acquisition candidates that the Company pursues, and the costs of operations. The Company has been investing in expanding its operation in new states, its courier service in Colorado, and transforming the assets acquired from Revolutionary Software. The Company’s management has taken several steps to ensure that it will have sufficient liquidity to meet its obligations through December 31, 2018, including growing and diversifying its revenue streams, selectively reducing expenses, and considering additional funding transactions with potential investors. Additionally, if the Company’s actual revenues are less than forecasted, the Company anticipates that variable expenses will also decline, and the Company’s management can implement expense reduction as necessary. The Company is evaluating other measures to further improve its liquidity, including the sale of equity or debt securities. Lastly, the Company may elect to reduce certain related-party and third-party debt by converting such debt into common shares. The Company’s management believes that these actions will enable the Company to meet its liquidity requirements through August 15, 2019. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2018 and beyond.

The Company plans to generate positive cash flow from its Security Grade and BioTrack acquisitions to address some of the liquidity concerns. However, to execute the Company’s business plan, service existing indebtedness and implement its business strategy, the Company anticipates that it will need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. The Company cannot be sure that any additional funding, if needed, will be available on terms favorable to the Company or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute the Company’s current stockholders’ ownership and could also result in a decrease in the market price of the Company’s common stock. The terms of those securities issued by the Company in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. The Company also may be required to recognize non-cash expenses in connection with certain securities it issues, such as convertible notes and warrants, which may adversely impact the Company’s operating results and financial condition. Furthermore, any debt financing, if available, may subject the Company to restrictive covenants and significant interest costs. There can be no assurance that the Company will be able to raise additional capital, when needed, to continue operations in their current form.

4. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC, Boss Security Solutions, Inc., Security Consultants Group Oregon, LLC (“Security Oregon”), Security Grade, and BioTrack THC.

7

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Use of estimates includes the following: 1) allowance for doubtful accounts, 2) estimated useful lives of property, equipment and intangible assets, 3) intangibles impairment, 4) valuation of convertible notes payable and 5) revenue recognition. Actual results could differ from estimates.

Cash

Cash consists of checking accounts. The Company considers all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be cash.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

Management charges balances off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due, or delinquent based on how recently payments have been received.

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $34,767 and $3,000 at June 30, 2018 and December 31, 2017.

Long-Lived Assets, Including Definite Lived Intangible Assets

Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of non-compete agreements and customer relationships. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

Goodwill

Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. Helix reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

8

The impairment model prescribes a two-step method for determining goodwill impairment. However, an entity is permitted to first assess qualitative factors to determine whether the two-step goodwill impairment test is necessary. Helix may consider qualitative factors including, but not limited to, general economic conditions, Helix’s outlook, market performance of Helix’s industry and recent and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. In the first step, Helix determines the fair value of its reporting unit using a discounted cash flow analysis. If the net book value of the reporting unit exceeds its fair value, Helix then performs the second step of the impairment test, which requires allocation of the reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to goodwill. An impairment charge is recognized when the implied fair value of Helix’s goodwill is less than its carrying amount.

Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset. It was determined that during the first quarter of 2018, the Company’s entire amount of goodwill attributable to the Security Grade acquisition was impaired. See Note 9 for a further discussion on the impairment.

Accounting for Acquisitions 

In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets acquired, and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. 

Business Combinations

The Company accounts for its business combinations under the provisions of Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings.

The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using established valuation techniques. The estimated fair value of the net assets acquired was determined using the income approach to valuation based on the discounted cash flow method. Under this method, expected future cash flows of the business on a stand-alone basis are discounted back to a present value. The estimated fair value of identifiable intangible assets, consisting of software and trade name acquired were determined using the relief from royalty method.

The most significant assumptions under the relief from royalty method used to value software and trade names include: estimated remaining useful life, expected revenue, royalty rate, tax rate, discount rate and tax amortization benefit. The discounted cash flow method used to value non-compete agreements includes assumptions such as: expected revenue, term of the non-compete agreements, probability and ability to compete, operating margin, tax rate and discount rate. Management has developed these assumptions on the basis of historical knowledge of the business and projected financial information of the Company. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.  

9

Revenue Recognition

Under FASB Topic 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation.

The security services revenue is generated from performing armed and unarmed guarding which is contracted for on an hourly basis. Revenues associated with these contracted services are recognized under time-based arrangements as services are provided.

Additionally, the Company provides transportation security services, which are generally contracted for on a per-run basis and sometimes additional fees and surcharges are also billed to the client depending on the length of the run. Revenues associated with these services are recognized as the transportation service is provided.

The Company also generates revenue from developing and licensing seed to sale cannabis compliance software to both private-sector and public-sector (government agencies) businesses that are involved in cannabis related operations. The Company also generates revenue from on-going training, support and software customization services.

Occasionally, the Company will enter into systems installation arrangements. Installation jobs are estimated based on the cost of equipment to be installed, the number of hours expected to be incurred to complete the job and other ancillary costs. Revenue associated with these services are recognized over the arrangement period.

Lastly, the Company generates advertising revenues from consumer advertising on its Cannabase platform. Revenue is recognized over the contract period associated with each specific advertising campaign.

Expenses

Cost of Revenues

The cost of revenues is the total cost incurred to obtain a sale and the cost of the goods or services sold. Cost of revenues primarily consisted of hourly compensation for security personnel and employees involved in the creation and development of licensing software.

Operating Expenses

Operating expenses encompass selling general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company.

Other (Expense) Income, net

Other (expense) income, net consisted of change in fair value of convertible note, change in fair value of convertible note – related party, interest expense, change in fair value of obligation to issue warrants, loss on extinguishment of debt, loss on impairment of Goodwill and gain on reduction of obligation pursuant to acquisition.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives are three years for vehicles and five years for furniture and equipment. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are sold, or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in other income.

Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

10

Leases

Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.

If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a capital lease; and if none of the four criteria are met, the lease is classified by the Company as an operating lease.

Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $34,963 and $1,388 for the three months ended June 30, 2018 and 2017, respectively, and $61,737 and $5,179 for the six months ended June 30, 2018 and 2017, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the six months ended June 30, 2018 and 2017.

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

Initial Measurement

The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.

Subsequent Measurement – Financial instruments classified as liabilities

The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income.

Beneficial Conversion Feature

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a Beneficial Conversion Feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the beneficial conversion feature and the Company amortizes the discount to interest expense over the life of the debt.

The Company accounts for the beneficial conversion feature on its convertible preferred stock in accordance with ASC 470-20, Debt with Conversion and Other Options. The BCF of convertible preferred stock is normally characterized as the convertible portion or feature that provides a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of convertible preferred stock when issued. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

11

To determine the effective conversion price, the Company first allocates the proceeds received to the convertible preferred stock and then uses those allocated proceeds to determine the effective conversion price. If the convertible instrument is issued in a basket transaction (i.e., issued along with other freestanding financial instruments), the proceeds should first be allocated to the various instruments in the basket. Any amounts paid to the investor when the transaction is consummated (e.g., origination fees, due diligence costs) represent a reduction in the proceeds received by the issuer. The intrinsic value of the conversion option should be measured using the effective conversion price for the convertible preferred stock on the proceeds allocated to that instrument. The effective conversion price represents proceeds allocable to the convertible preferred stock divided by the number of shares into which it is convertible. The effective conversion price is then compared to the per share fair value of the underlying shares on the commitment date.

The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible preferred stock. This discount should be accreted from the date on which the BCF is first recognized through the earliest conversion date for instruments that do not have a stated redemption date. The intrinsic value of the BCF is recognized as a deemed dividend on convertible preferred stock over a period specified in the guidance.

Share-based Compensation

The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock Based Compensation. Stock-based compensation to employees consist of stock options grants and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant.

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees based upon the fair value of the underlying instrument. The equity instruments, are valued using the Black-Scholes valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services are received.

The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

12

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

● Level 3 – Inputs that are unobservable for the asset or liability.

Certain assets and liabilities of the Company are required to be recorded at fair value either on a recurring or non-recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. The following section describes the valuation methodologies that the Company used to measure, for disclosure purposes, its financial instruments at fair value.

Convertible notes payable

The fair value of the Company’s convertible notes payable, approximated the carrying value as of June 30, 2018 and December 31, 2017. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2.

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable and accrued liabilities, advances from shareholders and obligation pursuant to acquisition approximate their fair value due to the short-term maturity of those items.

Earnings (Loss) per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS excluded all potential dilutive shares if their effect was anti-dilutive.

Basic net loss per share is based on the weighted average number of common and common-equivalent shares outstanding. Potential common shares includable in the computation of fully-diluted per share results are not presented in the consolidated financial statements for the three and six months ended June 30, 2018 and 2017 as their effect would be anti-dilutive.

Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.

13

The anti-dilutive shares of common stock outstanding for the three and six months ended June 30, 2018 and 2017 were as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Potentially dilutive securities:
Convertible notes payable		135,634		226,320		135,634		226,320
Convertible Preferred A Stock		1,000,000		17,186,713		1,000,000		17,186,713
Convertible Preferred B Stock		13,784,201		7,318,084		13,784,201		7,318,084
Warrants		3,307,073		2,557,195		3,307,073		2,557,195
Stock options		8,704,345		414,854		8,704,345		414,854

Reclassifications

Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. In April and May 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing”, ASU 2016-11, “Revenue Recognition and Derivatives and Hedging – Recession of SEC Guidance”, ASU 2016-12, “Revenue from Contracts with Customers – Narrow-Scope Improvements and Practical Expedients”, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”.  These ASUs each affect the guidance of the new revenue recognition standard in ASU 2014-09 and related subsequent ASUs. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017 for public companies

On January 1, 2018, we adopted the new accounting standard ASC 606, “Revenue from Contracts with Customers and all the related amendments” (“ASC 606”) to all contracts which were not completed or expired as of January 1, 2018 using the modified retrospective method. The Company had no cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while the comparative information will continue to be reported under the accounting standards in effect for those periods.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method, whereas financing leases will be treated similarly to a capital lease under the current standard. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The new standard must be presented using the modified retrospective method. However, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method to adopt the new leases standard. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company is still evaluating the method of adoption. While the Company is continuing to assess all potential impacts of the new standard, the Company currently believes the most significant impact relates to its accounting for office space, colocation operating leases, and embedded leases within its supplier contracts.

14

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero-coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The guidance was effective for the Company beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted this standard on January 1, 2018.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350); Simplifying the Test for Goodwill Impairment. The amendments in this update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for public companies for the reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Accordingly, at March 31, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value. Please refer to Note 9 for further detail.

In May 2017, the FASB issued ASU No 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all three of the following are met:

(1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

(2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.

(3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. Note that the current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-09. ASU 2017-09 is effective for all annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the potential impact of adopting ASU 2017-11 on its financial statements and related disclosures.

15

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

5. Revenue Recognition

Adoption of ASC 606 Revenue from Contracts with Customers

The Company adopted the new revenue standard, ASC 606, using the modified retrospective method with respect to all non-completed contracts as of January 1, 2018. This method required retrospective application of the new accounting standard to all unfulfilled contracts that were outstanding as of January 1, 2018. Revenues and contract assets and liabilities for contracts completed prior to January 1, 2018 are presented in accordance with ASC 605.

The Company has determined that there were no adjustments required with respect to the adoption of ASC 606 with respect to any prior periods.

Disaggregation of revenue 

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Types of Revenues:
Security and Guarding	$	1,535,638	$	1,015,662	$	2,629,412	$	1,707,399
Systems Installation		100,699		-		135,263		-
Software		576,142		-		576,142		-
Total revenues	$	2,212,479	$	1,015,662	$	3,340,817	$	1,707,399

The following is a description of the principal activities from which we generate our revenue.

Security and Guarding Revenue

Helix provides armed and unarmed guards, as well as armed transportation services. The guards are charged out at an hourly rate, with invoices typically sent to clients shortly after each month-end for the previous month, with revenue being recognized over time as the service has been provided. Transportation services are typically invoiced on a per-run basis, with revenue being recognized over time as the service has been completed.

Systems Installation Revenue

Security systems, including IP CCTV, intrusion alarm systems, perimeter alarm systems, and access controls are installed for clients. Installation jobs are estimated based on the cost of the equipment, the number of man hours expected to complete the work, supplies, travel, and any other ancillary costs. The installation is typically invoiced with 60% of the total price immediately after signing and the balance upon completion of the installation service. The timing of these contracts are short-term in nature and are less than 12 months in duration.

Software

The Company generates revenue from developing and licensing seed to sale cannabis compliance software to both private-sector and public-sector (government agencies) businesses that are involved in cannabis related operations. The Company also generates revenue from on-going training, support and software customization services.

The private-sector software entails cultivation tracking, inventory management, point of sale and analytic reporting to assist businesses in meeting their compliance requirements and effectively manage their businesses. Customers within the private sector are charged an initial one-time installation fee and the revenues associated with these services are recognized upon completion of installation and configuration at a point in time. After the installation and configuration of the software is completed, the customer is invoiced monthly and revenues associated with these services are recognized monthly over a period of time in which the customer continues to use the software and related services.

The public-sector software assists government agencies in efficient oversight of cannabis related business under their jurisdiction. Revenues associated with governmental contracts are longer-term in nature and recognized upon completion of certain milestones over a period of time or on a completed-contract basis at a point in time. The Company considers the contract to be complete when all significant costs have been incurred and the customer accepts the project. Costs incurred prior to the customer accepting the project are deferred and reflected on the Balance Sheet as Work-in-process – Traceability.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in accordance with ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  Generally, the Company’s contracts include a single performance obligation that is separately identifiable, and therefore, distinct. Under ASC 606, the allocation of transaction price is not necessary if only one performance obligation is identified.

16

Significant Judgments

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue, costs and satisfaction of performance obligation. The Company satisfies its performance obligations and subsequently recognizes revenue, over time, as security and installation services are performed. There were no changes to the significant judgments used by the Company to determine the timing of satisfaction of the performance obligations under ASC 606.

Costs to Obtain or Fulfill Contract

The Company’s costs to fulfill or obtain contracts with customers primarily consist of commissions and legal costs. The Company provides sales team members with commissions at 0-6%. Although sales commissions are incremental in nature and are only incurred when a contract is obtained, there is no up-front commission paid on the satisfactory obtainment of a contract, resulting in no sales commissions being capitalized at June 30, 2018. The Company also incurs legal costs relating to the drafting and negotiating of contracts with select customers. Because legal costs are not incremental in nature and are incurred regardless of whether a contract is ultimately obtained, there were no legal costs capitalized as of June 30, 2018. The Company did not record amortization of costs incurred to obtain the contract or any impairment losses for the period ending June 30, 2018.

6. Business Combination

Security Grade Acquisition

On June 2, 2017, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (“Security Grade”), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, provided that, within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60^th day following the closing, on the 61^st day following the closing, the Company shall deliver an additional $800,000 in cash and issue 207,427 additional stock options (the “Additional Stock Options”). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Agreement within the first 60 days following the closing, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Agreement in the 180 days immediately preceding such termination. Pursuant to these provisions, as of June 30, 2018, the Company has a liability pursuant to the Agreement of $244,159 payable following the Closing.

The merger is being accounted for as a business combination in accordance with ASC 805. The Company’s allocation of the purchase price was calculated as follows:

Base Price – Cash	$	2,100,373
Base Price - Stock Options		916,643
Contingent Consideration - Stock Options		916,643
Total Purchase Price	$	3,933,659

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	14,137
Accounts receivable		53,792
Costs & earnings in excess of billings		96,898
Property, plant and equipment, net		27,775
Trademarks		25,000		10
Customer lists		3,154,578		5
Web address		5,000		5
Goodwill		664,329
Other assets		3,880
Total assets acquired	$	4,045,389
Liabilities assumed:
Billings in excess of costs	$	23,967
Loans payable		18,414
Credit card payable and other liabilities		69,349
Total liabilities assumed		111,730
Estimated fair value of net assets acquired	$	3,933,659

17

The initial stock options are included as part of the purchase price. The Company determined the fair value of the contingent consideration to be $916,643 at June 2, 2017 and recorded it as a liability in its unaudited condensed consolidated balance sheets. The Company satisfied their contingent consideration liability during the third quarter of 2017. During the period ended June 30, 2018, the Company reached settlement agreements with five of the six selling members. As a result of these settlements, 70,151 options previously issued as part of the acquisition were cancelled.

BioTrack Acquisition

On March 3, 2018, Helix TCS, Inc. (the “Company”) and its wholly owned subsidiary, Helix Acquisition Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bio-Tech Medical Software, Inc. (“BioTrackTHC”) and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders. Pursuant to the Merger Agreement on June 1, 2018, Merger Sub merged with and into BioTrackTHC, with BioTrackTHC surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”). The Company closed the Merger. In connection with closing the Merger, the Company issued 38,184,985 unregistered shares of Company common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc 2014 Stock Incentive Plan (“BioTrackTHC Stock Plan”), pursuant to which options exercisable for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders and optionholders will own 48% of the Company on a fully diluted basis on the closing date.

The Merger is being accounted for as a business combination in accordance with ASC 805. The Company has determined preliminary fair values of the assets acquired and liabilities assumed in the BioTrackTHC merger. These values are subject to change as we perform additional reviews of our assumptions utilized.

The Company has made a provisional allocation of the purchase price of the BioTrackTHC transaction to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the provisional purchase price allocations relating to the BioTrackTHC transaction: 

Base Price - Common Stock	$	44,905,542
Base Price - Stock Options		12,646,491
Total Purchase Price	$	57,552,033

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	448,697
Accounts receivable		128,427
Prepaid expenses		351,615
Property, plant and equipment, net		72,252
Goodwill		39,135,007
Customer list		8,304,449		5
Software		9,321,627		4.5
Tradename		466,081		4.5
Total assets acquired	$	58,228,155
Liabilities assumed:
Accounts payable	$	223,581
Other liabilities		452,541
Total liabilities assumed		676,122
Estimated fair value of net assets acquired	$	57,552,033

18

The Company has not completed the valuation studies necessary to finalize the acquisition fair values of the assets acquired and liabilities assumed and related allocation of purchase price for BioTrackTHC. Accordingly, the type and value of the intangible assets amounts set forth above are preliminary. Once the valuation process is finalized for BioTrackTHC, there could be changes to the reported values of the assets acquired and liabilities assumed, including goodwill and intangible assets and those changes could differ materially from what is presented above.

Total acquisition costs for the BioTrackTHC merger incurred during the three and six months ended June 30, 2018 was $116,624, and is included in selling, general and administrative expense in the Company’s Statements of Operations.

Unaudited Pro Forma Results

BioTrackTHC contributed revenues of $576,142 and a net loss of $132,109 for the period June 1, 2018 through June 30, 2018, included in the Company’s consolidated condensed statements of operations.

The following table below represents the revenue, net loss and loss per share effect of the acquired company, as reported in our pro forma basis as if the acquisition occurred on January 1, 2017. These pro forma results are not necessarily indicative of the results that actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Description	2018			2017			2018			2017
Revenues	$	3,280,872		$	2,660,197		$	6,162,373		$	5,105,097
Net loss		(2,077,322	)		(2,806,083	)		(2,554,163	)		(8,311,917	)
Net loss attributable to common shareholders		(9,281,011	)		(5,961,970	)		(24,756,357	)		(11,467,804	)
Loss per share attributable to common shareholders:
Basic and diluted-as pro forma (unaudited)		(0.22	)		(0.21	)		(0.69	)		(0.40	)

7. Asset Acquisition

The acquisition of the assets of Revolutionary Software, LLC occurred via two transactions.

1.

On March 14, 2016, the Company purchased one-third of the equity interest in Revolutionary for total consideration of $350,000 in cash and 75,000 shares of common stock of the Company. $50,000 was paid in cash at closing, with the balance ($300,000) being paid in twenty-four monthly installments of $10,417, with a final payment of $50,000 to be paid on the twenty-fifth month.

2.

On April 11, 2016, the Company entered into an asset purchase agreement with Revolutionary, in which the Company purchased all of the intangible rights and property of Revolutionary for total consideration of $300,000 payable in two equal installments pursuant to a promissory note and 2,320,000 shares of restricted common stock of the Company. As of June 30, 2018, the Company owed Revolutionary $0.

The total purchase price for the Revolutionary assets acquired was $1,596,750. The acquisition cost has been allocated over the intangible assets acquired in accordance with the guidance set forth in ASC 805, Business Combinations, please see Note 9. Intangible Assets and Goodwill, Net. As of June 30, 2018, and December 31, 2017, the Company has a liability pursuant to the Revolutionary asset acquisition of $0 and $58,370, respectively.

19

8. Property and Equipment, Net

At June 30, 2018 and December 31, 2017, property and equipment consisted of the following:

	June 30, 2018			December 31, 2017
Furniture and equipment	$	86,292		$	16,332
Software equipment		5,376			1,382
Vehicles		237,805			175,647
Total		329,473			193,361
Less: Accumulated depreciation		(79,448	)		(82,727	)
Property and equipment, net	$	250,025		$	110,634

Depreciation expense for the three months ended June 30, 2018 and 2017 was $32,893 and $14,830, respectively, and $35,893 and $23,036 for the six months ended June 30, 2018 and 2017, respectively.

9. Intangible Assets, Net and Goodwill

The following table summarizes the Company’s intangible assets as of June 30, 2018 and December 31, 2017:

					June 30, 2018
	Estimated Useful Life (Years)		Gross Carrying Amount		Assets Acquired Pursuant to Business Combination (2)		Accumulated Amortization			Net Book Value
Database		5	$	93,427	$	-	$	(41,444	)	$	51,983
Trade names and trademarks		5 - 10		125,000		466,081		(33,092	)		557,989
Web addresses		5		130,000		-		(56,525	)		73,475
Customer list		5		3,154,578		8,304,449		(810,831	)		10,648,196
Software		4.5		-		9,321,627		(164,433	)		9,157,194
			$	3,503,005	$	18,092,157	$	(1,106,325	)	$	20,488,837

					December 31, 2017
	Estimated Useful Life (Years)		Gross Carrying Amount at December 31, 2016		Assets Acquired Pursuant to Business Combination (1)		Accumulated Amortization			Net Book Value
Database		5	$	93,427	$	-	$	(32,183	)	$	61,244
Trade names and trademarks		10		100,000		25,000		(18,675	)		106,325
Web addresses		5		125,000		5,000		(43,639	)		86,361
Customer list		5		-		3,154,578		(366,249	)		2,788,329
			$	318,427	$	3,184,578	$	(460,746	)	$	3,042,259

(1)	On June 2, 2017, the Company acquired various assets of Security Grade Protective Services, Ltd. (See Note 6).
(2)	On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 6).

20

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $476,003 and $61,953 for the three months ended June 30, 2018 and 2017, respectively, and $645,579 and $75,374 for the six months ended June 30, 2018 and 2017, respectively.

The following table summarizes the Company’s Goodwill as of June 30, 2018:

	Total Goodwill
Balance at January 1, 2018	$	664,329
Impairment of goodwill		(664,329	)
Goodwill attributable to BioTrack acquisition		39,135,007
Balance at June 30, 2018	$	39,135,007

During the first quarter of 2018, the Company came to a settlement agreement with numerous Security Grade employees resulting from a misrepresentation of revenue and customer list information provided as part of the acquisition. Therefore, the Company considers the settlement to be an indicator for goodwill impairment testing. Accordingly, at March 30, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off of $664,329 for the six months ended June 30, 2018. As part of the BioTrack acquisition, Goodwill in the amount of $39,135,007 was recognized on the Company’s Condensed Consolidated Balance Sheet.

10. Accounts Payable and Accrued Expenses

As of June 30, 2018 and December 31, 2017, accounts payable and accrued expenses consisted of the following:

	June 30, 2018		December 31, 2017
Accounts payable	$	1,130,405	$	334,751
Accrued expenses		236,319		220,682
Accrued interest		36,680		43,204
Total	$	1,403,404	$	598,637

11. Costs, Estimated Earnings and Billings

Costs, estimated earnings and billings on uncompleted contracts are summarized as follows as of June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Costs incurred on uncompleted contracts	$	78,108		$	64,704
Estimated earnings		33,213			27,730
Cost and estimated earnings earned on uncompleted contracts		111,321			92,434
Billings to date		163,619			71,778
Costs and estimated earnings in excess of billings on uncompleted contracts		(52,298	)		20,656
Costs in excess of billings	$	9,277		$	40,847
Billings in excess of cost		(61,575	)		(20,191	)
	$	(52,298	)	$	20,656

21

12. Convertible Note Payable

	June 30, 2018			December 31, 2017
Note Five, 5% convertible promissory note, fixed secured, maturing November 16, 2018	$	114,746		$	812,393
		114,746			812,393
Less: Current portion		(114,746	)		(812,393	)
Long-term portion	$	-		$	-

On September 30, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Four”) with a fourth investor (the “Fourth Investor”) in which the Fourth Investor provided the Company $500,000 in cash. As of December 31, 2016, the Class B Preferred Shares were not established as a result of Holder Default, in which, the Fourth Investor did not act in good faith towards the prompt negotiation, execution and delivery of the Class B Preferred Shares.

On March 31, 2017, the First Amendment to Note Four (the “Amended Note”) was entered by the Company and the Holder (also the Fourth Investor). In the absence of a Company Event of Default or Holder Event of Default, Amended Note is payable by issuance upon conversion into Class B Preferred Shares of the Company, which was to occur no later than June 1, 2017. The Amended Note had the following conversion features:

● Automatic Conversion. The principal balance of the Amended shall automatically convert into shares of Class B Preferred Shares upon execution by the Company and the Fourth Investor of definitive documentation relating to the $500,000, aggregate principal amount, and investment by the Fourth Investor in Class B Preferred Shares of the Company.

● Company Default. In the event of a Company Event of Default, the Fourth Investor the shall have the right to elect to (i) at any time prior to June 30, 2017, convert the aggregate outstanding principal amount of Note Four into Class B Preferred Shares equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis, or (ii) at any time commencing on July 1, 2017 and ending on September 31, 2017, have Note Four redeemed for cash at a redemption price, in aggregate, equal to 150% of the aggregate principal outstanding balance of Note Four or (iii) to convert Note Four into common shares of the Company equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis. In the event the Holder does not elect any remedy in the event of a Company Event of Default, on September 31, 2017 the Amended Note shall be converted in whole into common shares of the Company equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis.

● Holder Default. In the event of a Holder Event of Default, the Company shall have the right to either (i) redeem the Amended Note at par value at any time prior to June 1, 2017 or (ii) convert the outstanding principal balance into common shares of the Company at market value.

● The $12,000,000 valuation in Note Four is subject to dilution of $600,000 from additional investments in the Company by third parties following the Holder’s $500,000 investment that is memorialized in Note Four. The Holder was to receive the same number of shares as it would have for its investment if it had converted at a $12,000,000 valuation on October 20, 2016 given the 26,587,497 shares outstanding at that time. Note Four was to convert into 1,162,500 shares.

22

Due to the terms of the Amendment, the Company evaluated Note Four under ASC 470-50 to determine if modification or extinguishment treatment was necessary. After performing the analysis under ASC 470-50, it was determined extinguishment treatment was appropriate and the Company should extinguish Note Four and recognize the Amended Note as new debt. The Company recognized a loss on extinguishment of $4,611,395 on Note Four.

The Company evaluated the Amended Note and the embedded conversion feature under ASC 815 and determined the conversion feature did not meet the definition of a derivative and therefore should not be bifurcated. The Company then evaluated the Amended Note in accordance with ASC 480 and determined that Note Four will be accounted for as a liability measured at fair value. As of March 31, 2017, the fair value of the liability was $500,000.

On February 13, 2017, the Company entered into a $183,333 10% Fixed Secured Convertible Promissory Note (“Note Five”) with a third investor (the “Third Investor”). The Third Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the Third Investor for due diligence and legal bills for the transaction. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on Note Five due and payable on September 12, 2017 (unless converted under terms and provisions as set forth within Note Five). The principal balance of Note Five was convertible at the election of the Third Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at $1.50 per share. In conjunction with Note Five, the Company issued a warrant to the third investor to purchase 25,000 shares of the Company’s common stock at $1.00 per share. Note Five became effective on February 14, 2017 upon the execution by the Company and the Third Investor of numerous exhibit documents.

The Company evaluated the embedded conversion feature within the above convertible note under ASC 815 and determined the conversion feature did not meet the definition of a derivative and therefore should not be bifurcated. Then the Company evaluated the conversion feature for a beneficial conversion feature at inception. The Company accounted for the intrinsic value of a BCF inherent to the convertible note payable and a total debt discount of $183,333 was recorded.

The company recorded a debt discount relating to the warrants issued in the amount of $22,000 based on the relative fair values of Note Five without the warrants and the warrants themselves at the effective date of Note Five. The additional $16,666 retained by the Third Investor for due diligence and legal bills for the transaction will be recorded as a debt discount. The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $183,333. Therefore, the debt discount related to the BCF was in the amount of $144,666. The excess value of the BCF discount was recognized as a loss in earnings and recorded as an interest expense in the amount of $390,666 and will be amortized through Maturity of Note Five.

The debt discounts were amortized to interest expense over the life of the note. As of December 31, 2017, and June 30, 2018 the discount was fully amortized.

On February 13, 2017, the Company entered into a $25,000 10% Fixed Secured Convertible Promissory Note (“Note Six”) with the Third Investor. The Third Investor provided the Company with $25,000 in cash, which was received by the Company during the period ended March 31, 2017. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on Note Six due and payable on September 13, 2017. The principal balance of Note Six was convertible at the election of the Third Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at $6.10 per share. Note Six become effective on February 14, 2017 upon the execution by the Company and the Third Investor of numerous exhibit documents.

23

The Company evaluated Note Six in accordance with ASC 815 to determine if the conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the conversion feature did not meet the requirements for bifurcation pursuant to ASC 815. Then the Company evaluated the conversion feature for a beneficial conversion feature at inception and determined that Note Six did not have a beneficial conversion feature. As a result, the Company recorded the conventional convertible note as a debt instrument in its entirety.

On April 26, 2017, the Company entered into a $100,000 10% Secured Convertible Promissory Note (“Note Seven”) with the Fourth Investor. The Fourth Investor provided the Company with $72,000 in cash proceeds, which was received by the Company during the three months ended June 30, 2017. Note Seven is due on October 26, 2017 and the Company must pay guaranteed interest on the principal balance at an amount equivalent to 10% of the note amount. The principal balance of Note Seven is convertible at the election of the Fourth Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at the lower of $1.00 or a 50% discount to the lowest closing bid price of the Company’s common stock for the 30 Trading Days prior to conversion. In conjunction with Note Seven, the Company issued a warrant to the fourth investor to purchase 150,000 shares of the Company’s common stock at $1.00 per share.

On November 16, 2017, the Company amended Notes Five, Six, and Seven (“the Amended Notes”) with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. The amendment of Note Six and Seven included terms, permitting the Company the option to tender payment in full on or before November 21, 2017, at a 15% discount of the amended principal amounts. At November 16, 2017, the principal amounts of Note Five, Six and Seven were $281,900, $38,441 and $131,107, respectively. On November 21, 2017, the Company paid the remaining principal balance, at the 15% discount on Notes Six and Seven in the amount of $144,259.

On February 15, March 12 and March 21, 2018 the holder of Note Five elected their option to partially convert the convertible note into shares of the Company’s common stock. After the conversions the remaining Principal balance was $106,900. Please refer to Footnote 16 for additional details on the partial conversions of Note Five.

On May 16, 2018, the Company amended Note Five (“Second Amendment”) with the Fourth Investor. The Second Amendment states that Note Five shall have a maturity of November 16, 2018 and shall be prepayable at any time at 120% of the unpaid principal and accrued interest balance. The principal amount as of the date of the Second Amendment was $112,305.

The Company evaluated Note Five in accordance with ASC 480, Distinguishing Liabilities from Equity and determined the Note Five will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2018, and December 31, 2017, the fair value of Note Five was $114,746 and $812,393, respectively. Therefore, the Company recorded a gain to the change in fair value of $120,630 and $697,646 related to Note Five for the three and six months ended June 30, 2018, respectively.

24

13. Related Party Transactions

Advances from Related Parties

The Company has an additional loan outstanding from a former Company executive. The advance does not accrue interest and has no definite repayment terms. The loan balance was $65,250 and $124,750 as of June 30, 2018 and December 31, 2017, respectively.

Convertible Note Payable

On March 11, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Eight”) with Paul Hodges, a Director of the Company (the “Related Party Holder”). The Related Party Holder provided the Company with $150,000 in cash, and the Company promised to pay the principal amount, together with interest at an annual rate of 7%, with principal and accrued interest on Note Eight due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note Eight was convertible at the election of the Related Party Holder, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. The Company evaluated Note Eight in accordance with ASC 480, Distinguishing Liabilities from Equity and determined that Note Eight will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings.

On February 20, 2018, the Company entered into an agreement to amend the Convertible Promissory Note (this “Amendment”) with the undersigned holder (each, a “Holder”) initially issued to such Holder and dated March 2016 (the “Note”). The Company and Holders desire to extend the maturity date of the Note to August 20, 2018.

The Note is hereby amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of the Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of the Amendment. The principal amount of the note will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on this Note shall be due and payable on August 20, 2018 (the “Maturity Date”). All provisions related to conversion of the Note into equity securities of the Company were terminated as part of the Amendment.

As of February 20, 2018, the fair value of the liability was $239,343, however due to termination of the conversion of the note into equity securities, Note Five will be valued in its principal amount of $125,000 and accordingly the Company recorded a credit regarding the change in fair value of $0 and charge of $43,696 for the three months ended June 30, 2018 and 2017, respectively, and $118,506 and $56,107 for the six months ended June 30, 2018 and 2017, respectively. The interest expense associated with Note Five was $0 and $2,618 for the three months ended June 30, 2018 and 2017, respectively and $2,402 and $5,178 for the six months ended June 30, 2018 and 2017, respectively.

Warrants

In March 2016, the Company issued 960,000 shares of restricted common stock to the Related Party Holder per a subscription agreement for total proceeds of $150,000. In conjunction with the subscription agreement, the Company issued a warrant to the Related Party Holder to purchase 1,920,000 restricted shares of the Company’s common stock at $0.16 per share. The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company’s notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company’s notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of June 30, 2018, the warrants granted are not exercisable.

25

14. Promissory Notes

On February 13, 2017, the Company entered into an unsecured promissory note in the amount of $180,000. The unsecured promissory note has a fixed interest rate of 8% and was due and payable on June 30, 2017. In conjunction with the Series B Preferred Stock Purchase Agreement, as discussed in Note 16, the Company satisfied its liability in exchange for Series B Preferred Stock. The interest expense associated with the unsecured promissory note was $0 and $1,871 for the three months ended June 30, 2018 and 2017, respectively and $0 and $2,887 for the six months ended June 30, 2018 and 2017, respectively.

On January 30, 2017, the Company entered into an unsecured promissory note in the amount of $75,000. The unsecured promissory note had a fixed interest rate of 8% and was due and payable on June 30, 2017. In conjunction with the Series B Preferred Stock Purchase Agreement, as discussed in Note 16, the Company satisfied its liability in exchange for Series B Preferred Stock. The interest expense associated with the unsecured promissory note was $0 and $779 for the three months ended June 30, 2018 and 2017, respectively and $0 and $2,570 for the six months ended June 30, 2018 and 2017, respectively.

15. Notes Payable

	June 30, 2018			December 31, 2017
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$	92,277		$	55,890
Loans Payable - Credit Union		5,940			8,582
Less: Current portion of loans payable		(7,869	)		(11,179	)
Long-term portion of loans payable	$	90,348		$	53,293

The interest expense associated with the notes payable was $720 and $230 for the three months ended June 30, 2018 and 2017, respectively, and $1,420 and $230 for the six months ended June 30, 2018 and 2017, respectively.

16. Shareholders’ Equity

Common Stock

Subscription Agreements

In February 2018, the Company issued 222,222 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $200,000.

In March 2018, the Company issued 500,000 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $450,000.

In April 2018, the Company issued 500,000 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $400,000.

In May 2018, the Company issued 244,444 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $200,000.

Other Common Stock Issuances

In May 2018, the Company issued 50,000 shares of restricted common stock to a consultant per a consultant agreement.

In June 2018, the Company issued 38,184,985 shares of common stock as part of the BioTrack acquisition.

On June 7, 2018, two selling shareholders of Security Grade exercised their right to purchase 212,633 shares of the Company’s common stock.

Conversion of Convertible Note to Common Stock

On February 15, 2018, the holder of Note Five elected their option to partially convert $50,000 in principal of the convertible note into 46,066 shares of the Company’s common stock.

On March 12, 2018, the same holder partially converted an additional $50,000 in principal of the convertible note into 63,963 shares of the Company’s common stock.

On March 21, 2018, the same holder partially converted an additional $75,000 in principal of the convertible note into 95,945 shares of the Company’s common stock.

26

Amended Convertible Note

On February 20, 2018, the Company entered into an agreement to amend a Convertible Promissory Note with the undersigned holder initially issued to such Holder and dated March 2016. The Company and Holders desire to extend the maturity date of the Note to August 20, 2018. The holder was issued 15,000 shares of the Company’s restricted common stock as part of the amendment.

The Note is hereby amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of this Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of this Amendment. The principal amount of the note will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on this Note shall be due and payable on August 20, 2018 (the “Maturity Date”). All provisions related to conversion of the Note into equity securities of the Company are hereby deleted.

On May 16, 2018, the Company entered into a second amendment agreement of a Convertible Promissory Note with the holder of a 10% fixed secured convertible promissory note. The new Maturity Date is November 16, 2018. The new interest rate is 5%. The note is prepayable at 120% of the unpaid balance upon 10 business days’ notice to the holder, which has the option to convert, in whole or in part, during the notice period. The conversion price shall be equal to a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion.

2017 Omnibus Incentive Plan

On January 11, 2018, the Company issued 42,850 shares of the Company’s restricted common stock under the 2017 Omnibus Incentive Plan to select personnel of the Company. Additionally, on March 15, 2018, the Company issued an additional 100,000 shares of the Company’s common stock to select employees of the Company.

In May 2018, the Company issued 83,900 shares of common stock to various employees pursuant to the Company’s 2017 Omnibus Stock Incentive Plan.

Series A convertible preferred stock

In October 2015, the Company issued a total of 1,000,000 shares of its Class A Preferred Stock as part of a reorganization in which Helix Opportunities LLC contributed 100% of itself and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 1,000,000 convertible preferred shares of the Company. The Class A Preferred Stock included super majority voting rights and were convertible into 60% of the Company’s common stock. During the third quarter of 2017, the Company modified the conversion rate on the Class A Preferred Stock to a 1:1 ratio. This modification reduced the amount of potentially dilutive Convertible Series A Stock by 15,746,127 shares to a total of 1,000,000 at September 30, 2017.

Series B convertible preferred stock

Series B Preferred Stock Purchase Agreement

On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares are convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees listed below and the satisfaction of the promissory notes discussed in Note 14.

In connection with the Series B Preferred Stock Purchase Agreement, the Company is obligated to issue warrants to a third-party for services to purchase 462,195 shares of common stock at $0.325 per share (see Note 18). These warrants have been accounted for as an obligation to issue because as of the balance sheet date the Company did not deliver the warrants though incurred the obligation; accordingly, they were recognized as a liability on the unaudited condensed consolidated balance sheet and cost of issuance of Series B preferred shares on the unaudited condensed consolidated statement of shareholders’ equity (deficit).

On July 28, 2017, as contemplated by the Initial Series B Preferred Purchase Agreement, the Parties entered into a second Series B Preferred Stock Purchase Agreement (the “Second Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 1,680,000 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $840,000.

On August 29, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a third Series B Preferred Stock Purchase Agreement (the “Third Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 369,756 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $120,000.

On September 15, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a fourth Series B Preferred Stock Purchase Agreement (the “Fourth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 462,195 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $150,000.

27

On October 11, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a fifth Series B Preferred Stock Purchase Agreement (the “Fifth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 462,195 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $150,000.

On October 31, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a sixth Series B Preferred Stock Purchase Agreement (the “Sixth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 1,042,337 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $557,500.

On December 19, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a seventh Series B Preferred Stock Purchase Agreement (the “Seventh Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 2,449,634 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $795,000.

Series B Preferred Stock

In accordance with the Certificate of Incorporation, there were 9,000,000 authorized Series B Preferred Stock at a par value of $ 0.001. In connection with the Series B Preferred Stock Purchase Agreement, on May 12, 2017, the Company filed a Certificate of Designation (the “Certificate of Designations”) with the Secretary of State of the State of Delaware to designate the preferences, rights and limitations of the Series B Preferred Shares. On August 23, 2017 the Certificate of Designations was amended and restated to increase the number of shares of Series B Preferred Stock authorized to 17,000,000.

Conversion:

Each Series B Preferred Share is convertible at the option of the holder at any time on or after May 12, 2018 into such number of shares of the Company’s common stock equal to the number of Series B Preferred Shares to be converted, multiplied by the Preferred Conversation Rate. The Preferred Conversion Rate shall be the quotient obtained by dividing the Preferred Stock Original Issue Price ($0.3253815) by the Preferred Stock Conversation Price in effect at the time of the conversion (the initial conversion price will be equal to the Preferred Stock Original Issue Price, subject to adjustment in the event of stock splits, stock dividends, and fundamental transactions). Based on the current conversion price, the Series B Preferred Shares are convertible into 13,306,599 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (x) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (y) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company’s Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000).

Beneficial Conversion Feature – Series B Preferred Stock (deemed dividend):

Each share of Series B Preferred Stock is convertible into shares of common stock, at any time at the option of the holder at any time on or after May 12, 2018. On May 17, 2017, the date of issuances of the Series B, the publicly traded common stock price was $3.98.

28

Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature exists, as the effective conversion price for the Series B preferred shares at issuance was less than the fair value of the common stock into which the preferred shares are convertible. A beneficial conversion feature based on the intrinsic value at the date of issuances for the Series B preferred shares is scheduled below. For the three and six months ended June 30, 2018, the beneficial conversion amount of $14,998,505 and $22,202,194, respectively was accreted back to the preferred stock as a deemed dividend and charged to additional paid in capital in the absence of earning as the beneficial conversion feature is amortized over time through the earliest conversion date, May 12, 2018. As of June 30, 2018, the beneficial conversion feature was fully amortized. Provided below is a schedule of the issuances of Series B preferred shares and the amount accredited to deemed dividend at June 30, 2018.

For the Six Months Ended June 30, 2018
Issuance Date	Beneficial Conversion Feature Term (months)		Number of shares		Fair Value of Beneficial Conversion Feature		Amount accreted as a deemed dividend at December 31, 2017			Amount accreted as a deemed dividend for the Six Months Ended June 30, 2018			Unamortized Beneficial Conversion Feature
May 17, 2017		12		7,318,084	$	25,247,098	$	(15,779,436	)	$	(9,467,661	)	$	-
July 29, 2017		9.5		1,680,000		6,804,000		(3,674,634	)		(3,129,366	)		-
August 29, 2017		8.5		369,756		1,148,263		(556,190	)		(592,073	)		-
September 15, 2017		8		462,195		1,435,329		(648,601	)		(786,728	)		-
October 11, 2017		7		462,195		1,121,036		(426,309	)		(694,727	)		-
October 31, 2017		6.5		1,042,337		1,735,641		(548,570	)		(1,187,071	)		-
December 19, 2017		5		2,449,634		6,921,347		(576,779	)		(6,344,568	)		-
Total				13,784,201	$	44,412,714	$	(22,210,519	)	$	(22,202,194	)	$	-

Dividends, Voting Rights and Liquidity Value:

Pursuant to the Certificate of Designations, the Series B Preferred Shares bear no dividends, except that if the Board declares a dividend payable upon the then-outstanding shares of the Company’s common stock. The Series B Preferred Shares vote together with the common stock and all other classes and series of stock of the Company as a single class on all actions to be taken by the stockholders of the Company including, but not limited to, actions amending the certificate of incorporation of the Company to increase the number of authorized shares of the common stock. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series B Preferred Shares are entitled to (i) first receive distributions out of our assets in an amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock and (ii) second, on an as-converted basis alongside the common stock.

Classification:

The Series B Preferred Shares are classified within permanent equity on the Company’s consolidated balance sheet as they do not meet the criteria that would require presentation outside of permanent equity under ASC 480, Distinguishing Liabilities from Equity.

17. Stock Options

As part of the Membership Interest Purchase Agreement entered into between the Company and Security Grade, on June 2, 2017 (see Note 6), the Company granted to the selling members the option to purchase up to 414,854 shares of the Company’s common stock at a price of $0.001 per share. Of the 414,854 options granted, 207,427 were vested at closing and equity classified. The vesting of the remaining 207,427 shares were subject to certain milestones being achieved and was initially recognized as contingent consideration, both a component of purchase price. As a result of the milestones being met during the third quarter of 2017, the remaining 207,427 shares have also vested. The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant.

On March 6, 2018, the Company filed a lawsuit in the United States Court for the District of Colorado alleging violations in previously disclosed representations and warranties by the plaintiff as part of the Security Grade Acquisition. Following the appointment of a registered Public Company Accounting Oversight Board (“PCAOB”) auditor, certain misrepresentations, primarily surrounding the misclassification of certain revenues as being recurring, were discovered, artificially inflating the price of the membership interest in Security Grade. As a result of the certain settlements with the selling shareholders, 71,644 options previously issued as part of the acquisition were cancelled.

As part of the Merger Agreement entered into between the Company and BioTrackTHC, on June 1, 2018 (see Note 6), the Company assumed the BioTrackTHC Stock Plan, pursuant to which options exercisable at prices of $0.11, $0.79 and $1.66 per share for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders and optionholders will own 48% of the Company on a fully diluted basis on the closing date.

29

Stock option activity for the period ended June 30, 2018 is as follows:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2018		414,854		$	0.001		2.42
Granted		490,000		$	0.001		0.52
Assumed Options pursuant to acquisition		8,132,410		$	0.001		2.41
Forfeited and expired		(121,779	)	$	0.001
Exercised		(212,633	)	$	0.001
Outstanding at June 30, 2018		8,702,852		$	0.001		2.95
Vested options at June 30, 2018		8,425,485		$	0.001		2.43

18. Warrants

On February 13, 2017, the Company entered into a $183,333 Fixed secured Convertible Promissory Note (“Note Five”) with the Fourth Investor. The Fourth Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the Fourth Investor for due diligence and legal bills for the transaction. In conjunction with Note Five, the Company issued a warrant, of which the value was derived and based off the fair value of Note Five, to the fourth investor to purchase 25,000 shares of the Company’s common stock at $1.00 per share. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after February 14, 2017 and on or before February 12, 2022, by delivery to the Company of the Notice of Exercise. On December 11, 2017, the investor exercised their purchase right in a net settlement cashless exercise.

In connection with the issuance of the Note Seven, the Company issued a warrant (the “Warrant”) to the Purchaser to purchase 150,000 shares of Common Stock pursuant to the terms and provisions thereunder. The Warrant is exercisable at any time within five (5) years of issuance and entitles the Purchaser to purchase 150,000 shares of the Common Stock at an exercise price of the lesser of either i) $1.00 or ii) a 50% discount to the lowest closing bid price thirty (30) trading days immediately preceding conversion, subject to certain adjustments.

Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after April 26, 2017 and on or before April 26, 2022, by delivery to the Company of the Notice of Exercise. On December 11, 2017, the investor exercised their purchase right in a net settlement cashless exercise.

During the three months ended June 30, 2018, the Company entered into a Graduated Lock-Up Letter to induce the entering into of a consulting agreement in exchange for 50,000 shares of the Company’s common stock and the granting of 575,000 warrants for the purchase of common stock of the Company. The company recognized a compensation expense of $943,000 for the three and six months ended June 30, 2018 relating to the granting of the new warrants.

30

A summary of warrant activity is as follows:

For the Six Months ended June 30, 2018
	Warrant Shares		Weighted Average Exercise Price
Balance at January 1, 2018		2,732,073	$	0.23
Warrants granted		575,000	$	0.01
Balance at June 30, 2018		3,307,073	$	0.19

Warrant Obligations

In connection with the Series B Preferred Stock Purchase Agreement (See Note 16), the Company is obligated to issue warrants to a third-party to purchase 812,073 shares of common stock at $0.325 per share for services rendered. These warrants have been accounted for as warrant obligations and are recognized as a liability on the unaudited condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017. For the three months ended June 30, 2018 and 2017, the Company recorded a credit and a charge in the change in fair value of the warrant obligations of $321,161 and $124,791, respectively, and is reflected in the unaudited condensed consolidated statements of operations, other income (expense). For the six months ended June 30, 2018 and 2017, the Company recorded a credit and charge in the change in fair value of the warrant obligations of $1,297,840 and $124,791, respectively, and is reflected in the unaudited condensed consolidated statements of operations, other income (expense). Although the Company issued warrants during the first quarter of 2018, the rights entitled to the third-party holder of the warrants to purchase shares of the Company’s common stock was not exercised. Upon exercising the right to purchase the Company’s common stock by the third-party, the Company will de-recognize the liability for warrant obligations and reclassify the appropriate amount into equity.

The fair value of the Company’s obligation to issue warrants was calculated using the Black-Scholes model and the following assumptions:

	As of June 30, 2018			As of December 31, 2017			As of May 17, 2017
Fair value of company's common stock	$	1.41		$	3.00		$	3.98
Dividend yield		0	%		0	%		0	%
Expected volatility		237.9	%		266.4	%		181.2	%
Risk Free interest rate		2.63	%		1.98	%		1.42	%
Expected life (years)		2.15			2.65			3.00
Fair value of financial instruments - warrants	$	1,131,729		$	2,429,569		$	1,839,133

The change in fair value of the financial instruments – warrants is as follows:

	Amount
Balance as of January 1, 2018	$	2,429,569
Change in fair value of liability to issue warrants		(1,297,840	)
Balance as of June 30, 2018	$	1,131,729

	Amount
Balance as of April 1, 2018	$	1,452,890
Change in fair value of liability to issue warrants		(321,161	)
Balance as of June 30, 2018	$	1,131,729

19. Stock-Based Compensation

2017 Omnibus Incentive Plan

The Company’s 2017 Omnibus Incentive Plan (the “2017 Plan”) was adopted by our Board of Directors and a majority of our voting security holders on October 17, 2017. The 2017 Plan permits the granting of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and dividend equivalent rights to eligible employees, directors and consultants. We grant options to purchase shares of common stock under the 2017 Plan at no less than the fair value of the underlying common stock as of the date of grant. Options granted under the Plan have a maximum term of ten years. Under the Plan, a total of 5,000,000 shares of common stock are reserved for issuance. As of June 30, 2018, there were 226,750 shares of common stock outstanding under the 2017 Plan.

31

20. Income Taxes

No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company’s net deferred income tax assets for the six months ended June 30, 2018 and 2017 consist of income tax loss carryforwards. These amounts are available for carryforward for use in offsetting taxable income of future years through 2035. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry-forward period. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Due to the Company’s history of operating losses, these deferred tax assets arising from the future tax benefits are currently not likely to be realized and are thus reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes. 

For the six months ended June 30, 2018 and 2017, the Company has a net operating loss carry forward of approximately $8,365,000 and $4,362,000, respectively. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382. The Company applied a 100% valuation reserve against the deferred tax benefit as the realization of the benefit is not certain.

21. Commitments and Contingencies

The Company is obligated under four operating lease agreements for office facilities in Colorado, Florida, Washington and Hawaii, which expire in February and March 2021.

Rent expense incurred under the Company’s operating leases amount to $65,888 and $22,511 during the three months ended June 30, 2018 and 2017, respectively and $84,451 and $40,721 for the six months ended June 30, 2018 and 2017, respectively.

22. Subsequent Events

In July 2018, the Company issued 327,777 shares of restricted common stock at $0.90 per share to an investor per a subscription agreement for total proceeds of $294,999.

In July 2018, the Company issued 200,000 shares of restricted common stock to consultants as an inducement to enter into a leak-out agreement with the Company.

In July 2018, the Company issued 100,000 shares of the Company’s common stock registered under 2017 Omnibus Stock Incentive Plan to select employees of the Company.

In July 2018, the Company issued 3,983 shares of the Company’s common stock resulting from the exercise of stock options granted as part of the Security Grade acquisition.

In August 2018, the Company issued 327,777 shares of restricted common stock at $0.90 per share to an investor per a subscription agreement for total proceeds of $294,999.

In August 2018, the Company issued 100,000 shares of restricted common stock as part of an agreement entered into with an investor relation consultant.

In August 2018, the Company entered into a asset acquisition agreement with Engeni LLC and its majority owned subsidiary Engeni SA in the Republic of Argentina (collectively “Engeni”). At closing, the Company issued 366,700 shares of Company restricted common stock to the former owners of Engeni. An additional 10,000 shares of the Company’s restricted common stock were also issued to two of the former owners of Engeni as part of a consulting agreement entered into between the Company and former owners. Upon the achievement of certain milestones, the owners of Engeni may receive up to 733,300 additional shares of Company restricted Common Stock plus $100,000.

32

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  

Forward-Looking Statements

The following discussion of our financial condition and results of operations for the three and six months ended June 30, 2018 and 2017 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K/A for the year ended December 31, 2017, as filed on April 4, 2018 with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “Helix”, the “Company”, “we”, “us”, and “our” refer to Helix TCS, Inc.

Overview

Helix’s mission is to provide clients with the most powerful and cutting-edge integrated operating environments in the market, helping them to better manage and mitigate risk while they focus on their core business. We aim to accomplish these goals through a unique combination of business, logistics, risk-management, and investment skills, delivered through a proprietary software suite and partnership platform.

Our team is composed of former military, law enforcement, and technology professionals with deep experience in security and law enforcement, intelligence, technology design and development, partner relations, data aggregation, venture capital, private equity, risk-management, banking, and finance – a combination that we believe is truly unmatched in the Legal Cannabis Industry.

Technology is a cornerstone of Helix’s service offering. We offer clients the only true technology platform in the industry, geared towards allowing clients to manage inventory and supply costs through Cannabase, as well as bespoke monitoring and transport solutions. We focus on utilizing technology as an operations multiplier, bringing in and managing unique partnerships across the tech spectrum to help tailor desired outcomes for our clients.

Within the cannabis industry, no other activity carries as much potential for unforeseen negative impact as a lapse in compliance operations. Helix brings a broad range of compliance services to firms in the cannabis industry, safeguarding their ability to operate while increasing their access to services that offer them a competitive edge.

As our flagship service offering, we offer a high standard in security operations: transport, armed and unarmed guarding, training, investigation, and special services in the industry. From the training of our guard staff, to the sophistication and effectiveness of our literally, battle-tested protocols, to our responsiveness to client needs and suggestions, Helix delivers integrated operating environments that we believe are unmatched in the industry.

We have greatly enhanced our core operations with the recent acquisitions of Security Grade and BioTrack. Security Grade is a market leader in the security profession and provides a broad range of services, from security consulting to installation of surveillance technology. Consistent with our team of professionals, Security Grade employs specialists with extensive experience and exposure to all areas of security related services. BioTrack specializes in providing cannabis software services, ranging from monitoring of plant inventory to point-of-sale solutions. We believe these strategic acquisitions will help field the growing demand in the Legal Cannabis Industry.

33

Results of Operations for the three months ended June 30, 2018 and 2017

The following table shows our results of operations for the three months ended June 30, 2018 and 2017. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	For the Three Months Ended June 30,						Change
	2018			2017			Dollars			Percentage
Revenue	$	2,212,479		$	1,015,662		$	1,196,817			118	%
Cost of revenue		1,560,387			768,132			792,255			103	%
Gross margin		652,092			247,530			404,562			163	%
Operating expenses		3,215,688			656,989			2,558,699			389	%
Loss from operations		(2,563,596	)		(409,459	)		(2,154,137	)		526	%
Other income (expense), net		735,248			(2,015,541	)		2,750,789			-136	%
Net loss	$	(1,828,348	)	$	(2,425,000	)	$	596,652			-25	%
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		(7,203,689	)		(3,155,887	)		(4,047,802	)		128	%
Net loss attributable to common shareholders	$	(9,032,037	)	$	(5,580,887	)	$	(3,451,150	)		62	%

Revenue

Total revenue for the three-month period ended June 30, 2018 was $2,212,479, which represented an increase of $1,196,817 compared to total revenue of $1,015,662 for the three months ended June 30, 2017. The increase primarily resulted from increased revenue from security and guarding, and new revenue streams of systems installation and software.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2018 and 2017 primarily consisted of hourly compensation for security personnel. Cost of revenues increased by $792,255 for the three months ended June 30, 2018, to $1,560,387 as compared to $768,132 for the three months ended June 30, 2017. The increase primarily resulted from an increase in security personnel associated with higher revenue, as well as the acquisition of BioTrack.

Operating Expenses

Our operating expenses encompass selling, general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Our operating expenses during the three months ended June 30, 2018 and 2017 were $3,215,688 and $656,989 respectively. The overall $2,558,699 increase in operating expenses was attributable to the following increases in operating expenses of:

● General and administrative expenses – $325,150;

● Salaries and wages – $1,429,313;

● Professional and legal fees – $16,644; and

● Depreciation and amortization – $787,592.

34

The $325,150 increase in general and administrative expenses is a result of increases in rent expense, advertising and travel expenses resulting from an expansion in our operations. The $1,429,313 increase in salaries and wages resulted from an increase in headcount, including BioTrack personnel and an increase in share-based compensation. The $16,644 increase in professional and legal fees primarily resulted from an increase in legal fees and costs associated with fundraising. The $787,592 increase in depreciation and amortization was due to amortization of intangible assets acquired in the BioTrack acquisition.

Other income (expense)

Net other income (expense) consisted of gains on the change in the fair value of convertible note, change in fair value of warrant obligations, gain on reduction of obligation pursuant to acquisition, and interest expense. Net other income (expense) during the three months ended June 30, 2018 and 2017 was $735,248 and $(2,015,541), respectively. The $2,750,789 increase in other income (expense) was primarily attributable to a gain on the change in fair value of convertible notes of $120,630, gain on the change in the fair value of warrant obligations of $321,161, gain on the change in fair value associated with an obligation pursuant to acquisition of $290,441, an exclusion of a loss on an induced conversion in the current period and interest expense of $3,016 recognized in the three months ended June 30, 2018.

Net loss

For the foregoing reasons, we had a net loss of $1,828,348 for the three months ended June 30, 2018, or $0.04 net loss per common share, basic and diluted, respectively compared to a net loss of $2,425,000 for the three months ended June 30, 2017, or $0.08 net loss per common share, basic and diluted.

Convertible preferred stock beneficial conversion feature accreted as a deemed dividend

The convertible preferred stock beneficial conversion feature accreted as a deemed dividend resulted from the effective conversion price of the Series B preferred shares at issuance being less than the fair value of the common stock into which the preferred shares are convertible. The result was a non-cash charge in the amount of $7,203,689 for the three months ended June 30, 2018 compared to $3,155,887 for the three months ended June 30, 2017.

Net Loss Attributable to common shareholders

For the foregoing reasons, we had a net loss attributable to common shareholders of $9,032,037 for the three months ended June 30, 2018, or $0.21 net loss per share attributable to common shareholders - basic and diluted, compared to net loss attributable to common shareholders of $5,580,887 for the three months ended June 30, 2017, or $0.20 net loss per share attributable to common shareholders – basic and diluted.

35

Results of Operations for the six months ended June 30, 2018 and 2017

The following table shows our results of operations for the six months ended June 30, 2018 and 2017. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	For the Six Months Ended June 30,						Change
	2018			2017			Dollars			Percentage
Revenue	$	3,340,817		$	1,707,399		$	1,633,418			96	%
Cost of revenue		2,351,092			1,378,335			972,757			71	%
Gross margin		989,725			329,064			660,661			201	%
Operating expenses		5,248,550			1,147,038			4,101,512			358	%
Loss from operations		(4,258,825	)		(817,974	)		(3,440,851	)		421	%
Other income (expense), net		1,991,800			(7,074,696	)		9,066,496			-128	%
Net loss	$	(2,267,025	)	$	(7,892,670	)	$	5,625,645			-71	%
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		(22,202,194	)		(3,155,887	)		(19,046,307	)		604	%
Net loss attributable to common shareholders	$	(24,469,219	)	$	(11,048,557	)	$	(13,420,662	)		121	%

Revenue

Total revenue for the six-month period ended June 30, 2018 was $3,340,817, which represented an increase of $1,633,418 compared to total revenue of $1,707,399 for the six months ended June 30, 2017. The increase primarily resulted from increased revenue from security and guarding, and new revenue streams of systems installation and software.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2018 and 2017 primarily consisted of hourly compensation for security personnel. Cost of revenues increased by $972,757 for the six months ended June 30, 2018, to $2,351,092 as compared to $1,378,335 for the six months ended June 30, 2017. The increase primarily resulted from an increase in security personnel associated with higher revenue, as well as the acquisition of BioTrack.

Operating Expenses

Our operating expenses encompass selling, general and administrative expenses, salaries and wages, professional and legal fees, and depreciation and amortization. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Our operating expenses during the six months ended June 30, 2018 and 2017 were $5,248,550 and $1,147,038 respectively. The overall $4,101,512 increase in operating expenses was attributable to the following increases in operating expenses of:

● General and administrative expenses – $495,049;

● Salaries and wages – $2,133,901;

● Professional and legal fees – $507,694; and

● Depreciation and amortization – $964,868.

36

The $495,049 increase in general and administrative expenses is a result of increases in rent expense, advertising and travel expenses resulting from an expansion in our operations. The $2,133,901 increase in salaries and wages resulted from an increase in headcount, including BioTrack personnel and an increase in share-based compensation. The $507,694 increase in professional and legal fees primarily resulted from an increase in legal fees and costs associated with fundraising. The $964,868 increase in depreciation and amortization was due to amortization of intangible assets acquired in the BioTrack acquisition.

Other income (expense)

Net other income (expense) consisted of gains on the change in the fair value of convertible note, change in fair value of warrant obligations, change in the fair value of note payable – related party, loss on impairment of goodwill, gain on reduction of obligation pursuant to acquisition, and interest expense. Net other income (expense) during the six months ended June 30, 2018 and 2017 was $1,991,800 and $(7,074,696), respectively. The $9,066,496 increase in other income (expense) was primarily attributable to a gain on the change in fair value of convertible notes of $697,646, a gain on the change in fair value of convertible note – related party of $118,506, gain on the change in the fair value of warrant obligations of $1,297,840, loss on impairment of goodwill of $(664,329), gain on the reduction of obligation pursuant to acquisition of $557,054, and interest expense of $14,917. In addition, no loss on extinguishment of debt or induced conversion of convertible note was recognized compared to $(1,503,876) and $(4,611,395) recognized in the six months ended June 30, 2017.

Net loss

For the foregoing reasons, we had a net loss of $2,267,025 for the six months ended June 30, 2018, or $0.06 net loss per common share, basic and diluted, respectively compared to a net loss of $7,892,670 for the six months ended June 30, 2017, or $0.28 net loss per common share, basic and diluted. 

Convertible preferred stock beneficial conversion feature accreted as a deemed dividend

The convertible preferred stock beneficial conversion feature accreted as a deemed dividend resulted from the effective conversion price of the Series B preferred shares at issuance being less than the fair value of the common stock into which the preferred shares are convertible. The result was a non-cash charge in the amount of $22,202,194 for the six months ended June 30, 2018 compared to $3,155,887 for the six months ended June 30, 2017.

Net Loss Attributable to common shareholders

For the foregoing reasons, we had a net loss attributable to common shareholders of $24,469,219 for the six months ended June 30, 2018, or $0.68 net loss per share attributable to common shareholders - basic and diluted, compared to net loss attributable to common shareholders of $11,048,557 for the six months ended June 30, 2017, or $0.39 net loss per share attributable to common shareholders – basic and diluted.

Liquidity, Capital Resources and Cash Flows

Going Concern

Management believes that we will continue to incur losses for the immediate future. Therefore, we may either need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern. For the six months ended June 30, 2018, we have generated revenue and are trying to achieve positive cash flows from operations.

37

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

As of June 30, 2018, we had a cash balance of $444,527, net accounts receivable of $1,092,095 and $3,157,323 in current liabilities. At the current cash consumption rate, we may need to consider additional funding sources toward the end of fiscal 2018. We are taking proactive measures to reduce operating expenses, drive growth in revenue and expeditiously resolve any remaining legal matters.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.

The condensed consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

Capital Resources 

The following table summarizes total current assets, liabilities and working capital deficit for the periods indicated: 

	June 30, 2018			December 31, 2017			Change
Current assets	$	1,545,899		$	1,519,714		$	26,185
Current liabilities		3,157,323			4,808,995			(1,651,672	)
Working capital deficit	$	(1,611,424	)	$	(3,289,281	)	$	1,677,857

As of June 30, 2018, and December 31, 2017, we had a cash balance of $444,527 and $868,554, respectively.

38

Summary of Cash Flows.

	For the Six Months Ended June 30,
	2018			2017
Net cash used in operating activities	$	(1,969,434	)	$	(815,996	)
Net cash provided by (used in) investing activities		321,162			(855,549	)
Net cash provided by financing activities		1,224,245			2,126,701

Net cash used in operating activities. Net cash used in operating activities for the six months ended June 30, 2018 was $(1,969,434). This included a net loss of $(2,267,025), non-cash charge related to depreciation and amortization of $681,472, non-cash charge related to share-based compensation of $1,562,025, non-cash losses due to changes in fair value of convertible notes, fair value of warrant obligations, and fair value of a related party note of $(697,647), $(1,297,840), and $(118,505), respectively, non-cash charge from loss on impairment of goodwill of $664,329, non-cash gain on reduction of obligation pursuant to acquisition of $(290,441), and changes in accounts receivable, deposits, costs in excess of billings, billings in excess of costs, deferred rent, and accounts payable and accrued expenses of $(320,955). Net cash used in operating activities for the six months ended June 30, 2017 was $815,996. This included a net loss of $(7,892,670), non-cash charge related to depreciation and amortization of $98,410, non-cash loss of $353,000 regarding the change in fair value of convertible notes, non-cash gain of $(43,696) regarding the fair value of convertible notes – related party, non-cash gain of $(35,264) regarding the change in fair value of contingent consideration, non-cash loss on beneficial conversion feature of $390,666, non-cash loss on extinguishment of debt of $4,611,395, non-cash loss on induced conversion of convertible note of $1,503,876, non-cash loss on the change in fair value of warrants to be issued of $124,791 and changes in accounts receivable, deposits, accounts payable, accrued expenses and deferred rent of $111,591.

Net cash provided by (used in) investing activities. Net cash provided by investing activities for the six months ended June 30, 2018 was $321,162, which consisted of capital expenditures of $(103,032), cash payment pursuant to the Revolutionary asset acquisition of $(24,503), and cash acquired as part of the BioTrack business combination in the amount of $448,697.  Net cash used in investing activities for the six months ended June 30, 2017 was $855,549, which consisted of capital expenditures of $(22,814), cash payments pursuant to the Revolutionary asset acquisition of $(46,872) and cash payment pursuant to the Security Grade business acquisition of $(785,863).

Net cash provided by financing activities. Net cash provided by financing activities for the six months ended June 30, 2018 was $1,224,245, which resulted from proceeds from the issuance of common stock of $1,250,000, proceeds from notes payable of $33,745, and repayment of advances from related parties of $(59,500).  Net cash provided by financing activities for the six months ended June 30, 2017 was $2,126,701, which resulted from proceeds from the issuance of convertible notes payable of $229,167, proceeds of $255,000 from the issuance of promissory notes and advances from shareholders of $60,500, proceeds from the issuance of common stock of $100,000, proceeds from the issuance of Series B convertible preferred stock of $1,517,500, payments pursuant to advances from related parties of $32,000 and payments pursuant to notes payable of $3,466. 

Off-Balance Sheet Arrangements

None. 

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K/A for the year ended December 31, 2017 filed with the SEC on April 4, 2018.

39

Related Party Transactions

The Company has an additional loan outstanding from a Company executive. The advance does not accrue interest and has no definite repayment terms. The loan balance was $65,250 and $124,750 as of June 30, 2018 and December 31, 2017, respectively.

On March 11, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Five”) with Paul Hodges, a Director of the Company (the “Related Party Holder”). The Related Party Holder provided the Company with $150,000 in cash, and the Company promised to pay the principal amount, together with interest at an annual rate of 7%, with principal and accrued interest on Note Five due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note Five was convertible at the election of the Related Party Holder, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. The Company evaluated Note Five in accordance with ASC 480, Distinguishing Liabilities from Equity and determined that Note Five will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings.

On February 20, 2018, Helix TCS, Inc. (the “Company”) entered into an agreement to amend the Convertible Promissory Note (this “Amendment”) with the Related Party Holder initially issued to such Holder and dated March 2016 (the “Note”). The Company and Holder desire to extend the maturity date of the Note to August 20, 2018.

The Note is hereby amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of this Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of this Amendment. The principal amount of the note will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on this Note shall be due and payable on August 20, 2018 (the “Maturity Date”). All provisions related to conversion of the Note into equity securities of the Company were terminated as part of this Amendment.

As of February 20, 2018, the fair value of the liability was $239,343; however, due to termination of the conversion of the note into equity securities, Note Five will be valued in its principal amount of $125,000 and accordingly the Company recorded a credit regarding the change in fair value of $0 and charge of $43,696 for the three months ended June 30, 2018 and 2017, respectively, and $118,506 and $56,107 for the six months ended June 30, 2018 and 2017, respectively. The interest expense associated with Note Five was $0 and $2,618 for the three months ended June 30, 2018 and 2017, respectively, and $2,402 and $5,178 for the six months ended June 30, 2018 and 2017, respectively.

40

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

ITEM 4. Controls and Procedures 

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer (who is our Principal Financial Officer), to allow timely decisions regarding required disclosures. Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or procedures will prevent all error and all fraud. 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. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control problems or acts of fraud, if any, within the Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2018, our disclosure controls and procedures were effective.

Management’s Report on Internal Controls Over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our internal controls and procedures as of June 30, 2018, the end of the interim period covered by this report established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. The evaluation of our internal controls and procedures included a review of the internal controls’ and procedures’ objectives, design, implementation and the effect of the controls and procedures on the information generated for use in this report. 

In the course of our evaluation, we sought to identify errors, control problems or acts of fraud and to confirm the appropriate corrective actions, including process improvements, were being undertaken. Based on that evaluation, management, including our Chief Executive Office and Chief Financial Officer, concluded that the Company did not maintain effective internal control over financial reporting as of the six months ended June 30, 2018 due to the continuing existence of material weaknesses in the internal control over financial reporting described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

41

Management has determined that we did not maintain effective internal controls over financial reporting as of June 30, 2018 due to the existence of the following material weaknesses identified by management:

● The Company did not maintain effective controls over certain aspects of the financial reporting process because we lacked personnel with accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements.

● Inadequate segregation of duties.

We expect to be materially dependent on a third party that can provide us with accounting consulting services for the foreseeable future. We believe that we are in the process of addressing the deficiencies that affected our internal control over financial reporting and we are developing specific action plans for each of the above material weaknesses. Because the remedial actions require hiring of additional personnel, upgrading certain of our information technology systems and relying extensively on manual review and approval, the successful operation of these controls for at least several quarters may be required before management may be able to conclude that the material weaknesses have been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations.

Changes in internal control over financial reporting

During the six months ended June 30, 2018, there was no change in our internal control over financial reporting or in other factors that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

42

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

Occasionally, we may be involved in claims and legal proceedings arising from the ordinary course of our business. We record a provision for a liability when we believe that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on our consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

There is currently no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self- regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material effect on the Company, with the exception of:

Baker, et al. v. Helix TCS, Inc.

On March 8, 2017, two former employees filed a lawsuit in the United States District Court for the District of Colorado alleging violations of the Fair Labor Standards Act and the Colorado Wage Act on behalf of themselves and other employees. The plaintiffs seek damages for our alleged failure to compensate them appropriately for the overtime hours they worked as purported “non-exempt” employees. On April 3, 2017, we moved to dismiss the complaint. As of June 30, 2018, the claim is currently in the process of discovery.

Kenney, et al. v. Helix TCS, Inc.

On July 20, 2017 one former employee filed a lawsuit in the United States District Court for the District of Colorado alleging violations of the Fair Labor Standards Act on behalf of themselves and other employees. The plaintiffs seek damages for our alleged failure to compensate them appropriately for the overtime hours they worked as purported “non-exempt” employees.

At this time, the Company is not able to predict the outcome of the lawsuit, any possible loss or possible range of loss associated with the lawsuit or any potential effect on the Company’s business, results of operations or financial condition. However, the Company believes the lawsuit is wholly without merit and will defend itself from these claims vigorously.

Helix TCS, Inc. v. Beckett, et al.

On March 6, 2018 the Company filed a lawsuit in the District Court for the city and county of Denver alleging violations in previously disclosed representations and warranties by the plaintiff as part of the Security Grade acquisition. Following the appointment of a registered Pubic Company Accounting Oversight Board (“PCAOB”) auditor, certain financial misrepresentations, including undisclosed liabilities, the overstatement of revenues, and the misclassification of certain revenues as being recurring, were discovered, ultimately artificially inflating the price of the membership interests in Security Grade.

At this time, the Company has entered a declaration surrounding their right of setoff against one or more of the sellers pursuant in the terms of the Master Interest Purchase Agreement. The Company cannot currently predict the outcome of the lawsuit. 

ITEM 1A. Risk Factors

Smaller reporting companies such as us are not required to provide the information required by this item.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities for the quarter ended June 30, 2018 that were not otherwise disclosed or required to be reported on a Current Report on Form 8-K.

ITEM 3. Defaults upon Senior Securities

None.

ITEM 4. Mine Safety Disclosure

Not applicable.

ITEM 5. Other Information

None. 

43

ITEM 6. Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger by and among Helix TCS, Inc., Helix Acquisition Sub, Inc., Bio-Tech Medical Software, Inc. and Terence J. Ferraro, as the Securityholder Representative, dated March 3, 2018 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on June 5, 2018).
10.32	Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.32 of the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on June 5, 2018).
10.33	Pledge and Security Agreement dated February 1, 2018 by RSF5, LLC and Helix TCS, Inc. for the benefit of BTC Investment LLC.*
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32.1	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase *
101.DEF	XBRL Taxonomy Extension Definition Linkbase *
101.LAB	XBRL Taxonomy Extension Label Linkbase *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase *

* Filed herewith 

44

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, thereunto duly authorized.

Date: August 14, 2018	By:	/s/ Zachary L. Venegas
		Zachary L. Venegas
		Chief Executive Officer (Principal Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Zachary L. Venegas	Chief Executive Officer	August 14, 2018
Zachary L. Venegas	(Principal Executive Officer)
/s/ Paul Hodges	Director	August 14, 2018
Paul Hodges
/s/ Scott Ogur	Chief Financial Officer	August 14, 2018
Scott Ogur	(Principal Financial Officer)

45

EX-10.33

Exhibit 10.33

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (the “Agreement”) is made and entered as of the 1^st day of February, 2018 (the “Effective Date”) by RSF5, LLC, a Delaware limited liability company (“Grantor”) and Helix TCS, Inc. (“Helix”), for the benefit of BTC Investment LLC (f/k/a Greenfield Capital, LLC), a Delaware limited liability company (“Secured Party”).

W I T N E S S E T H:

WHEREAS, Secured Party has agreed to loan Grantor One Million Seven Hundred Fifty Thousand and No/100 Dollars ($1,750,000.00) pursuant to that certain Secured Promissory Note dated of even date herewith (together with any extensions, modifications, replacements or renewals thereof, in whole or in part, the “Note”; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Note); and

WHEREAS, as a condition to Secured Party providing financing to Grantor, Secured Party is requiring that Grantor pledge certain assets to Secured Party as security for the obligations under the Note; and

WHEREAS, Grantor acknowledges that it will benefit from the financing provided by Secured Party pursuant to the Note and desires to induce Secured Party to make such financing available to Grantor by executing this Agreement.

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

A. PLEDGE OF COLLATERAL

1. Pledge. Grantor hereby grants Secured Party a security interest in the following (collectively, the “Collateral”): Fifty Thousand shares of the Series A Preferred Stock (the “Preferred Shares”) of Bio-Tech Medical Software, Inc., a Florida corporation (the “Company”), which represents 7.55% of the total issued and outstanding Series A Preferred Stock of the Company, on a fully diluted basis, and if the Preferred Shares shall be converted into any other class of stock at the Company or into any other capital stock of any other Person, a number of shares equal to the value of all amounts due and owing to Secured Party under the Note and this Pledge Agreement, and any and all certificates representing the same (collectively, the “Pledged Interests”), and any and all proceeds and products of the foregoing. Grantor from time to time shall execute all such documents (including without limitation, assigning and delivering to Secured Party stock certificates representing the Collateral, along with stock powers duly executed in blank with respect to the Collateral, and take all such other actions as Secured Party may reasonably request from time to time to perfect, confirm and/or evidence the security interest granted hereby as a perfected security interest. Grantor authorizes Secured Party to file such financing statements, amendments, and continuation statements covering the Collateral and containing such collateral descriptions as Secured Party shall deem necessary to perfect or to maintain the perfection of Secured Party’s security interest. Grantor agrees to pay all taxes, fees and costs (including reasonable attorneys’ fees) paid or incurred by Secured Party in connection with the preparation, filing or recordation thereof.

2. Voting; Distributions.

a. Voting. So long as no Event of Default under the Note shall have occurred and be continuing, Grantor shall have the sole right to exercise any voting and consensual rights with respect to any Collateral on all matters, and to grant any consents and exercise all other rights as owner or holder of said Collateral. Upon the occurrence and during the continuance of an Event of Default, Secured Party shall be entitled, in addition to any other rights herein contained, to exercise, in Secured Party’s judgment, any voting and consensual rights with respect to any Collateral on all matters and to grant any consents and exercise all other rights as owner or holder of said Collateral.

Notwithstanding the foregoing and so long as no Event of Default under the Note has occurred and is continuing, other than in connection with (A) a Deemed Merger Event that does not result in an Event of Default or (B) an equity financing that values the Company at $40,000,000 or more on a post-money basis, Grantor shall not, for so long as any indebtedness under the Note is due and owing to Secured Party by Grantor, without the prior written consent of the Secured Party: (i) convert the Pledged Interests into common stock of the Company or otherwise cause, or permit the Company to take any action that would convert the Pledged Interests into common stock of the Company; or (ii) cause or permit the Company to, (A) issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional capital stock or other equity interests in the Company that would dilute the Pledged Interests other than granting options to employees to purchase shares of the Company’s common stock pursuant to equity compensation plans in the ordinary course of business or (B) amend, modify or otherwise alter the Articles of Incorporation of the Company in a manner that would adversely affect the Pledged Interests.

Upon the occurrence and continuance of an Event of Default under the Note and at Secured Party’s written request, Grantor shall execute and deliver to Secured Party irrevocable proxies with respect to the Collateral in form satisfactory to Secured Party, but no such additional proxy shall be necessary for Secured Party to exercise the voting rights described above. Noteholder shall have no duty to exercise any of the foregoing rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing.

b. Distributions. So long as no Event of Default under the Note shall have occurred and be continuing, Grantor shall have the sole right to receive all interest, dividends or distributions arising from the Collateral. Upon the occurrence and during the continuance of an Event of Default and upon notice thereof to the Grantor, (i) Grantor’s right to receive such interest, dividends and distributions shall immediately and automatically terminate, with no further notice to Grantor, unless and until reinstated in writing by Secured Party, and (ii) Secured Party shall have the right, in addition to any other rights herein contained, to receive all interest, dividends and distributions and apply such amounts to the Grantor’s obligations under the Note in the manner determined by Secured Party and in accordance with this Agreement. Any portions of the Collateral received by Grantor in violation of this Agreement shall remain subject to Secured Party’s security interest and lien hereunder, shall be immediately delivered to Secured Party in the same form as received except for any necessary endorsements, and pending such delivery shall be held in trust for Secured Party by Grantor and kept separate from Grantor’s other assets.

3. Representations. Grantor is the legal and beneficial owner of, and has good and marketable title to, and has full right and authority to pledge and assign the Collateral, free and clear of all liens or other charges or encumbrances. Grantor shall keep the Collateral free from any liens, encumbrances and security interests (except those created by this Agreement, the Company’s Amended and Restated Shareholders’ Agreement as currently in effect and the Voting Agreement of even date herewith executed by Grantor) and shall pay and discharge when due all taxes, levies and other charges upon the Collateral and shall defend the Collateral against all claims and legal proceedings claiming any interest therein adverse to Secured Party or Grantor by Persons other than Secured Party.

2

4. Action Upon an Event of Default. In addition to its rights and remedies provided hereunder, whenever an Event of Default under the Note shall have occurred and be continuing, Secured Party shall have all rights and remedies of a secured party upon default under the Uniform Commercial Code or other applicable law. Without limiting the foregoing, Secured Party shall have the right, at any time and from time to time following the occurrence and during the continuance of an Event of Default, to sell, resell, assign and deliver, in Secured Party’s discretion, all or any of the Collateral, in one or more transactions at the same or different times, and any right, title, interest, claim and/or demand therein or right of redemption thereof, on any securities exchange on which the Collateral or any of it may be listed or at public or private sale, for cash or upon credit for future delivery, and in connection therewith Secured Party may grant options, Grantor hereby waiving and releasing any and all equity or right of redemption after an Event of Default has occurred. If any of the Collateral is sold by Secured Party upon credit for future delivery, Secured Party shall not be liable for any failure of the purchaser to purchase or pay for the same and, in the event of any such failure, Secured Party may resell such Collateral. In no event shall Grantor be credited with any part of the proceeds of sale of any Collateral until cash payment of such sale has actually been received by Secured Party.

5. Sale of Collateral. Secured Party shall give Grantor at least ten (10) days prior written notice of the time and place of any sale or other disposition to be made pursuant to Section 4 above, which notice Grantor agrees is reasonable. Secured Party shall not be obligated to make any sale of Collateral if Secured Party shall determine not to do so, regardless of the fact that notice of sale may have been given. Upon each private sale of Collateral of a type customarily sold in a recognized market and upon each public sale, Secured Party or any holder of the Note, may purchase all or any of the Collateral being sold, free from any equity or right of redemption, which is hereby waived and released by Grantor, and may make payments therefor (by endorsement without recourse) in the Note, in lieu of cash, to the extent of the amount then due thereon, which Grantor hereby agrees to accept.

6. Private Sale. Grantor recognizes that Secured Party may be unable to effect a public sale of all or a part of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended, as now or hereafter in effect, or in applicable blue sky or other state securities laws, as now or hereafter in effect, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Grantor agrees that private sales so made may be at prices and other terms less favorable than if such Collateral were sold at public sales, and that Secured Party has no obligation to delay sale of any such Collateral for the period of time necessary to permit the issuer of such Collateral to register such Collateral for public sale under such applicable securities laws. Grantor agrees that private sales made in compliance with this Agreement shall be deemed to have been made in a commercially reasonable manner.

7. Helix Note. Notwithstanding anything herein to the contrary, upon an Event of Default, Secured Party may, at its sole option and in lieu of exercising any of its rights hereunder with respect to the Pledged Interests, exchange the Note for a new promissory note executed and delivered by Helix to Secured Party (the “Helix Note”). The Helix Note shall (i) bear interest at nine percent (9%) per annum, (ii) be secured by a second-priority security interest in all of the assets of Helix, such priority being second only to RedDiamond Partners, LLC, which represents the only outstanding security interest on the assets of Helix as of the date hereof, (iii) be payable in full within nine (9) months following execution thereof and (iv) have a principal amount equal to all amounts due and owing by Grantor to Secured Party at the time of execution, including, without limitation, any costs of collection incurred by Secured Party in connection with the Event of Default. If, in Secured Party’s sole discretion, Secured Party desires to exercise its rights under this Section A.7, Secured Party shall give written notice to Grantor and Helix in accordance with Section B.11. Helix acknowledges and agrees that should Secured Party, in Secured Party’s sole discretion, desire to execute its rights under this Section A.7, Helix will issue the Helix Note to Secured Party and will pay the Helix Note to Secured Party in accordance with the terms of the Helix Note. Upon Secured Party’s receipt of the Helix Note, (a) Grantor will sell and transfer to Helix the Pledged Interests for an aggregate purchase price of $50.00 and (b) all of Secured Party’s rights with respect to the Pledged Interests, whether pursuant to this Agreement or otherwise, shall terminate.

8. Cumulative Remedies. The remedies provided herein in favor of Secured Party shall not be deemed exclusive, but shall be cumulative, and shall be in addition to all other remedies in favor of Secured Party under the Loan Documents or existing at law or in equity.

3

9. Power of Attorney to Execute. Upon and during the continuance of an Event of Default, Secured Party shall have the right, for and in the name, place and stead of Grantor, to execute such endorsements, assignments or other documents or instruments, including instruments or agreements exercising its voting and consensual rights hereunder and instruments of conveyance or transfer with respect to all or any of the Collateral as may be reasonably necessary in order to assure its rights hereunder. Without limiting the generality of the foregoing, upon and during the continuance of an Event of Default, Secured Party shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to Grantor representing any interest, dividend or other distribution payable in respect of the Collateral that Secured Party is entitled to receive hereunder or any part thereof and to give full discharge for the same. Such rights shall be subject to the limitations and restrictions set forth in this Agreement. This power of attorney is a power coupled with an interest and shall be irrevocable for so long as any of Grantor’s obligations under the Note remain outstanding.

10. Application of Proceeds. All cash proceeds received by Secured Party pursuant to any sale of, collection from, or other realization upon, all or any part of the Collateral may, in the discretion of Secured Party, be held by Secured Party as additional Collateral security for, or then or at any time thereafter be applied in whole or in part by Secured Party against, all or any part of the amounts due under the Note in the following order:

(a) First, to expenses payable by Grantor pursuant to Section 11 hereof or otherwise under any of the Loan Documents;

(b) Second, to the unpaid interest (including post-petition interest to the extent the Secured Party is entitled thereto) accrued and then due or owing on the Note;

(c) Third, on account of all principal of the Note then due or owing; and

(d) Fourth, to any other amounts under the Note or the other Loan Documents then due or owing.

Any surplus of such cash or cash proceeds held by Secured Party and remaining after payment in full of the Note shall be paid over to Grantor or to whomsoever may be lawfully entitled to receive such surplus, and Grantor shall be liable for any deficiency.

11. Indemnity and Expenses. Grantor hereby agrees to indemnify and hold harmless Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including enforcement of this Agreement), except claims, losses or liabilities resulting from Secured Party’s gross negligence, willful misconduct or breach of this Agreement. Upon demand, Grantor will pay, or cause to be paid, to Secured Party the amount of any and all reasonable expenses, including but not limited to reasonable fees and disbursements of its counsel and of any experts and agents, which Secured Party may incur in connection with the administration of this Agreement, the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, the exercise or enforcement of any of the rights of Secured Party hereunder, and the failure by Grantor to perform or observe any of the provisions hereof.

12. No Duty on Secured Party. The powers conferred on Secured Party hereunder are solely to protect Secured Party’s interest in the Collateral and shall not impose any duty to exercise any such powers. Except for the safe custody of any Collateral in Secured Party’s possession and the accounting for monies actually received by Secured Party hereunder, Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Nothing contained in this Agreement shall be construed or interpreted to transfer to Secured Party any obligations of a shareholder of the Company or cause the Secured Party to be deemed a shareholder of the Company prior to Secured Party’s express exercise of its rights to become such. To the extent permitted by applicable law, Grantor waives all claims, damages and demands against Secured Party arising out of the lawful sale or disposition of the Collateral in accordance with the terms hereof.

4

B. MISCELLANEOUS

1. Term. The pledge made by Grantor hereunder shall serve as security for the performance of all the covenants and conditions of Grantor under the Note and the Loan Documents until Grantor has satisfied or discharged its obligations under the Note and the Loan Documents.

2. Further Assurances. Grantor shall do, make, execute and deliver all such additional and further acts, things, deeds, assurances, instruments and documents as Secured Party may request to perfect, preserve and protect the Secured Party’s rights hereunder or in any of the Collateral, including, without limitation, placing legends on Collateral or on books and records pertaining to Collateral stating that Secured Party has a security interest therein and/or executing one or more control agreements.

3. Performance or Termination of Obligations. Upon the discharge of Grantor’s obligations under the Note and the Loan Documents, Secured Party shall release, transfer and deliver to Grantor all the Collateral and all rights received by Secured Party hereunder, and the security interest granted hereby shall be deemed rescinded and terminated.

4. No Waiver. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default.

5. Governing Law. This Agreement, its construction and the determination of any rights, duties or remedies of the parties arising out of or relating to this Agreement, shall be governed by and construed under and in accordance with the laws of the State of Delaware without respect to any conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

6. Inurement. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, executors, administrators, successors or permitted assigns.

7. Entire Agreement. This Agreement, together with the Loan Documents, represent the entire agreement of the parties, and may not be modified or terminated except by written agreement executed by all of the parties.

8. Assignment. This Agreement shall not be assigned by any party hereto without the written consent of Secured Party. Secured Party may assign its rights hereunder to assignees, or to participants in the Note in accordance with the Loan Documents. This Agreement shall be binding on, and inure to the benefit of, the parties to it and their respective legal representatives, successors and permitted assigns.

9. Rights and Waivers. No failure or delay on the part of Secured Party in exercising any right, power or privilege under this Agreement or any applicable law shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver or modification of any right, power or privilege of Secured Party or of any obligation of Grantor shall be effective unless such waiver or modification is in writing, and signed by Secured Party and then only to the extent set forth therein. A waiver by Secured Party of any right, power, or privilege hereunder on any one occasion shall not be construed as a bar to, or waiver of, the exercise of any such right, power or privilege which Secured Party otherwise would have on any subsequent occasion.

5

10. Counterparts; Facsimile. This Agreement may be executed in any number of counterparts (by facsimile, portable document format (pdf) or original) and by different parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument.

11. Notices. Any notice required or permitted to be delivered hereunder shall be in writing and shall be deemed to have been delivered when hand delivered, one (1) day after being sent by overnight courier or five (5) days after having been deposited in the United States mail, postage prepaid, certified, return receipt requested, addressed to the parties at the addresses set forth below, or to such other address as either party hereto shall from time to time designate to the other party by written notice.

If to Secured Party:	BTC Investment LLC
	c/o Brooks Pierce McLendon Humphrey & Leonard, LLP
	230 N. Elm Street, Suite 2000
	Greensboro, North Carolina 27401
	Attn: Susan Young
If to Grantor or Helix:	RSF5, LLC
	c/o Helix TCS, Inc.
	5300 Parkway, Suite 300
	Denver, CO 80111
	Attention:  CEO.

[Signatures on following page]

6

IN WITNESS WHEREOF, Grantor has executed this Agreement effective the day and year first above written.

RSF5, LLC
By:	/s/ Jonathan Rosenthal
Name:	Jonathan Rosenthal
Title:	Authorized Person
By:	/s/ Andrew Schweibold
Name:	Andrew Schweibold
Title:	Authorized Person

HELIX TCS, INC.
By:	/s/ Scott Ogur
Name:	Scott Ogur
Title:	Chief Financial Officer

Acknowledged and Agreed:

BTC INVESTMENT LLC

By: BTNF GP, LLC, Manager

By:	/s/ Andrew Oshay
Name:	Andrew Oshay
Title:	Manager

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Zachary L. Venegas, certify that:

1.    I have reviewed this Quarterly report on Form 10-Q of Helix TCS, 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 for the period in which this quarterly 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;

 5.    The registrant’s other certifying officer 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 14, 2018	By:	/s/ Zachary L. Venegas
		Zachary L. Venegas Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Scott Ogur, certify that

1.    I have reviewed this Quarterly report on Form 10-Q of Helix TCS, 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 for 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;

5.    The registrant’s other certifying officer 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 14, 2018	By:	/s/ Scott Ogur
		Scott Ogur Chief Financial Officer

EX-32.1

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 this Quarterly Report on Form 10-Q of Helix TCS, Inc. (the “Company”) for the period ended June 30, 2018 (the “Report”), as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Zachary L. Venegas, Chief Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and the results of operations of the Company for the periods covered by the Report.

Date: August 14, 2018	By:	/s/ Zachary L. Venegas
		Zachary L. Venegas
		Chief Executive Officer

EX-32.2

EXHIBIT 32.2

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 this Quarterly Report on Form 10-Q of Helix TCS, Inc. (the “Company”) for the period ended June 30, 2018 (the “Report”), as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Scott Ogur, Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and the results of operations of the Company for the periods covered by the Report.

Date: August 14, 2018	By:	/s/ Scott Ogur
		Scott Ogur
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 13, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	Helix TCS, Inc.
Entity Central Index Key	0001611277
Trading Symbol	HLIX
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		70,569,647

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash	$ 444,527	$ 868,554
Accounts receivable, net	1,092,095	610,313
Costs & earnings in excess of billings	9,277	40,847
Total current assets	1,545,899	1,519,714
Deposits and other assets	469,997	68,313
Property and equipment, net	250,025	110,634
Intangible assets, net	20,488,837	3,042,259
Goodwill	39,135,007	664,329
Total assets	61,889,765	5,405,249
Current liabilities:
Accounts payable and accrued liabilities	1,403,404	598,637
Advances from related parties	65,250	124,750
Billings in excess of costs & earnings	61,575	20,191
Deferred rent	3,590	9,667
Notes payable, current portion	7,869	11,179
Obligation pursuant to acquisition	244,159	559,103
Convertible notes payable, net of discount	114,746	812,393
Convertible note payable - related party	125,001	243,506
Obligation to issue warrants	1,131,729	2,429,569
Total current liabilities	3,157,323	4,808,995
Long-term liabilities:
Notes payable, net of current portion	90,348	53,293
Total long-term liabilities	90,348	53,293
Total liabilities	3,247,671	4,862,288
Shareholders' equity:
Common stock; par value $0.001; 200,000,000 shares authorized; 69,133,410 shares issued and outstanding as of June 30, 2018; 28,771,402 shares issued and outstanding as of December 31, 2017	69,134	28,771
Additional paid-in capital	79,066,909	18,741,114
Accumulated deficit	(20,508,733)	(18,241,708)
Total shareholders' equity	58,642,094	542,961
Total liabilities and shareholders' equity	61,889,765	5,405,249
Preferred stock (Class A)
Shareholders' equity:
Preferred stock value	1,000	1,000
Total shareholders' equity	1,000	1,000
Preferred stock (Class B)
Shareholders' equity:
Preferred stock value	13,784	13,784
Total shareholders' equity	$ 13,784	$ 13,784

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	69,133,410	28,771,402
Common stock, shares outstanding	69,133,410	28,771,402
Preferred stock (Class A)
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,000,000	3,000,000
Preferred stock, shares issued	1,000,000	1,000,000
Preferred stock, shares outstanding	1,000,000	1,000,000
Preferred stock (Class B)
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	17,000,000	17,000,000
Preferred stock, shares issued	13,784,201	13,784,201
Preferred stock, shares outstanding	13,784,201	13,784,201

XML

Condensed Consolidated 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]
Security and guarding	$ 1,535,638	$ 1,015,662	$ 2,629,412	$ 1,707,399
Systems installation	100,699		135,263
Software	576,142		576,142
Total revenues	2,212,479	1,015,662	3,340,817	1,707,399
Cost of revenue	1,560,387	768,132	2,351,092	1,378,335
Gross margin	652,092	247,530	989,725	329,064
Operating expenses:
Selling, general and administrative	527,999	202,849	875,879	380,830
Salaries and wages	1,554,519	125,206	2,420,839	286,938
Professional and legal fees	268,795	252,151	888,554	380,860
Depreciation and amortization	864,375	76,783	1,063,278	98,410
Total operating expenses	3,215,688	656,989	5,248,550	1,147,038
Loss from operations	(2,563,596)	(409,459)	(4,258,825)	(817,974)
Other income (expenses):
Change in fair value of convertible note	120,630	(353,000)	697,646	(353,000)
Change in fair value of convertible note - related party		56,107	118,506	43,696
Change in fair value of obligation to issue warrants	321,161	(124,791)	1,297,840	(124,791)
Change in fair value of contingent consideration		35,264		35,264
Loss on induced conversion of convertible note		(1,503,876)		(1,503,876)
Loss on extinguishment of debt				(4,611,395)
Loss on impairment of Goodwill			(664,329)
Gain on reduction of obligation pursuant to acquisition	290,441		557,054
Interest expense	3,016	(125,245)	(14,917)	(560,594)
Other income (expenses)	735,248	(2,015,541)	1,991,800	(7,074,696)
Net loss	(1,828,348)	(2,425,000)	(2,267,025)	(7,892,670)
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend	(7,203,689)	(3,155,887)	(22,202,194)	(3,155,887)
Net loss attributable to common shareholders	$ (9,032,037)	$ (5,580,887)	$ (24,469,219)	$ (11,048,557)
Net loss per share attributable to common shareholders:
Basic	$ (0.21)	$ (0.20)	$ (0.68)	$ (0.39)
Diluted	$ (0.21)	$ (0.20)	$ (0.68)	$ (0.39)
Weighted average common shares outstanding:
Basic	42,673,528	28,598,843	35,907,118	28,566,127
Diluted	42,673,528	28,598,843	35,907,118	28,566,127

XML

Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($)	Total	Preferred Stock (Class A)	Preferred Stock (Class B)	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Balance at Dec. 31, 2017	$ 542,961	$ 1,000	$ 13,784	$ 28,771	$ 18,741,114	$ (18,241,708)
Balance, Shares at Dec. 31, 2017		1,000,000	13,784,201	28,771,402
Beneficial conversion feature of Series B convertible preferred stock					22,202,194
Deemed dividend on conversion of Series B convertible preferred stock to common stock					(22,202,194)
Issuance of common stock per stock subscription agreements	1,319,999			$ 1,467	1,318,532
Issuance of common stock per stock subscription agreements, Shares				1,466,666
Issuance of common stock resulting from convertible note conversion	175,000			$ 206	174,794
Issuance of common stock resulting from convertible note conversion, Shares				205,974
Issuance of restricted common stock	452,979			$ 158	452,821
Issuance of restricted common stock, Shares				157,850
Reduction in Additional Paid-In Capital due to Security Grade acquisition settlement agreement	(300,840)				(300,840)
Restricted common stock issued as part of BioTrack acquisition	57,552,033			$ 38,185	57,513,848
Restricted common stock issued as part of BioTrack acquisition, Shares				38,184,985
Issuance of common stock to employees under Stock Incentive Plan	139,274			$ 84	139,190
Issuance of common stock to employees under Stock Incentive Plan, Shares				83,900
Issuance of common stock resulting from inducement of consulting agreement	84,500			$ 50	84,450
Issuance of common stock resulting from inducement of consulting agreement, Shares				50,000
Issuance of warrants pursuant to consulting agreement	943,000				943,000
Issuance of common stock resulting from exercise of stock options	213			$ 213
Issuance of common stock resulting from exercise of stock options, Shares				212,633
Net loss	(2,267,025)					(2,267,025)
Balance at Jun. 30, 2018	$ 58,642,094	$ 1,000	$ 13,784	$ 69,134	$ 79,066,909	$ (20,508,733)
Balance, Shares at Jun. 30, 2018		1,000,000	13,784,201	69,133,410

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,267,025)	$ (7,892,670)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,063,278	98,410
Amortization of debt discounts		185,087
Share-based compensation expense	1,562,025
Change in fair value of convertible notes	(697,647)	353,000
Change in fair value of obligation to issue warrants	(1,297,840)	124,791
Change in fair value of convertible notes - related party	(118,505)	(43,696)
Change in fair value of contingent consideration		(35,264)
Loss on induced conversion of convertible debt		1,503,876
Loss on extinguishment of debt		4,611,395
Loss on beneficial conversion feature of convertible note		390,666
Loss on impairment of goodwill	664,329
Gain on reduction of obligation pursuant to acquisition	(557,054)
Change in operating assets and liabilities:
Accounts receivable	(430,951)	(220,460)
Prepaid expenses
Deposits	(50,069)	(5,659)
Costs in excess of billings	31,570
Accounts payable and accrued expenses	93,148	113,005
Deferred rent	(6,077)	1,523
Billings in excess of costs	41,384
Net cash used in operating activities	(1,969,434)	(815,996)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(103,032)	(22,814)
Payments for business combination, net of cash acquired		(785,863)
Cash acquired from business combination	448,697
Payments for asset acquisition	(24,503)	(46,872)
Net cash provided by (used in) investing activities	321,162	(855,549)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of convertible notes payable		229,167
Proceeds from issuance of common stock pursuant to share purchase agreements
Advances from related parties	(59,500)	60,500
Repayment to related parties		(32,000)
Payments pursuant to notes payable		(3,466)
Proceeds from notes payable	33,745
Proceeds from the issuance of a promissory note		255,000
Proceeds from the issuance of common stock	1,250,000	100,000
Proceeds from the issuance of Series B convertible preferred stock		1,517,500
Net cash provided by financing activities	1,224,245	2,126,701
Net change in cash	(424,027)	455,156
Cash, beginning of period	868,554	57,841
Cash, end of period	444,527	512,997
Supplemental disclosure of cash and non-cash transactions:
Financing of property and equipment purchases		52,082
Equity issued pursuant to asset acquisition (non-cash acquisition of BioTrack)	57,552,033
Cost of issuance of Series B preferred shares		(1,941,633)
Stock options issued pursuant to acquisition consideration		916,643
Warrant issuances to investors		93,200
Noncash or Part Noncash Acquisition, Debt Assumed		4,581,395
Partial conversion of convertible note into common stock	175,000
Security Grade acquisition consideration settlement	$ 197,804

XML

Description of Business

6 Months Ended

Jun. 30, 2018

Description of Business [Abstract]

Description of Business

1. Description of Business

Helix TCS, Inc. (the “Company” or “Helix”) was incorporated in Delaware on March 13, 2014. Pursuant to the acquisition of the assets of Helix TCS, LLC, as discussed below, we changed our name from Jubilee4 Gold, Inc. to Helix TCS, Inc. effective October 25, 2015.

Effective October 25, 2015, we entered into an acquisition and exchange agreement with Helix TCS LLC. We closed the transaction contemplated under that agreement on December 23, 2015 and Helix TCS, LLC was merged into and with Helix.

Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. in exchange for 20 million common shares and 1 million convertible preferred shares of the Company.

The Acquisition Agreement of Helix TCS, LLC was treated as a recapitalization for financial accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and their historical financial statements before the Acquisition Agreement were replaced with the historical financial statements of the Company. The common stock account of the Company continues post-merger, while the retained earnings of the acquiree is eliminated.

On April 11, 2016, the Company acquired the assets of Revolutionary Software, LLC (“Revolutionary”) (see Note 5).

On June 2, 2017, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (“Security Grade”), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, if within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the closing, on the 61st day following the closing, the Company was obligated to issue 207,427 additional stock options (the “Additional Stock Options”). The Company subsequently issued the 207,427 Additional Stock Options on August 1, 2017 as well as a second cash payment of $800,000 pursuant to the original terms of the agreement.

In the first quarter of 2018, the Company notified the selling members of Security Grade of their intent on exercising their right of setoff noted in the Agreement after discovering misrepresentations made by one of the selling members of Security Grade. The Company has settled with five of the six selling members and are in negotiations with the final selling member. The Company has initiated a lawsuit against the sixth selling member. See Item 1. Legal Proceedings for further detail surrounding the lawsuit.

On March 3, 2018, Helix TCS, Inc. and its wholly owned subsidiary, Helix Acquisition Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bio-Tech Medical Software, Inc. (“BioTrackTHC”) and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders. Pursuant to the Merger Agreement, Merger Sub merged with and into BioTrackTHC, with BioTrackTHC surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”).

On June 1, 2018, in connection with closing the merger, the Company issued 38,184,985 unregistered shares of its common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (“BioTrackTHC Stock Plan”), pursuant to which options exercisable in the amount of 8,132,410 shares of common stock are outstanding. As a result of the merger, BioTrackTHC stockholders and optionholders own 48% of the Company on a fully diluted basis on the closing date.

XML

Revision of Prior Period Financial Statements

6 Months Ended

Jun. 30, 2018

Revision of Prior Period Financial Statements [Abstract]

Revision of Prior Period Financial Statements

2. Revision of Prior Period Financial Statements

The Company corrected certain immaterial errors in its financial statements contained herein. In accordance with ASC 650-10-S99 and S55 (formerly Staff Accounting Bulletins (“SAB”) No. 99 and No. 108), Accounting Changes and Error Corrections, the Company concluded that these errors were, individually, and in the aggregate, not material, quantitatively or qualitatively, to the financial statements in these periods.

On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares is convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees and the satisfaction of the promissory notes.

On October 11, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a fifth Series B Preferred Stock Purchase Agreement (the “Fifth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 231,097 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $75,000. Upon further review of the Agreement, it was noted the total number of shares issued under the Agreement was 462,195 shares with total proceeds of $150,000.

On October 31, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a sixth Series B Preferred Stock Purchase Agreement (the “Sixth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 795,833 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $80,000. Upon further review of the Agreement, it was noted the total number of shares issued under the Agreement was 1,042,337 shares with total proceeds of $557,500.

As a result of the October 11, 2017 and October 31, 2017 transactions, the Company recorded an increase of $477, $552,023 and $552,500 to Series B Preferred Shares – par amount, additional paid-in capital and accumulated deficit, respectively.

On November 16, 2017, the Company amended Notes Five, Six, and Seven (“the Amended Notes”) with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. The amendment of Note Six and Seven included terms, permitting the Company the option to tender payment in full on or before November 21, 2017, at a 15% discount of the amended principal amounts. Note Five, Six and Seven principal amounts were amended to $281,900, $38,441 and $131,107, respectively. The Company evaluated the Amended Notes in accordance with ASC 480, Distinguishing Liabilities from Equity and determined the Amended Notes will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. At November 16, 2017, the principal amounts of Note Five, Six and Seven were $281,900, $38,441 and $131,107, respectively. As of December 31, 2017, the Company recorded the fair value of Note Five, Six and Seven at $812,393, $110,781 and $377,830, respectively. Therefore, the Company recorded a charge to the change in fair value of $(530,493), $(72,340) and $(246,723) related to Note Five, Six and Seven, respectively.

Upon further review it was noted that, on November 21, 2017, the Company paid the remaining principal balance, at the 15% discount on Notes Six and Seven in the amount of $144,259. Therefore, Notes Six and Seven did not have a balance as of December 31, 2017.

As a result of the November 21, 2017 transaction, the Company recorded a reduction to convertible notes payable, net of discount of $488,611 and a credit to the change in fair value of convertible notes of $488,611.

When taking into consideration the two transactions indicated above, the net impact to accumulated deficit was a charge of $63,889, resulting from the netting of the gain of $488,611 from the reduction in the fair value of convertible notes at December 31, 2017 offset by the $552,500 of additional expense associated with the Series B Purchase Agreement.

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s amended audited consolidated financial statements for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K/A, filed with the SEC on April 4, 2018. In addition, the Company’s future Quarterly Reports on Form 10-Q for subsequent quarterly periods during the current fiscal year will reflect the impact of the revision in the comparative prior quarter and year-to-date periods.

The following table summarizes the effects of the revisions on the financial statements for the periods reported.

	Previously Reported			Adjustments			Revised
Condensed Consolidated Balance Sheet as of December 31, 2017
Convertible notes payable, net of discount	$	1,301,004		$	(488,611	)	$	812,393
Total liabilities	$	5,350,899		$	(488,611	)	$	4,862,288
Preferred Shares (Class B) Outstanding		13,306,599			477,602			13,784,201
Preferred Shares (Class B) Par Amount	$	13,307		$	477		$	13,784
Additional Paid in Capital	$	3,923,234		$	552,023		$	4,475,257
Accumulated Deficit	$	(18,177,819	)	$	(63,889	)	$	(18,241,708	)
Total Shareholders' Equity	$	54,350		$	488,611		$	542,961
Total Liabilities and Shareholders' Equity	$	5,405,249		$	-		$	5,405,249

XML

Going Concern Uncertainty, Financial Condition and Management's Plans

6 Months Ended

Jun. 30, 2018

Going Concern Uncertainty, Financial Condition and Management's Plans [Abstract]

Going Concern Uncertainty, Financial Condition and Management's Plans

3. Going Concern Uncertainty, Financial Condition and Management’s Plans

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next 12 months. The Company believes that its ability to continue operations depends on its ability to sustain and grow revenue and results of operations as well as its ability to access capital markets when necessary to accomplish the Company’s strategic objectives. The Company believes that it will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and, depending on the results of operations, the Company may need additional equity or debt financing until the Company can achieve profitability and positive cash flows from operating activities, if ever.

At June 30, 2018, the Company had a working capital deficit of approximately $1,611,424, as compared to working capital deficit of approximately $3,289,281 at December 31, 2017. The increase of $1,677,857 in the Company’s working capital from December 31, 2017 to June 30, 2018 was primarily the result of a decrease in the Company’s obligation to issue warrants and a decrease in the balance of the Company’s convertible notes payable, partially offset by a decrease in cash and increase in accounts payable and accrued liabilities.

The Company’s future capital requirements for its operations will depend on many factors, including the profitability of its businesses, the number and cash requirements of other acquisition candidates that the Company pursues, and the costs of operations. The Company has been investing in expanding its operation in new states, its courier service in Colorado, and transforming the assets acquired from Revolutionary Software. The Company’s management has taken several steps to ensure that it will have sufficient liquidity to meet its obligations through December 31, 2018, including growing and diversifying its revenue streams, selectively reducing expenses, and considering additional funding transactions with potential investors. Additionally, if the Company’s actual revenues are less than forecasted, the Company anticipates that variable expenses will also decline, and the Company’s management can implement expense reduction as necessary. The Company is evaluating other measures to further improve its liquidity, including the sale of equity or debt securities. Lastly, the Company may elect to reduce certain related-party and third-party debt by converting such debt into common shares. The Company’s management believes that these actions will enable the Company to meet its liquidity requirements through August 15, 2019. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2018 and beyond.

The Company plans to generate positive cash flow from its Security Grade and BioTrack acquisitions to address some of the liquidity concerns. However, to execute the Company’s business plan, service existing indebtedness and implement its business strategy, the Company anticipates that it will need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. The Company cannot be sure that any additional funding, if needed, will be available on terms favorable to the Company or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute the Company’s current stockholders’ ownership and could also result in a decrease in the market price of the Company’s common stock. The terms of those securities issued by the Company in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. The Company also may be required to recognize non-cash expenses in connection with certain securities it issues, such as convertible notes and warrants, which may adversely impact the Company’s operating results and financial condition. Furthermore, any debt financing, if available, may subject the Company to restrictive covenants and significant interest costs. There can be no assurance that the Company will be able to raise additional capital, when needed, to continue operations in their current form.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

4. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC, Boss Security Solutions, Inc., Security Consultants Group Oregon, LLC (“Security Oregon”), Security Grade, and BioTrack THC.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Use of estimates includes the following: 1) allowance for doubtful accounts, 2) estimated useful lives of property, equipment and intangible assets, 3) intangibles impairment, 4) valuation of convertible notes payable and 5) revenue recognition. Actual results could differ from estimates.

Cash

Cash consists of checking accounts. The Company considers all highly-liquid investments purchased with a maturity of three months or less at the time of purchase to be cash.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

Management charges balances off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due, or delinquent based on how recently payments have been received.

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $34,767 and $3,000 at June 30, 2018 and December 31, 2017.

Long-Lived Assets, Including Definite Lived Intangible Assets

Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of non-compete agreements and customer relationships. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

Goodwill

Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. Helix reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

The impairment model prescribes a two-step method for determining goodwill impairment. However, an entity is permitted to first assess qualitative factors to determine whether the two-step goodwill impairment test is necessary. Helix may consider qualitative factors including, but not limited to, general economic conditions, Helix’s outlook, market performance of Helix’s industry and recent and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. In the first step, Helix determines the fair value of its reporting unit using a discounted cash flow analysis. If the net book value of the reporting unit exceeds its fair value, Helix then performs the second step of the impairment test, which requires allocation of the reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to goodwill. An impairment charge is recognized when the implied fair value of Helix’s goodwill is less than its carrying amount.

Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset. It was determined that during the first quarter of 2018, the Company’s entire amount of goodwill attributable to the Security Grade acquisition was impaired. See Note 9 for a further discussion on the impairment.

Accounting for Acquisitions 

In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets acquired, and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. 

Business Combinations

The Company accounts for its business combinations under the provisions of Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings.

The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using established valuation techniques. The estimated fair value of the net assets acquired was determined using the income approach to valuation based on the discounted cash flow method. Under this method, expected future cash flows of the business on a stand-alone basis are discounted back to a present value. The estimated fair value of identifiable intangible assets, consisting of software and trade name acquired were determined using the relief from royalty method.

The most significant assumptions under the relief from royalty method used to value software and trade names include: estimated remaining useful life, expected revenue, royalty rate, tax rate, discount rate and tax amortization benefit. The discounted cash flow method used to value non-compete agreements includes assumptions such as: expected revenue, term of the non-compete agreements, probability and ability to compete, operating margin, tax rate and discount rate. Management has developed these assumptions on the basis of historical knowledge of the business and projected financial information of the Company. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.  

Revenue Recognition

Under FASB Topic 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation.

The security services revenue is generated from performing armed and unarmed guarding which is contracted for on an hourly basis. Revenues associated with these contracted services are recognized under time-based arrangements as services are provided.

Additionally, the Company provides transportation security services, which are generally contracted for on a per-run basis and sometimes additional fees and surcharges are also billed to the client depending on the length of the run. Revenues associated with these services are recognized as the transportation service is provided.

The Company also generates revenue from developing and licensing seed to sale cannabis compliance software to both private-sector and public-sector (government agencies) businesses that are involved in cannabis related operations. The Company also generates revenue from on-going training, support and software customization services.

Occasionally, the Company will enter into systems installation arrangements. Installation jobs are estimated based on the cost of equipment to be installed, the number of hours expected to be incurred to complete the job and other ancillary costs. Revenue associated with these services are recognized over the arrangement period.

Lastly, the Company generates advertising revenues from consumer advertising on its Cannabase platform. Revenue is recognized over the contract period associated with each specific advertising campaign.

Expenses

Cost of Revenues

The cost of revenues is the total cost incurred to obtain a sale and the cost of the goods or services sold. Cost of revenues primarily consisted of hourly compensation for security personnel and employees involved in the creation and development of licensing software.

Operating Expenses

Operating expenses encompass selling general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company.

Other (Expense) Income, net

Other (expense) income, net consisted of change in fair value of convertible note, change in fair value of convertible note – related party, interest expense, change in fair value of obligation to issue warrants, loss on extinguishment of debt, loss on impairment of Goodwill and gain on reduction of obligation pursuant to acquisition.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives are 3 years for vehicles and 5 years for furniture and equipment. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are sold, or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in other income.

Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

Leases

Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.

If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a capital lease; and if none of the four criteria are met, the lease is classified by the Company as an operating lease.

Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $34,963 and $1,388 for the three months ended June 30, 2018 and 2017, respectively, and $61,737 and $5,179 for the six months ended June 30, 2018 and 2017, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the six months ended June 30, 2018 and 2017.

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

Initial Measurement

The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.

Subsequent Measurement – Financial instruments classified as liabilities

The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income.

Beneficial Conversion Feature

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a Beneficial Conversion Feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the beneficial conversion feature and the Company amortizes the discount to interest expense over the life of the debt.

The Company accounts for the beneficial conversion feature on its convertible preferred stock in accordance with ASC 470-20, Debt with Conversion and Other Options. The BCF of convertible preferred stock is normally characterized as the convertible portion or feature that provides a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of convertible preferred stock when issued. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

To determine the effective conversion price, the Company first allocates the proceeds received to the convertible preferred stock and then uses those allocated proceeds to determine the effective conversion price. If the convertible instrument is issued in a basket transaction (i.e., issued along with other freestanding financial instruments), the proceeds should first be allocated to the various instruments in the basket. Any amounts paid to the investor when the transaction is consummated (e.g., origination fees, due diligence costs) represent a reduction in the proceeds received by the issuer. The intrinsic value of the conversion option should be measured using the effective conversion price for the convertible preferred stock on the proceeds allocated to that instrument. The effective conversion price represents proceeds allocable to the convertible preferred stock divided by the number of shares into which it is convertible. The effective conversion price is then compared to the per share fair value of the underlying shares on the commitment date.

The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible preferred stock. This discount should be accreted from the date on which the BCF is first recognized through the earliest conversion date for instruments that do not have a stated redemption date. The intrinsic value of the BCF is recognized as a deemed dividend on convertible preferred stock over a period specified in the guidance.

Share-based Compensation

The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock Based Compensation. Stock-based compensation to employees consist of stock options grants and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant.

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees based upon the fair-value of the underlying instrument. The equity instruments, are valued using the Black-Scholes valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services are received.

The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

● Level 3 – Inputs that are unobservable for the asset or liability.

Certain assets and liabilities of the Company are required to be recorded at fair value either on a recurring or non-recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. The following section describes the valuation methodologies that the Company used to measure, for disclosure purposes, its financial instruments at fair value.

Convertible notes payable

The fair value of the Company’s convertible notes payable, approximated the carrying value as of June 30, 2018 and December 31, 2017. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2.

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable and accrued liabilities, advances from shareholders and obligation pursuant to acquisition approximate their fair value due to the short-term maturity of those items.

Earnings (Loss) per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS excluded all potential dilutive shares if their effect was anti-dilutive.

Basic net loss per share is based on the weighted average number of common and common-equivalent shares outstanding. Potential common shares includable in the computation of fully-diluted per share results are not presented in the consolidated financial statements for the three and six months ended June 30, 2018 and 2017 as their effect would be anti-dilutive.

Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.

The anti-dilutive shares of common stock outstanding for the three and six months ended June 30, 2018 and 2017 were as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Potentially dilutive securities:
Convertible notes payable		135,634		226,320		135,634		226,320
Convertible Preferred A Stock		1,000,000		17,186,713		1,000,000		17,186,713
Convertible Preferred B Stock		13,784,201		7,318,084		13,784,201		7,318,084
Warrants		3,307,073		2,557,195		3,307,073		2,557,195
Stock options		8,704,345		414,854		8,704,345		414,854

Reclassifications

Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. In April and May 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing”, ASU 2016-11, “Revenue Recognition and Derivatives and Hedging – Recession of SEC Guidance”, ASU 2016-12, “Revenue from Contracts with Customers – Narrow-Scope Improvements and Practical Expedients”, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”.  These ASUs each affect the guidance of the new revenue recognition standard in ASU 2014-09 and related subsequent ASUs. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017 for public companies

On January 1, 2018, we adopted the new accounting standard ASC 606, “Revenue from Contracts with Customers and all the related amendments” (“ASC 606”) to all contracts which were not completed or expired as of January 1, 2018 using the modified retrospective method. The Company had no cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while the comparative information will continue to be reported under the accounting standards in effect for those periods.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method, whereas financing leases will be treated similarly to a capital lease under the current standard. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The new standard must be presented using the modified retrospective method. However, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method to adopt the new leases standard. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company is still evaluating the method of adoption. While the Company is continuing to assess all potential impacts of the new standard, the Company currently believes the most significant impact relates to its accounting for office space, colocation operating leases, and embedded leases within its supplier contracts.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero-coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The guidance was effective for the Company beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted this standard on January 1, 2018.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350); Simplifying the Test for Goodwill Impairment. The amendments in this update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for public companies for the reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Accordingly, at March 31, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value. Please refer to Note 9 for further detail.

In May 2017, the FASB issued ASU No 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all three of the following are met:

(1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

(2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.

(3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. Note that the current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-09. ASU 2017-09 is effective for all annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the potential impact of adopting ASU 2017-11 on its financial statements and related disclosures.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

XML

Revenue Recognition

6 Months Ended

Jun. 30, 2018

Revenue Recognition [Abstract]

Revenue Recognition

5. Revenue Recognition

Adoption of ASC 606 Revenue from Contracts with Customers

The Company adopted the new revenue standard, ASC 606, using the modified retrospective method with respect to all non-completed contracts as of January 1, 2018. This method required retrospective application of the new accounting standard to all unfulfilled contracts that were outstanding as of January 1, 2018. Revenues and contract assets and liabilities for contracts completed prior to January 1, 2018 are presented in accordance with ASC 605.

The Company has determined that there were no adjustments required with respect to the adoption of ASC 606 with respect to any prior periods.

Disaggregation of revenue 

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Types of Revenues:
Security and Guarding	$	1,535,638	$	1,015,662	$	2,629,412	$	1,707,399
Systems Installation		100,699		-		135,263		-
Software		576,142		-		576,142		-
Total revenues	$	2,212,479	$	1,015,662	$	3,340,817	$	1,707,399

The following is a description of the principal activities from which we generate our revenue.

Security and Guarding Revenue

Helix provides armed and unarmed guards, as well as armed transportation services. The guards are charged out at an hourly rate, with invoices typically sent to clients shortly after each month-end for the previous month, with revenue being recognized over time as the service has been provided. Transportation services are typically invoiced on a per-run basis, with revenue being recognized over time as the service has been completed.

Systems Installation Revenue

Security systems, including IP CCTV, intrusion alarm systems, perimeter alarm systems, and access controls are installed for clients. Installation jobs are estimated based on the cost of the equipment, the number of man hours expected to complete the work, supplies, travel, and any other ancillary costs. The installation is typically invoiced with 60% of the total price immediately after signing and the balance upon completion of the installation service. The timing of these contracts are short-term in nature and are less than 12 months in duration.

Software

The Company generates revenue from developing and licensing seed to sale cannabis compliance software to both private-sector and public-sector (government agencies) businesses that are involved in cannabis related operations. The Company also generates revenue from on-going training, support and software customization services.

The private-sector software entails cultivation tracking, inventory management, point of sale and analytic reporting to assist businesses in meeting their compliance requirements and effectively manage their businesses. Customers within the private sector are charged an initial one-time installation fee and the revenues associated with these services are recognized upon completion of installation and configuration at a point in time. After the installation and configuration of the software is completed, the customer is invoiced monthly and revenues associated with these services are recognized monthly over a period of time in which the customer continues to use the software and related services.

The public-sector software assists government agencies in efficient oversight of cannabis related business under their jurisdiction. Revenues associated with governmental contracts are longer-term in nature and recognized upon completion of certain milestones over a period of time or on a completed-contract basis at a point in time. The Company considers the contract to be complete when all significant costs have been incurred and the customer accepts the project. Costs incurred prior to the customer accepting the project are deferred and reflected on the Balance Sheet as Work-in-process – Traceability.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in accordance with ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  Generally, the Company’s contracts include a single performance obligation that is separately identifiable, and therefore, distinct. Under ASC 606, the allocation of transaction price is not necessary if only one performance obligation is identified.

Significant Judgments

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue, costs and satisfaction of performance obligation. The Company satisfies its performance obligations and subsequently recognizes revenue, over time, as security and installation services are performed. There were no changes to the significant judgments used by the Company to determine the timing of satisfaction of the performance obligations under ASC 606.

Costs to Obtain or Fulfill Contract

The Company’s costs to fulfill or obtain contracts with customers primarily consist of commissions and legal costs. The Company provides sales team members with commissions at 0-6%. Although sales commissions are incremental in nature and are only incurred when a contract is obtained, there is no up-front commission paid on the satisfactory obtainment of a contract, resulting in no sales commissions being capitalized at June 30, 2018. The Company also incurs legal costs relating to the drafting and negotiating of contracts with select customers. Because legal costs are not incremental in nature and are incurred regardless of whether a contract is ultimately obtained, there were no legal costs capitalized as of June 30, 2018. The Company did not record amortization of costs incurred to obtain the contract or any impairment losses for the period ending June 30, 2018.

XML

Business Combination

6 Months Ended

Jun. 30, 2018

Business Combination [Abstract]

Business Combination

6. Business Combination

Security Grade Acquisition

On June 2, 2017, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (“Security Grade”), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, provided that, within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60^th day following the closing, on the 61^st day following the closing, the Company shall deliver an additional $800,000 in cash and issue 207,427 additional stock options (the “Additional Stock Options”). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Agreement within the first 60 days following the closing, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Agreement in the 180 days immediately preceding such termination. Pursuant to these provisions, as of June 30, 2018, the Company has a liability pursuant to the Agreement of $244,159 payable following the Closing.

The merger is being accounted for as a business combination in accordance with ASC 805. The Company’s allocation of the purchase price was calculated as follows:

Base Price – Cash	$	2,100,373
Base Price - Stock Options		916,643
Contingent Consideration - Stock Options		916,643
Total Purchase Price	$	3,933,659

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	14,137
Accounts receivable		53,792
Costs & earnings in excess of billings		96,898
Property, plant and equipment, net		27,775
Trademarks		25,000		10
Customer lists		3,154,578		5
Web address		5,000		5
Goodwill		664,329
Other assets		3,880
Total assets acquired	$	4,045,389
Liabilities assumed:
Billings in excess of costs	$	23,967
Loans payable		18,414
Credit card payable and other liabilities		69,349
Total liabilities assumed		111,730
Estimated fair value of net assets acquired	$	3,933,659

The initial stock options are included as part of the purchase price. The Company determined the fair value of the contingent consideration to be $916,643 at June 2, 2017 and recorded it as a liability in its unaudited condensed consolidated balance sheets. The Company satisfied their contingent consideration liability during the third quarter of 2017. During the period ended June 30, 2018, the Company reached settlement agreements with five of the six selling members. As a result of these settlements, 70,151 options previously issued as part of the acquisition were cancelled.

BioTrack Acquisition

On March 3, 2018, Helix TCS, Inc. (the “Company”) and its wholly owned subsidiary, Helix Acquisition Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bio-Tech Medical Software, Inc. (“BioTrackTHC”) and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders. Pursuant to the Merger Agreement on June 1, 2018, Merger Sub merged with and into BioTrackTHC, with BioTrackTHC surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”). The Company closed the Merger. In connection with closing the Merger, the Company issued 38,184,985 unregistered shares of Company common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc 2014 Stock Incentive Plan (“BioTrackTHC Stock Plan”), pursuant to which options exercisable for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders and optionholders will own 48% of the Company on a fully diluted basis on the closing date.

The Merger is being accounted for as a business combination in accordance with ASC 805. The Company has determined preliminary fair values of the assets acquired and liabilities assumed in the BioTrackTHC merger. These values are subject to change as we perform additional reviews of our assumptions utilized.

The Company has made a provisional allocation of the purchase price of the BioTrackTHC transaction to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the provisional purchase price allocations relating to the BioTrackTHC transaction: 

Base Price - Common Stock	$	44,905,542
Base Price - Stock Options		12,646,491
Total Purchase Price	$	57,552,033

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	448,697
Accounts receivable		128,427
Prepaid expenses		351,615
Property, plant and equipment, net		72,252
Goodwill		39,135,007
Customer list		8,304,449		5
Software		9,321,627		4.5
Tradename		466,081		4.5
Total assets acquired	$	58,228,155
Liabilities assumed:
Accounts payable	$	223,581
Other liabilities		452,541
Total liabilities assumed		676,122
Estimated fair value of net assets acquired	$	57,552,033

The Company has not completed the valuation studies necessary to finalize the acquisition fair values of the assets acquired and liabilities assumed and related allocation of purchase price for BioTrackTHC. Accordingly, the type and value of the intangible assets amounts set forth above are preliminary. Once the valuation process is finalized for BioTrackTHC, there could be changes to the reported values of the assets acquired and liabilities assumed, including goodwill and intangible assets and those changes could differ materially from what is presented above.

Total acquisition costs for the BioTrackTHC merger incurred during the three and six months ended June 30, 2018 was $116,624, and is included in selling, general and administrative expense in the Company’s Statements of Operations.

Unaudited Pro Forma Results

BioTrackTHC contributed revenues of $576,142 and a net loss of $132,109 for the period June 1, 2018 through June 30, 2018, included in the Company’s consolidated condensed statements of operations.

The following table below represents the revenue, net loss and loss per share effect of the acquired company, as reported in our pro forma basis as if the acquisition occurred on January 1, 2017. These pro forma results are not necessarily indicative of the results that actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Description	2018			2017			2018			2017
Revenues	$	3,280,872		$	2,660,197		$	6,162,373		$	5,105,097
Net loss		(2,077,322	)		(2,806,083	)		(2,554,163	)		(8,311,917	)
Net loss attributable to common shareholders		(9,281,011	)		(5,961,970	)		(24,756,357	)		(11,467,804	)
Loss per share attributable to common shareholders:
Basic and diluted-as pro forma (unaudited)		(0.22	)		(0.21	)		(0.69	)		(0.40	)

XML

Asset Acquisition

6 Months Ended

Jun. 30, 2018

Asset Acquisition [Abstract]

Asset Acquisition

7. Asset Acquisition

The acquisition of the assets of Revolutionary Software, LLC occurred via two transactions.

1.

On March 14, 2016, the Company purchased one-third of the equity interest in Revolutionary for total consideration of $350,000 in cash and 75,000 shares of common stock of the Company. $50,000 was paid in cash at closing, with the balance ($300,000) being paid in twenty-four monthly installments of $10,417, with a final payment of $50,000 to be paid on the twenty-fifth month.

2.

On April 11, 2016, the Company entered into an asset purchase agreement with Revolutionary, in which the Company purchased all of the intangible rights and property of Revolutionary for total consideration of $300,000 payable in two equal installments pursuant to a promissory note and 2,320,000 shares of restricted common stock of the Company. As of June 30, 2018, the Company owed Revolutionary $0.

The total purchase price for the Revolutionary assets acquired was $1,596,750. The acquisition cost has been allocated over the intangible assets acquired in accordance with the guidance set forth in ASC 805, Business Combinations, please see Note 9. Intangible Assets and Goodwill, Net. As of June 30, 2018, and December 31, 2017, the Company has a liability pursuant to the Revolutionary asset acquisition of $0 and $58,370, respectively.

XML

Property and Equipment, Net

6 Months Ended

Jun. 30, 2018

Property and Equipment, Net [Abstract]

Property and Equipment, Net

8. Property and Equipment, Net

At June 30, 2018 and December 31, 2017, property and equipment consisted of the following:

	June 30, 2018			December 31, 2017
Furniture and equipment	$	86,292		$	16,332
Software equipment		5,376			1,382
Vehicles		237,805			175,647
Total		329,473			193,361
Less: Accumulated depreciation		(79,448	)		(82,727	)
Property and equipment, net	$	250,025		$	110,634

Depreciation expense for the three months ended June 30, 2018 and 2017 was $32,893 and $14,830, respectively, and $35,893 and $23,036 for the six months ended June 30, 2018 and 2017, respectively.

XML

Intangible Assets, Net and Goodwill

6 Months Ended

Jun. 30, 2018

Intangible Assets, Net and Goodwill [Abstract]

Intangible Assets, Net and Goodwill

9. Intangible Assets, Net and Goodwill

The following table summarizes the Company’s intangible assets as of June 30, 2018 and December 31, 2017:

					June 30, 2018
	Estimated  Useful Life  (Years)		Gross  Carrying  Amount		Assets  Acquired  Pursuant to  Business  Combination (2)		Accumulated Amortization			Net Book  Value
Database		5	$	93,427	$	-	$	(41,444	)	$	51,983
Trade names and trademarks		5 - 10		125,000		466,081		(33,092	)		557,989
Web addresses		5		130,000		-		(56,525	)		73,475
Customer list		5		3,154,578		8,304,449		(810,831	)		10,648,196
Software		4.5		-		9,321,627		(164,433	)		9,157,194
			$	3,503,005	$	18,092,157	$	(1,106,325	)	$	20,488,837

					December 31, 2017
	Estimated Useful Life  (Years)		Gross  Carrying  Amount at  December 31,  2016		Assets  Acquired  Pursuant to  Business  Combination (1)		Accumulated Amortization			Net Book Value
Database		5	$	93,427	$	-	$	(32,183	)	$	61,244
Trade names and trademarks		10		100,000		25,000		(18,675	)		106,325
Web addresses		5		125,000		5,000		(43,639	)		86,361
Customer list		5		-		3,154,578		(366,249	)		2,788,329
			$	318,427	$	3,184,578	$	(460,746	)	$	3,042,259

(1)	On June 2, 2017, the Company acquired various assets of Security Grade Protective Services, Ltd. (See Note 6).
(2)	On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 6).

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $476,003 and $61,953 for the three months ended June 30, 2018 and 2017, respectively, and $645,579 and $75,374 for the six months ended June 30, 2018 and 2017, respectively.

The following table summarizes the Company’s Goodwill as of June 30, 2018:

	Total Goodwill
Balance at January 1, 2018	$	664,329
Impairment of goodwill		(664,329	)
Goodwill attributable to BioTrack acquisition		39,135,007
Balance at June 30, 2018	$	39,135,007

During the first quarter of 2018, the Company came to a settlement agreement with numerous Security Grade employees resulting from a misrepresentation of revenue and customer list information provided as part of the acquisition. Therefore, the Company considers the settlement to be an indicator for goodwill impairment testing. Accordingly, at March 30, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off of $664,329 for the six months ended June 30, 2018. As part of the BioTrack acquisition, Goodwill in the amount of $39,135,007 was recognized on the Company’s Condensed Consolidated Balance Sheet.

XML

Accounts Payable and Accrued Expenses

6 Months Ended

Jun. 30, 2018

Accounts Payable and Accrued Expenses [Abstract]

Accounts payable and accrued expenses

10. Accounts Payable and Accrued Expenses

As of June 30, 2018 and December 31, 2017, accounts payable and accrued expenses consisted of the following:

	June 30, 2018		December 31, 2017
Accounts payable	$	1,130,405	$	334,751
Accrued expenses		236,319		220,682
Accrued interest		36,680		43,204
Total	$	1,403,404	$	598,637

XML

Costs, Estimated Earnings and Billings

6 Months Ended

Jun. 30, 2018

Costs, Estimated Earnings and Billings [Abstract]

Costs, Estimated Earnings and Billings

11. Costs, Estimated Earnings and Billings

Costs, estimated earnings and billings on uncompleted contracts are summarized as follows as of June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Costs incurred on uncompleted contracts	$	78,108		$	64,704
Estimated earnings		33,213			27,730
Cost and estimated earnings earned on uncompleted contracts		111,321			92,434
Billings to date		163,619			71,778
Costs and estimated earnings in excess of billings on uncompleted contracts		(52,298	)		20,656
Costs in excess of billings	$	9,277		$	40,847
Billings in excess of cost		(61,575	)		(20,191	)
	$	(52,298	)	$	20,656

XML

Convertible Note Payable

6 Months Ended

Jun. 30, 2018

Notes Payable/Convertible Note Payable/Promissory Notes [Abstract]

Convertible Note Payable

12. Convertible Note Payable

	June 30, 2018			December 31, 2017
Note Five, 5% convertible promissory note, fixed secured, maturing November 16, 2018	$	114,746		$	812,393
		114,746			812,393
Less: Current portion		(114,746	)		(812,393	)
Long-term portion	$	-		$	-

On September 30, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Four”) with a fourth investor (the “Fourth Investor”) in which the Fourth Investor provided the Company $500,000 in cash. As of December 31, 2016, the Class B Preferred Shares were not established as a result of Holder Default, in which, the Fourth Investor did not act in good faith towards the prompt negotiation, execution and delivery of the Class B Preferred Shares.

On March 31, 2017, the First Amendment to Note Four (the “Amended Note”) was entered by the Company and the Holder (also the Fourth Investor). In the absence of a Company Event of Default or Holder Event of Default, Amended Note is payable by issuance upon conversion into Class B Preferred Shares of the Company, which was to occur no later than June 1, 2017. The Amended Note had the following conversion features:

● Automatic Conversion. The principal balance of the Amended shall automatically convert into shares of Class B Preferred Shares upon execution by the Company and the Fourth Investor of definitive documentation relating to the $500,000, aggregate principal amount, and investment by the Fourth Investor in Class B Preferred Shares of the Company.

● Company Default. In the event of a Company Event of Default, the Fourth Investor the shall have the right to elect to (i) at any time prior to June 30, 2017, convert the aggregate outstanding principal amount of Note Four into Class B Preferred Shares equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis, or (ii) at any time commencing on July 1, 2017 and ending on September 31, 2017, have Note Four redeemed for cash at a redemption price, in aggregate, equal to 150% of the aggregate principal outstanding balance of Note Four or (iii) to convert Note Four into common shares of the Company equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis. In the event the Holder does not elect any remedy in the event of a Company Event of Default, on September 31, 2017 the Amended Note shall be converted in whole into common shares of the Company equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis.

● Holder Default. In the event of a Holder Event of Default, the Company shall have the right to either (i) redeem the Amended Note at par value at any time prior to June 1, 2017 or (ii) convert the outstanding principal balance into common shares of the Company at market value.

● The $12,000,000 valuation in Note Four is subject to dilution of $600,000 from additional investments in the Company by third parties following the Holder’s $500,000 investment that is memorialized in Note Four. The Holder was to receive the same number of shares as it would have for its investment if it had converted at a $12,000,000 valuation on October 20, 2016 given the 26,587,497 shares outstanding at that time. Note Four was to convert into 1,162,500 shares.

Due to the terms of the Amendment, the Company evaluated Note Four under ASC 470-50 to determine if modification or extinguishment treatment was necessary. After performing the analysis under ASC 470-50, it was determined extinguishment treatment was appropriate and the Company should extinguish Note Four and recognize the Amended Note as new debt. The Company recognized a loss on extinguishment of $4,611,395 on Note Four.

The Company evaluated the Amended Note and the embedded conversion feature under ASC 815 and determined the conversion feature did not meet the definition of a derivative and therefore should not be bifurcated. The Company then evaluated the Amended Note in accordance with ASC 480 and determined that Note Four will be accounted for as a liability measured at fair value. As of March 31, 2017, the fair value of the liability was $500,000.

On February 13, 2017, the Company entered into a $183,333 10% Fixed Secured Convertible Promissory Note (“Note Five”) with a third investor (the “Third Investor”). The Third Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the Third Investor for due diligence and legal bills for the transaction. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on Note Five due and payable on September 12, 2017 (unless converted under terms and provisions as set forth within Note Five). The principal balance of Note Five was convertible at the election of the Third Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at $1.50 per share. In conjunction with Note Five, the Company issued a warrant to the third investor to purchase 25,000 shares of the Company’s common stock at $1.00 per share. Note Five became effective on February 14, 2017 upon the execution by the Company and the Third Investor of numerous exhibit documents.

The Company evaluated the embedded conversion feature within the above convertible note under ASC 815 and determined the conversion feature did not meet the definition of a derivative and therefore should not be bifurcated. Then the Company evaluated the conversion feature for a beneficial conversion feature at inception. The Company accounted for the intrinsic value of a BCF inherent to the convertible note payable and a total debt discount of $183,333 was recorded.

The company recorded a debt discount relating to the warrants issued in the amount of $22,000 based on the relative fair values of Note Five without the warrants and the warrants themselves at the effective date of Note Five. The additional $16,666 retained by the Third Investor for due diligence and legal bills for the transaction will be recorded as a debt discount. The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $183,333. Therefore, the debt discount related to the BCF was in the amount of $144,666. The excess value of the BCF discount was recognized as a loss in earnings and recorded as an interest expense in the amount of $390,666 and will be amortized through Maturity of Note Five.

The debt discounts were amortized to interest expense over the life of the note. As of December 31, 2017, and June 30, 2018 the discount was fully amortized.

On February 13, 2017, the Company entered into a $25,000 10% Fixed Secured Convertible Promissory Note (“Note Six”) with the Third Investor. The Third Investor provided the Company with $25,000 in cash, which was received by the Company during the period ended March 31, 2017. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on Note Six due and payable on September 13, 2017. The principal balance of Note Six was convertible at the election of the Third Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at $6.10 per share. Note Six become effective on February 14, 2017 upon the execution by the Company and the Third Investor of numerous exhibit documents.

The Company evaluated Note Six in accordance with ASC 815 to determine if the conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the conversion feature did not meet the requirements for bifurcation pursuant to ASC 815. Then the Company evaluated the conversion feature for a beneficial conversion feature at inception and determined that Note Six did not have a beneficial conversion feature. As a result, the Company recorded the conventional convertible note as a debt instrument in its entirety.

On April 26, 2017, the Company entered into a $100,000 10% Secured Convertible Promissory Note (“Note Seven”) with the Fourth Investor. The Fourth Investor provided the Company with $72,000 in cash proceeds, which was received by the Company during the three months ended June 30, 2017. Note Seven is due on October 26, 2017 and the Company must pay guaranteed interest on the principal balance at an amount equivalent to 10% of the note amount. The principal balance of Note Seven is convertible at the election of the Fourth Investor, in whole or in part, at any time or from time to time, into the Company’s common stock at the lower of $1.00 or a 50% discount to the lowest closing bid price of the Company’s common stock for the 30 Trading Days prior to conversion. In conjunction with Note Seven, the Company issued a warrant to the fourth investor to purchase 150,000 shares of the Company’s common stock at $1.00 per share.

On November 16, 2017, the Company amended Notes Five, Six, and Seven (“the Amended Notes”) with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. The amendment of Note Six and Seven included terms, permitting the Company the option to tender payment in full on or before November 21, 2017, at a 15% discount of the amended principal amounts. At November 16, 2017, the principal amounts of Note Five, Six and Seven were $281,900, $38,441 and $131,107, respectively. On November 21, 2017, the Company paid the remaining principal balance, at the 15% discount on Notes Six and Seven in the amount of $144,259.

On February 15, March 12 and March 21, 2018 the holder of Note Five elected their option to partially convert the convertible note into shares of the Company’s common stock. After the conversions the remaining Principal balance was $106,900. Please refer to Footnote 16 for additional details on the partial conversions of Note Five.

On May 16, 2018, the Company amended Note Five (“Second Amendment”) with the Fourth Investor. The Second Amendment states that Note Five shall have a maturity of November 16, 2018 and shall be prepayable at any time at 120% of the unpaid principal and accrued interest balance. The principal amount as of the date of the Second Amendment was $112,305.

The Company evaluated Note Five in accordance with ASC 480, Distinguishing Liabilities from Equity and determined the Note Five will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2018, and December 31, 2017, the fair value of Note Five was $114,746 and $812,393, respectively. Therefore, the Company recorded a gain to the change in fair value of $120,630 and $697,646 related to Note Five for the three and six months ended June 30, 2018, respectively.

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

13. Related Party Transactions

Advances from Related Parties

The Company has an additional loan outstanding from a former Company executive. The advance does not accrue interest and has no definite repayment terms. The loan balance was $65,250 and $124,750 as of June 30, 2018 and December 31, 2017, respectively.

Convertible Note Payable

On March 11, 2016, the Company entered into an Unsecured Convertible Promissory Note (“Note Eight”) with Paul Hodges, a Director of the Company (the “Related Party Holder”). The Related Party Holder provided the Company with $150,000 in cash, and the Company promised to pay the principal amount, together with interest at an annual rate of 7%, with principal and accrued interest on Note Eight due and payable on December 31, 2017 (unless converted under terms and provisions as set forth below). The principal balance of Note Eight was convertible at the election of the Related Party Holder, in whole or in part, at any time or from time to time, into the Company’s common stock at a forty percent (40%) discount to the average market closing price for the previous five (5) trading days, preceding the date of conversion election. The Company evaluated Note Eight in accordance with ASC 480, Distinguishing Liabilities from Equity and determined that Note Eight will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings.

On February 20, 2018, the Company entered into an agreement to amend the Convertible Promissory Note (this “Amendment”) with the undersigned holder (each, a “Holder”) initially issued to such Holder and dated March 2016 (the “Note”). The Company and Holders desire to extend the maturity date of the Note to August 20, 2018.

The Note is hereby amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of the Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of the Amendment. The principal amount of the note will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on this Note shall be due and payable on August 20, 2018 (the “Maturity Date”). All provisions related to conversion of the Note into equity securities of the Company were terminated as part of the Amendment.

As of February 20, 2018, the fair value of the liability was $239,343, however due to termination of the conversion of the note into equity securities, Note Five will be valued in its principal amount of $125,000 and accordingly the Company recorded a credit regarding the change in fair value of $0 and charge of $43,696 for the three months ended June 30, 2018 and 2017, respectively, and $118,506 and $56,107 for the six months ended June 30, 2018 and 2017, respectively. The interest expense associated with Note Five was $0 and $2,618 for the three months ended June 30, 2018 and 2017, respectively and $2,402 and $5,178 for the six months ended June 30, 2018 and 2017, respectively.

Warrants

In March 2016, the Company issued 960,000 shares of restricted common stock to the Related Party Holder per a subscription agreement for total proceeds of $150,000. In conjunction with the subscription agreement, the Company issued a warrant to the Related Party Holder to purchase 1,920,000 restricted shares of the Company’s common stock at $0.16 per share. The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company’s notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company’s notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of June 30, 2018, the warrants granted are not exercisable.

XML

Promissory Notes

6 Months Ended

Jun. 30, 2018

Notes Payable/Convertible Note Payable/Promissory Notes [Abstract]

Promissory Notes

14. Promissory Notes

On February 13, 2017, the Company entered into an unsecured promissory note in the amount of $180,000. The unsecured promissory note has a fixed interest rate of 8% and was due and payable on June 30, 2017. In conjunction with the Series B Preferred Stock Purchase Agreement, as discussed in Note 16, the Company satisfied its liability in exchange for Series B Preferred Stock. The interest expense associated with the unsecured promissory note was $0 and $1,871 for the three months ended June 30, 2018 and 2017, respectively and $0 and $2,887 for the six months ended June 30, 2018 and 2017, respectively.

On January 30, 2017, the Company entered into an unsecured promissory note in the amount of $75,000. The unsecured promissory note had a fixed interest rate of 8% and was due and payable on June 30, 2017. In conjunction with the Series B Preferred Stock Purchase Agreement, as discussed in Note 16, the Company satisfied its liability in exchange for Series B Preferred Stock. The interest expense associated with the unsecured promissory note was $0 and $779 for the three months ended June 30, 2018 and 2017, respectively and $0 and $2,570 for the six months ended June 30, 2018 and 2017, respectively.

XML

Notes Payable

6 Months Ended

Jun. 30, 2018

Notes Payable/Convertible Note Payable/Promissory Notes [Abstract]

Notes Payable

15. Notes Payable

	June 30, 2018			December 31, 2017
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$	92,277		$	55,890
Loans Payable - Credit Union		5,940			8,582
Less: Current portion of loans payable		(7,869	)		(11,179	)
Long-term portion of loans payable	$	90,348		$	53,293

The interest expense associated with the notes payable was $720 and $230 for the three months ended June 30, 2018 and 2017, respectively, and $1,420 and $230 for the six months ended June 30, 2018 and 2017, respectively.

XML

Shareholders' Equity

6 Months Ended

Jun. 30, 2018

Shareholders' Equity [Abstract]

Shareholders' Equity

16. Shareholders’ Equity

Common Stock

Subscription Agreements

In February 2018, the Company issued 222,222 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $200,000.

In March 2018, the Company issued 500,000 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $450,000.

In April 2018, the Company issued 500,000 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $400,000.

In May 2018, the Company issued 244,444 shares of restricted common stock to an investor per a subscription agreement for total proceeds of $200,000.

Other Common Stock Issuances

In May 2018, the Company issued 50,000 shares of restricted common stock to a consultant per a consultant agreement.

In June 2018, the Company issued 38,184,985 shares of common stock as part of the BioTrack acquisition.

On June 7, 2018, two selling shareholders of Security Grade exercised their right to purchase 212,633 shares of the Company’s common stock.

Conversion of Convertible Note to Common Stock

On February 15, 2018, the holder of Note Five elected their option to partially convert $50,000 in principal of the convertible note into 46,066 shares of the Company’s common stock.

On March 12, 2018, the same holder partially converted an additional $50,000 in principal of the convertible note into 63,963 shares of the Company’s common stock.

On March 21, 2018, the same holder partially converted an additional $75,000 in principal of the convertible note into 95,945 shares of the Company’s common stock.

Amended Convertible Note

On February 20, 2018, the Company entered into an agreement to amend a Convertible Promissory Note with the undersigned holder initially issued to such Holder and dated March 2016. The Company and Holders desire to extend the maturity date of the Note to August 20, 2018. The holder was issued 15,000 shares of the Company’s restricted common stock as part of the amendment.

The Note is hereby amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of this Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of this Amendment. The principal amount of the note will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on this Note shall be due and payable on August 20, 2018 (the “Maturity Date”). All provisions related to conversion of the Note into equity securities of the Company are hereby deleted.

On May 16, 2018, the Company entered into a second amendment agreement of a Convertible Promissory Note with the holder of a 10% fixed secured convertible promissory note. The new Maturity Date is November 16, 2018. The new interest rate is 5%. The note is prepayable at 120% of the unpaid balance upon 10 business days’ notice to the holder, which has the option to convert, in whole or in part, during the notice period. The conversion price shall be equal to a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion.

2017 Omnibus Incentive Plan

On January 11, 2018, the Company issued 42,850 shares of the Company’s restricted common stock under the 2017 Omnibus Incentive Plan to select personnel of the Company. Additionally, on March 15, 2018, the Company issued an additional 100,000 shares of the Company’s common stock to select employees of the Company.

In May 2018, the Company issued 83,900 shares of common stock to various employees pursuant to the Company’s 2017 Omnibus Stock Incentive Plan.

Series A convertible preferred stock

In October 2015, the Company issued a total of 1,000,000 shares of its Class A Preferred Stock as part of a reorganization in which Helix Opportunities LLC contributed 100% of itself and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 1,000,000 convertible preferred shares of the Company. The Class A Preferred Stock included super majority voting rights and were convertible into 60% of the Company’s common stock. During the third quarter of 2017, the Company modified the conversion rate on the Class A Preferred Stock to a 1:1 ratio. This modification reduced the amount of potentially dilutive Convertible Series A Stock by 15,746,127 shares to a total of 1,000,000 at September 30, 2017.

Series B convertible preferred stock

Series B Preferred Stock Purchase Agreement

On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares are convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees listed below and the satisfaction of the promissory notes discussed in Note 14.

In connection with the Series B Preferred Stock Purchase Agreement, the Company is obligated to issue warrants to a third-party for services to purchase 462,195 shares of common stock at $0.325 per share (see Note 18). These warrants have been accounted for as an obligation to issue because as of the balance sheet date the Company did not deliver the warrants though incurred the obligation; accordingly, they were recognized as a liability on the unaudited condensed consolidated balance sheet and cost of issuance of Series B preferred shares on the unaudited condensed consolidated statement of shareholders’ equity (deficit).

On July 28, 2017, as contemplated by the Initial Series B Preferred Purchase Agreement, the Parties entered into a second Series B Preferred Stock Purchase Agreement (the “Second Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 1,680,000 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $840,000.

On August 29, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a third Series B Preferred Stock Purchase Agreement (the “Third Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 369,756 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $120,000.

On September 15, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a fourth Series B Preferred Stock Purchase Agreement (the “Fourth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 462,195 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $150,000.

On October 11, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a fifth Series B Preferred Stock Purchase Agreement (the “Fifth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 462,195 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $150,000.

On October 31, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a sixth Series B Preferred Stock Purchase Agreement (the “Sixth Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 1,042,337 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $557,500.

On December 19, 2017, as contemplated by the Initial Series B Purchase Agreement, the Parties entered into a seventh Series B Preferred Stock Purchase Agreement (the “Seventh Series B Purchase Agreement”) whereby the Company issued and sold to accredited investors 2,449,634 shares of the Company’s Series B Preferred Stock in exchange for an aggregate cash payment equal to $795,000.

Series B Preferred Stock

In accordance with the Certificate of Incorporation, there were 9,000,000 authorized Series B Preferred Stock at a par value of $ 0.001. In connection with the Series B Preferred Stock Purchase Agreement, on May 12, 2017, the Company filed a Certificate of Designation (the “Certificate of Designations”) with the Secretary of State of the State of Delaware to designate the preferences, rights and limitations of the Series B Preferred Shares. On August 23, 2017 the Certificate of Designations was amended and restated to increase the number of shares of Series B Preferred Stock authorized to 17,000,000.

Conversion:

Each Series B Preferred Share is convertible at the option of the holder at any time on or after May 12, 2018 into such number of shares of the Company’s common stock equal to the number of Series B Preferred Shares to be converted, multiplied by the Preferred Conversation Rate. The Preferred Conversion Rate shall be the quotient obtained by dividing the Preferred Stock Original Issue Price ($0.3253815) by the Preferred Stock Conversation Price in effect at the time of the conversion (the initial conversion price will be equal to the Preferred Stock Original Issue Price, subject to adjustment in the event of stock splits, stock dividends, and fundamental transactions). Based on the current conversion price, the Series B Preferred Shares are convertible into 13,306,599 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (x) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (y) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company’s Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000).

Beneficial Conversion Feature – Series B Preferred Stock (deemed dividend):

Each share of Series B Preferred Stock is convertible into shares of common stock, at any time at the option of the holder at any time on or after May 12, 2018. On May 17, 2017, the date of issuances of the Series B, the publicly traded common stock price was $3.98.

Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature exists, as the effective conversion price for the Series B preferred shares at issuance was less than the fair value of the common stock into which the preferred shares are convertible. A beneficial conversion feature based on the intrinsic value at the date of issuances for the Series B preferred shares is scheduled below. For the three and six months ended June 30, 2018, the beneficial conversion amount of $14,998,505 and $22,202,194, respectively was accreted back to the preferred stock as a deemed dividend and charged to additional paid in capital in the absence of earning as the beneficial conversion feature is amortized over time through the earliest conversion date, May 12, 2018. As of June 30, 2018, the beneficial conversion feature was fully amortized. Provided below is a schedule of the issuances of Series B preferred shares and the amount accredited to deemed dividend at June 30, 2018.

For the Six Months Ended June 30, 2018
Issuance Date	Beneficial Conversion Feature Term (months)		Number of shares		Fair Value of Beneficial Conversion Feature		Amount accreted as a deemed dividend at December 31, 2017			Amount accreted as a deemed dividend for the Six Months Ended June 30, 2018			Unamortized Beneficial Conversion Feature
May 17, 2017		12		7,318,084	$	25,247,098	$	(15,779,436	)	$	(9,467,661	)	$	-
July 29, 2017		9.5		1,680,000		6,804,000		(3,674,634	)		(3,129,366	)		-
August 29, 2017		8.5		369,756		1,148,263		(556,190	)		(592,073	)		-
September 15, 2017		8		462,195		1,435,329		(648,601	)		(786,728	)		-
October 11, 2017		7		462,195		1,121,036		(426,309	)		(694,727	)		-
October 31, 2017		6.5		1,042,337		1,735,641		(548,570	)		(1,187,071	)		-
December 19, 2017		5		2,449,634		6,921,347		(576,779	)		(6,344,568	)		-
Total				13,784,201	$	44,412,714	$	(22,210,519	)	$	(22,202,194	)	$	-

Dividends, Voting Rights and Liquidity Value:

Pursuant to the Certificate of Designations, the Series B Preferred Shares bear no dividends, except that if the Board declares a dividend payable upon the then-outstanding shares of the Company’s common stock. The Series B Preferred Shares vote together with the common stock and all other classes and series of stock of the Company as a single class on all actions to be taken by the stockholders of the Company including, but not limited to, actions amending the certificate of incorporation of the Company to increase the number of authorized shares of the common stock. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series B Preferred Shares are entitled to (i) first receive distributions out of our assets in an amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock and (ii) second, on an as-converted basis alongside the common stock.

Classification:

The Series B Preferred Shares are classified within permanent equity on the Company’s consolidated balance sheet as they do not meet the criteria that would require presentation outside of permanent equity under ASC 480, Distinguishing Liabilities from Equity.

XML

Stock Options

6 Months Ended

Jun. 30, 2018

Stock Options/Stock-Based Compensation [Abstract]

Stock Options

17. Stock Options

As part of the Membership Interest Purchase Agreement entered into between the Company and Security Grade, on June 2, 2017 (see Note 6), the Company granted to the selling members the option to purchase up to 414,854 shares of the Company’s common stock at a price of $0.001 per share. Of the 414,854 options granted, 207,427 were vested at closing and equity classified. The vesting of the remaining 207,427 shares were subject to certain milestones being achieved and was initially recognized as contingent consideration, both a component of purchase price. As a result of the milestones being met during the third quarter of 2017, the remaining 207,427 shares have also vested. The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant.

On March 6, 2018, the Company filed a lawsuit in the United States Court for the District of Colorado alleging violations in previously disclosed representations and warranties by the plaintiff as part of the Security Grade Acquisition. Following the appointment of a registered Public Company Accounting Oversight Board (“PCAOB”) auditor, certain misrepresentations, primarily surrounding the misclassification of certain revenues as being recurring, were discovered, artificially inflating the price of the membership interest in Security Grade. As a result of the certain settlements with the selling shareholders, 71,644 options previously issued as part of the acquisition were cancelled.

As part of the Merger Agreement entered into between the Company and BioTrackTHC, on June 1, 2018 (see Note 6), the Company assumed the BioTrackTHC Stock Plan, pursuant to which options exercisable at prices of $0.11, $0.79 and $1.66 per share for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders and optionholders will own 48% of the Company on a fully diluted basis on the closing date.

Stock option activity for the period ended June 30, 2018 is as follows:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2018		414,854		$	0.001		2.42
Granted		490,000		$	0.001		0.52
Assumed Options pursuant to acquisition		8,132,410		$	0.001		2.41
Forfeited and expired		(121,779	)	$	0.001
Exercised		(212,633	)	$	0.001
Outstanding at June 30, 2018		8,702,852		$	0.001		2.95
Vested options at June 30, 2018		8,425,485		$	0.001		2.43

XML

Warrants

6 Months Ended

Jun. 30, 2018

Warrants [Abstract]

Warrants

18. Warrants

On February 13, 2017, the Company entered into a $183,333 Fixed secured Convertible Promissory Note (“Note Five”) with the Fourth Investor. The Fourth Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the Fourth Investor for due diligence and legal bills for the transaction. In conjunction with Note Five, the Company issued a warrant, of which the value was derived and based off the fair value of Note Five, to the fourth investor to purchase 25,000 shares of the Company’s common stock at $1.00 per share. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after February 14, 2017 and on or before February 12, 2022, by delivery to the Company of the Notice of Exercise. On December 11, 2017, the investor exercised their purchase right in a net settlement cashless exercise.

In connection with the issuance of the Note Seven, the Company issued a warrant (the “Warrant”) to the Purchaser to purchase 150,000 shares of Common Stock pursuant to the terms and provisions thereunder. The Warrant is exercisable at any time within five (5) years of issuance and entitles the Purchaser to purchase 150,000 shares of the Common Stock at an exercise price of the lesser of either i) $1.00 or ii) a 50% discount to the lowest closing bid price thirty (30) trading days immediately preceding conversion, subject to certain adjustments.

Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after April 26, 2017 and on or before April 26, 2022, by delivery to the Company of the Notice of Exercise. On December 11, 2017, the investor exercised their purchase right in a net settlement cashless exercise.

During the three months ended June 30, 2018, the Company entered into a Graduated Lock-Up Letter to induce the entering into of a consulting agreement in exchange for 50,000 shares of the Company’s common stock and the granting of 575,000 warrants for the purchase of common stock of the Company. The company recognized a compensation expense of $943,000 for the three and six months ended June 30, 2018 relating to the granting of the new warrants.

A summary of warrant activity is as follows:

For the Six Months ended June 30, 2018
	Warrant Shares		Weighted Average Exercise Price
Balance at January 1, 2018		2,732,073	$	0.23
Warrants granted		575,000	$	0.01
Balance at June 30, 2018		3,307,073	$	0.19

Warrant Obligations

In connection with the Series B Preferred Stock Purchase Agreement (See Note 16), the Company is obligated to issue warrants to a third-party to purchase 812,073 shares of common stock at $0.325 per share for services rendered. These warrants have been accounted for as warrant obligations and are recognized as a liability on the unaudited condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017. For the three months ended June 30, 2018 and 2017, the Company recorded a credit and a charge in the change in fair value of the warrant obligations of $321,161 and $124,791, respectively, and is reflected in the unaudited condensed consolidated statements of operations, other income (expense). For the six months ended June 30, 2018 and 2017, the Company recorded a credit and charge in the change in fair value of the warrant obligations of $1,297,840 and $124,791, respectively, and is reflected in the unaudited condensed consolidated statements of operations, other income (expense). Although the Company issued warrants during the first quarter of 2018, the rights entitled to the third-party holder of the warrants to purchase shares of the Company’s common stock was not exercised. Upon exercising the right to purchase the Company’s common stock by the third-party, the Company will de-recognize the liability for warrant obligations and reclassify the appropriate amount into equity.

The fair value of the Company’s obligation to issue warrants was calculated using the Black-Scholes model and the following assumptions:

	As of June 30, 2018			As of December 31, 2017			As of May 17, 2017
Fair value of company's common stock	$	1.41		$	3.00		$	3.98
Dividend yield		0	%		0	%		0	%
Expected volatility		237.9	%		266.4	%		181.2	%
Risk Free interest rate		2.63	%		1.98	%		1.42	%
Expected life (years)		2.15			2.65			3.00
Fair value of financial instruments - warrants	$	1,131,729		$	2,429,569		$	1,839,133

The change in fair value of the financial instruments – warrants is as follows:

	Amount
Balance as of January 1, 2018	$	2,429,569
Change in fair value of liability to issue warrants		(1,297,840	)
Balance as of June 30, 2018	$	1,131,729

	Amount
Balance as of April 1, 2018	$	1,452,890
Change in fair value of liability to issue warrants		(321,161	)
Balance as of June 30, 2018	$	1,131,729

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2018

Stock Options/Stock-Based Compensation [Abstract]

Stock-Based Compensation

19. Stock-Based Compensation

2017 Omnibus Incentive Plan

The Company’s 2017 Omnibus Incentive Plan (the “2017 Plan”) was adopted by our Board of Directors and a majority of our voting security holders on October 17, 2017. The 2017 Plan permits the granting of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and dividend equivalent rights to eligible employees, directors and consultants. We grant options to purchase shares of common stock under the 2017 Plan at no less than the fair value of the underlying common stock as of the date of grant. Options granted under the Plan have a maximum term of ten years. Under the Plan, a total of 5,000,000 shares of common stock are reserved for issuance. As of June 30, 2018, there were 226,750 shares of common stock outstanding under the 2017 Plan.

XML

Income Taxes

6 Months Ended

Jun. 30, 2018

Income Taxes [Abstract]

Income Taxes

20. Income Taxes

No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company’s net deferred income tax assets for the six months ended June 30, 2018 and 2017 consist of income tax loss carryforwards. These amounts are available for carryforward for use in offsetting taxable income of future years through 2035. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry-forward period. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Due to the Company’s history of operating losses, these deferred tax assets arising from the future tax benefits are currently not likely to be realized and are thus reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes. 

For the six months ended June 30, 2018 and 2017, the Company has a net operating loss carry forward of approximately $8,365,000 and $4,362,000, respectively. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382. The Company applied a 100% valuation reserve against the deferred tax benefit as the realization of the benefit is not certain.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies [Abstract]

Commitments and Contingencies

21. Commitments and Contingencies

The Company is obligated under four operating lease agreements for office facilities in Colorado, Florida, Washington and Hawaii, which expire in February and March 2021.

Rent expense incurred under the Company’s operating leases amount to $65,888 and $22,511 during the three months ended June 30, 2018 and 2017, respectively and $84,451 and $40,721 for the six months ended June 30, 2018 and 2017, respectively.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

22. Subsequent Events

In July 2018, the Company issued 327,777 shares of restricted common stock at $0.90 per share to an investor per a subscription agreement for total proceeds of $294,999.

In July 2018, the Company issued 200,000 shares of restricted common stock to consultants as an inducement to enter into a leak-out agreement with the Company.

In July 2018, the Company issued 100,000 shares of the Company’s common stock registered under 2017 Omnibus Stock Incentive Plan to select employees of the Company.

In July 2018, the Company issued 3,983 shares of the Company’s common stock resulting from the exercise of stock options granted as part of the Security Grade acquisition.

In August 2018, the Company issued 327,777 shares of restricted common stock at $0.90 per share to an investor per a subscription agreement for total proceeds of $294,999.

In August 2018, the Company issued 100,000 shares of restricted common stock as part of an agreement entered into with an investor relation consultant.

In August 2018, the Company entered into a asset acquisition agreement with Engeni LLC and its majority owned subsidiary Engeni SA in the Republic of Argentina (collectively “Engeni”). At closing, the Company issued 366,700 shares of Company restricted common stock to the former owners of Engeni. An additional 10,000 shares of the Company’s restricted common stock were also issued to two of the former owners of Engeni as part of a consulting agreement entered into between the Company and former owners. Upon the achievement of certain milestones, the owners of Engeni may receive up to 733,300 additional shares of Company restricted Common Stock plus $100,000.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC, Boss Security Solutions, Inc., Security Consultants Group Oregon, LLC (“Security Oregon”), Security Grade, and BioTrack THC.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Use of estimates includes the following: 1) allowance for doubtful accounts, 2) estimated useful lives of property, equipment and intangible assets, 3) intangibles impairment, 4) valuation of convertible notes payable and 5) revenue recognition. Actual results could differ from estimates.

Cash

Cash

Cash consists of checking accounts. The Company considers all highly-liquid investments purchased with a maturity of three months or less at the time of purchase to be cash.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

Management charges balances off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due, or delinquent based on how recently payments have been received.

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $34,767 and $3,000 at June 30, 2018 and December 31, 2017.

Long-Lived Assets, Including Definite Lived Intangible Assets

Long-Lived Assets, Including Definite Lived Intangible Assets

Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of non-compete agreements and customer relationships. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

Goodwill

Goodwill

Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. Helix reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

The impairment model prescribes a two-step method for determining goodwill impairment. However, an entity is permitted to first assess qualitative factors to determine whether the two-step goodwill impairment test is necessary. Helix may consider qualitative factors including, but not limited to, general economic conditions, Helix’s outlook, market performance of Helix’s industry and recent and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. In the first step, Helix determines the fair value of its reporting unit using a discounted cash flow analysis. If the net book value of the reporting unit exceeds its fair value, Helix then performs the second step of the impairment test, which requires allocation of the reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to goodwill. An impairment charge is recognized when the implied fair value of Helix’s goodwill is less than its carrying amount.

Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset. It was determined that during the first quarter of 2018, the Company’s entire amount of goodwill attributable to the Security Grade acquisition was impaired. See Note 9 for a further discussion on the impairment.

Accounting for Acquisitions

Accounting for Acquisitions 

In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets acquired, and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations.

Business Combinations

Business Combinations

The Company accounts for its business combinations under the provisions of Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings.

The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using established valuation techniques. The estimated fair value of the net assets acquired was determined using the income approach to valuation based on the discounted cash flow method. Under this method, expected future cash flows of the business on a stand-alone basis are discounted back to a present value. The estimated fair value of identifiable intangible assets, consisting of software and trade name acquired were determined using the relief from royalty method.

The most significant assumptions under the relief from royalty method used to value software and trade names include: estimated remaining useful life, expected revenue, royalty rate, tax rate, discount rate and tax amortization benefit. The discounted cash flow method used to value non-compete agreements includes assumptions such as: expected revenue, term of the non-compete agreements, probability and ability to compete, operating margin, tax rate and discount rate. Management has developed these assumptions on the basis of historical knowledge of the business and projected financial information of the Company. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.

Revenue Recognition

Revenue Recognition

Under FASB Topic 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation.

The security services revenue is generated from performing armed and unarmed guarding which is contracted for on an hourly basis. Revenues associated with these contracted services are recognized under time-based arrangements as services are provided.

Additionally, the Company provides transportation security services, which are generally contracted for on a per-run basis and sometimes additional fees and surcharges are also billed to the client depending on the length of the run. Revenues associated with these services are recognized as the transportation service is provided.

The Company also generates revenue from developing and licensing seed to sale cannabis compliance software to both private-sector and public-sector (government agencies) businesses that are involved in cannabis related operations. The Company also generates revenue from on-going training, support and software customization services.

Occasionally, the Company will enter into systems installation arrangements. Installation jobs are estimated based on the cost of equipment to be installed, the number of hours expected to be incurred to complete the job and other ancillary costs. Revenue associated with these services are recognized over the arrangement period.

Lastly, the Company generates advertising revenues from consumer advertising on its Cannabase platform. Revenue is recognized over the contract period associated with each specific advertising campaign.

Expenses

Expenses

Cost of Revenues

The cost of revenues is the total cost incurred to obtain a sale and the cost of the goods or services sold. Cost of revenues primarily consisted of hourly compensation for security personnel and employees involved in the creation and development of licensing software.

Operating Expenses

Operating expenses encompass selling general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company.

Other (Expense) Income, net

Other (expense) income, net consisted of change in fair value of convertible note, change in fair value of convertible note – related party, interest expense, change in fair value of obligation to issue warrants, loss on extinguishment of debt, loss on impairment of Goodwill and gain on reduction of obligation pursuant to acquisition.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives are 3 years for vehicles and 5 years for furniture and equipment. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are sold, or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in other income.

Contingencies

Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

Leases

Leases

Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.

If at its inception, a lease meets any of the four lease criteria above, the lease is classified by the Company as a capital lease; and if none of the four criteria are met, the lease is classified by the Company as an operating lease.

Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in liabilities.

Advertising

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $34,963 and $1,388 for the three months ended June 30, 2018 and 2017, respectively, and $61,737 and $5,179 for the six months ended June 30, 2018 and 2017, respectively.

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the six months ended June 30, 2018 and 2017.

Distinguishing Liabilities from Equity

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

Initial Measurement

The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.

Subsequent Measurement – Financial instruments classified as liabilities

The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income.

Beneficial Conversion Feature

Beneficial Conversion Feature

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a Beneficial Conversion Feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC 470-20, Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the beneficial conversion feature and the Company amortizes the discount to interest expense over the life of the debt.

The Company accounts for the beneficial conversion feature on its convertible preferred stock in accordance with ASC 470-20, Debt with Conversion and Other Options. The BCF of convertible preferred stock is normally characterized as the convertible portion or feature that provides a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of convertible preferred stock when issued. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

To determine the effective conversion price, the Company first allocates the proceeds received to the convertible preferred stock and then uses those allocated proceeds to determine the effective conversion price. If the convertible instrument is issued in a basket transaction (i.e., issued along with other freestanding financial instruments), the proceeds should first be allocated to the various instruments in the basket. Any amounts paid to the investor when the transaction is consummated (e.g., origination fees, due diligence costs) represent a reduction in the proceeds received by the issuer. The intrinsic value of the conversion option should be measured using the effective conversion price for the convertible preferred stock on the proceeds allocated to that instrument. The effective conversion price represents proceeds allocable to the convertible preferred stock divided by the number of shares into which it is convertible. The effective conversion price is then compared to the per share fair value of the underlying shares on the commitment date.

The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible preferred stock. This discount should be accreted from the date on which the BCF is first recognized through the earliest conversion date for instruments that do not have a stated redemption date. The intrinsic value of the BCF is recognized as a deemed dividend on convertible preferred stock over a period specified in the guidance.

Share-based Compensation

Share-based Compensation

The Company accounts for stock-based compensation to employees in conformity with the provisions of ASC Topic 718, Stock Based Compensation. Stock-based compensation to employees consist of stock options grants and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant.

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees based upon the fair-value of the underlying instrument. The equity instruments, are valued using the Black-Scholes valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services are received.

The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service period of the award.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides a framework for measuring fair value in accordance with generally accepted accounting principles.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

● Level 3 – Inputs that are unobservable for the asset or liability.

Certain assets and liabilities of the Company are required to be recorded at fair value either on a recurring or non-recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. The following section describes the valuation methodologies that the Company used to measure, for disclosure purposes, its financial instruments at fair value.

Convertible notes payable

The fair value of the Company’s convertible notes payable, approximated the carrying value as of June 30, 2018 and December 31, 2017. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2.

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash, accounts receivable, prepaid expenses, deposits, accounts payable and accrued liabilities, advances from shareholders and obligation pursuant to acquisition approximate their fair value due to the short-term maturity of those items.

Earnings (Loss) per Share

Earnings (Loss) per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS excluded all potential dilutive shares if their effect was anti-dilutive.

Basic net loss per share is based on the weighted average number of common and common-equivalent shares outstanding. Potential common shares includable in the computation of fully-diluted per share results are not presented in the consolidated financial statements for the three and six months ended June 30, 2018 and 2017 as their effect would be anti-dilutive.

Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.

The anti-dilutive shares of common stock outstanding for the three and six months ended June 30, 2018 and 2017 were as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Potentially dilutive securities:
Convertible notes payable		135,634		226,320		135,634		226,320
Convertible Preferred A Stock		1,000,000		17,186,713		1,000,000		17,186,713
Convertible Preferred B Stock		13,784,201		7,318,084		13,784,201		7,318,084
Warrants		3,307,073		2,557,195		3,307,073		2,557,195
Stock options		8,704,345		414,854		8,704,345		414,854

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. In April and May 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing”, ASU 2016-11, “Revenue Recognition and Derivatives and Hedging – Recession of SEC Guidance”, ASU 2016-12, “Revenue from Contracts with Customers – Narrow-Scope Improvements and Practical Expedients”, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”.  These ASUs each affect the guidance of the new revenue recognition standard in ASU 2014-09 and related subsequent ASUs. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017 for public companies

On January 1, 2018, we adopted the new accounting standard ASC 606, “Revenue from Contracts with Customers and all the related amendments” (“ASC 606”) to all contracts which were not completed or expired as of January 1, 2018 using the modified retrospective method. The Company had no cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while the comparative information will continue to be reported under the accounting standards in effect for those periods.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method, whereas financing leases will be treated similarly to a capital lease under the current standard. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The new standard must be presented using the modified retrospective method. However, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method to adopt the new leases standard. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company is still evaluating the method of adoption. While the Company is continuing to assess all potential impacts of the new standard, the Company currently believes the most significant impact relates to its accounting for office space, colocation operating leases, and embedded leases within its supplier contracts.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero-coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The guidance was effective for the Company beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted this standard on January 1, 2018.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350); Simplifying the Test for Goodwill Impairment. The amendments in this update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for public companies for the reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Accordingly, at March 31, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value. Please refer to Note 9 for further detail.

In May 2017, the FASB issued ASU No 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all three of the following are met:

(1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

(2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.

(3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. Note that the current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-09. ASU 2017-09 is effective for all annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The updated standard was adopted by the Company on January 1, 2018. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently assessing the potential impact of adopting ASU 2017-11 on its financial statements and related disclosures.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

XML

Revision of Prior Period Financial Statements (Tables)

6 Months Ended

Jun. 30, 2018

Revision of Prior Period Financial Statements [Abstract]

Summary of effects of revisions on financial statements

	Previously Reported			Adjustments			Revised
Condensed Consolidated Balance Sheet as of December 31, 2017
Convertible notes payable, net of discount	$	1,301,004		$	(488,611	)	$	812,393
Total liabilities	$	5,350,899		$	(488,611	)	$	4,862,288
Preferred Shares (Class B) Outstanding		13,306,599			477,602			13,784,201
Preferred Shares (Class B) Par Amount	$	13,307		$	477		$	13,784
Additional Paid in Capital	$	3,923,234		$	552,023		$	4,475,257
Accumulated Deficit	$	(18,177,819	)	$	(63,889	)	$	(18,241,708	)
Total Shareholders' Equity	$	54,350		$	488,611		$	542,961
Total Liabilities and Shareholders' Equity	$	5,405,249		$	-		$	5,405,249

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Summary of Significant Accounting Policies [Abstract]

Schedule of anti-dilutive shares of common stock outstanding

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Potentially dilutive securities:
Convertible notes payable		135,634		226,320		135,634		226,320
Convertible Preferred A Stock		1,000,000		17,186,713		1,000,000		17,186,713
Convertible Preferred B Stock		13,784,201		7,318,084		13,784,201		7,318,084
Warrants		3,307,073		2,557,195		3,307,073		2,557,195
Stock options		8,704,345		414,854		8,704,345		414,854

XML

Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2018

Revenue Recognition [Abstract]

Schedule of disaggregation of revenue

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Types of Revenues:
Security and Guarding	$	1,535,638	$	1,015,662	$	2,629,412	$	1,707,399
Systems Installation		100,699		-		135,263		-
Software		576,142		-		576,142		-
Total revenues	$	2,212,479	$	1,015,662	$	3,340,817	$	1,707,399

XML

Business Combination (Tables)

6 Months Ended

Jun. 30, 2018

Business Acquisition [Line Items]

Schudule of the pro forma financial information purport to represent the results of operations for future periods

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Description	2018			2017			2018			2017
Revenues	$	3,280,872		$	2,660,197		$	6,162,373		$	5,105,097
Net loss		(2,077,322	)		(2,806,083	)		(2,554,163	)		(8,311,917	)
Net loss attributable to common shareholders		(9,281,011	)		(5,961,970	)		(24,756,357	)		(11,467,804	)
Loss per share attributable to common shareholders:
Basic and diluted-as pro forma (unaudited)		(0.22	)		(0.21	)		(0.69	)		(0.40	)

Security Grade Acquisition [Member]

Business Acquisition [Line Items]

Schedule of allocation of the purchase price

Base Price – Cash	$	2,100,373
Base Price - Stock Options		916,643
Contingent Consideration - Stock Options		916,643
Total Purchase Price	$	3,933,659

Schedule of assets acquired and liabilities assumed

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	14,137
Accounts receivable		53,792
Costs & earnings in excess of billings		96,898
Property, plant and equipment, net		27,775
Trademarks		25,000		10
Customer lists		3,154,578		5
Web address		5,000		5
Goodwill		664,329
Other assets		3,880
Total assets acquired	$	4,045,389
Liabilities assumed:
Billings in excess of costs	$	23,967
Loans payable		18,414
Credit card payable and other liabilities		69,349
Total liabilities assumed		111,730
Estimated fair value of net assets acquired	$	3,933,659

Biotrack Acquisition [Member]

Business Acquisition [Line Items]

Schedule of allocation of the purchase price

Base Price - Common Stock	$	44,905,542
Base Price - Stock Options		12,646,491
Total Purchase Price	$	57,552,033

Schedule of assets acquired and liabilities assumed

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	448,697
Accounts receivable		128,427
Prepaid expenses		351,615
Property, plant and equipment, net		72,252
Goodwill		39,135,007
Customer list		8,304,449		5
Software		9,321,627		4.5
Tradename		466,081		4.5
Total assets acquired	$	58,228,155
Liabilities assumed:
Accounts payable	$	223,581
Other liabilities		452,541
Total liabilities assumed		676,122
Estimated fair value of net assets acquired	$	57,552,033

XML

Property and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2018

Property and Equipment, Net [Abstract]

Schedule of property and equipment

	June 30, 2018			December 31, 2017
Furniture and equipment	$	86,292		$	16,332
Software equipment		5,376			1,382
Vehicles		237,805			175,647
Total		329,473			193,361
Less: Accumulated depreciation		(79,448	)		(82,727	)
Property and equipment, net	$	250,025		$	110,634

XML

Intangible Assets, Net and Goodwill (Tables)

6 Months Ended

Jun. 30, 2018

Intangible Assets, Net and Goodwill [Abstract]

Schedule of intangible assets

					June 30, 2018
	Estimated  Useful Life  (Years)		Gross  Carrying  Amount		Assets  Acquired  Pursuant to  Business  Combination (2)		Accumulated Amortization			Net Book  Value
Database		5	$	93,427	$	-	$	(41,444	)	$	51,983
Trade names and trademarks		5 - 10		125,000		466,081		(33,092	)		557,989
Web addresses		5		130,000		-		(56,525	)		73,475
Customer list		5		3,154,578		8,304,449		(810,831	)		10,648,196
Software		4.5		-		9,321,627		(164,433	)		9,157,194
			$	3,503,005	$	18,092,157	$	(1,106,325	)	$	20,488,837

					December 31, 2017
	Estimated Useful Life  (Years)		Gross  Carrying  Amount at  December 31,  2016		Assets  Acquired  Pursuant to  Business  Combination (1)		Accumulated Amortization			Net Book Value
Database		5	$	93,427	$	-	$	(32,183	)	$	61,244
Trade names and trademarks		10		100,000		25,000		(18,675	)		106,325
Web addresses		5		125,000		5,000		(43,639	)		86,361
Customer list		5		-		3,154,578		(366,249	)		2,788,329
			$	318,427	$	3,184,578	$	(460,746	)	$	3,042,259

(1)	On June 2, 2017, the Company acquired various assets of Security Grade Protective Services, Ltd. (See Note 6).
(2)	On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 6).

Summary of goodwill

	Total Goodwill
Balance at January 1, 2018	$	664,329
Impairment of goodwill		(664,329	)
Goodwill attributable to BioTrack acquisition		39,135,007
Balance at June 30, 2018	$	39,135,007

XML

Accounts Payable and Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2018

Accounts Payable and Accrued Expenses [Abstract]

Schedule of accounts payable and accrued expenses

	June 30, 2018		December 31, 2017
Accounts payable	$	1,130,405	$	334,751
Accrued expenses		236,319		220,682
Accrued interest		36,680		43,204
Total	$	1,403,404	$	598,637

XML

Costs, Estimated Earnings and Billings (Tables)

6 Months Ended

Jun. 30, 2018

Costs, Estimated Earnings and Billings [Abstract]

Summary of costs estimated earnings and billings on uncompleted contracts

	June 30, 2018			December 31, 2017
Costs incurred on uncompleted contracts	$	78,108		$	64,704
Estimated earnings		33,213			27,730
Cost and estimated earnings earned on uncompleted contracts		111,321			92,434
Billings to date		163,619			71,778
Costs and estimated earnings in excess of billings on uncompleted contracts		(52,298	)		20,656
Costs in excess of billings	$	9,277		$	40,847
Billings in excess of cost		(61,575	)		(20,191	)
	$	(52,298	)	$	20,656

XML

Convertible Note Payable (Tables)

6 Months Ended

Jun. 30, 2018

Notes Payable/Convertible Note Payable/Promissory Notes [Abstract]

Schedule of convertible note payable

	June 30, 2018			December 31, 2017
Note Five, 5% convertible promissory note, fixed secured, maturing November 16, 2018	$	114,746		$	812,393
		114,746			812,393
Less: Current portion		(114,746	)		(812,393	)
Long-term portion	$	-		$	-

XML

Notes Payable (Tables)

6 Months Ended

Jun. 30, 2018

Notes Payable/Convertible Note Payable/Promissory Notes [Abstract]

Schedule of notes payable

	June 30, 2018			December 31, 2017
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$	92,277		$	55,890
Loans Payable - Credit Union		5,940			8,582
Less: Current portion of loans payable		(7,869	)		(11,179	)
Long-term portion of loans payable	$	90,348		$	53,293

XML

Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2018

Shareholders' Equity [Abstract]

Schedule of the issuances of Series B preferred shares

For the Six Months Ended June 30, 2018
Issuance Date	Beneficial Conversion Feature Term (months)		Number of shares		Fair Value of Beneficial Conversion Feature		Amount accreted as a deemed dividend at December 31, 2017			Amount accreted as a deemed dividend for the Six Months Ended June 30, 2018			Unamortized Beneficial Conversion Feature
May 17, 2017		12		7,318,084	$	25,247,098	$	(15,779,436	)	$	(9,467,661	)	$	-
July 29, 2017		9.5		1,680,000		6,804,000		(3,674,634	)		(3,129,366	)		-
August 29, 2017		8.5		369,756		1,148,263		(556,190	)		(592,073	)		-
September 15, 2017		8		462,195		1,435,329		(648,601	)		(786,728	)		-
October 11, 2017		7		462,195		1,121,036		(426,309	)		(694,727	)		-
October 31, 2017		6.5		1,042,337		1,735,641		(548,570	)		(1,187,071	)		-
December 19, 2017		5		2,449,634		6,921,347		(576,779	)		(6,344,568	)		-
Total				13,784,201	$	44,412,714	$	(22,210,519	)	$	(22,202,194	)	$	-

XML

Stock Options (Tables)

6 Months Ended

Jun. 30, 2018

Stock Options/Stock-Based Compensation [Abstract]

Schedule of stock option activity

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2018		414,854		$	0.001		2.42
Granted		490,000		$	0.001		0.52
Assumed Options pursuant to acquisition		8,132,410		$	0.001		2.41
Forfeited and expired		(121,779	)	$	0.001
Exercised		(212,633	)	$	0.001
Outstanding at June 30, 2018		8,702,852		$	0.001		2.95
Vested options at June 30, 2018		8,425,485		$	0.001		2.43

XML

Warrants (Tables)

6 Months Ended

Jun. 30, 2018

Warrants [Abstract]

Summary of warrant activity

For the Six Months ended June 30, 2018
	Warrant Shares		Weighted Average Exercise Price
Balance at January 1, 2018		2,732,073	$	0.23
Warrants granted		575,000	$	0.01
Balance at June 30, 2018		3,307,073	$	0.19

Schedule of fair value of the company's obligation to issue warrants using Black-Scholes model

	As of June 30, 2018			As of December 31, 2017			As of May 17, 2017
Fair value of company's common stock	$	1.41		$	3.00		$	3.98
Dividend yield		0	%		0	%		0	%
Expected volatility		237.9	%		266.4	%		181.2	%
Risk Free interest rate		2.63	%		1.98	%		1.42	%
Expected life (years)		2.15			2.65			3.00
Fair value of financial instruments - warrants	$	1,131,729		$	2,429,569		$	1,839,133

Schedule of fair value of the financial instrument

	Amount
Balance as of January 1, 2018	$	2,429,569
Change in fair value of liability to issue warrants		(1,297,840	)
Balance as of June 30, 2018	$	1,131,729

	Amount
Balance as of April 1, 2018	$	1,452,890
Change in fair value of liability to issue warrants		(321,161	)
Balance as of June 30, 2018	$	1,131,729

XML

Description of Business (Details)		1 Months Ended
	Oct. 01, 2015	Jun. 01, 2018	Jun. 02, 2017
Description of Business (Textual)
Exchanged percentage of Helix TCS	100.00%
Business acquisition, description	Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. in exchange for 20 million common shares and 1 million convertible preferred shares of the Company.	The Company issued 38,184,985 unregistered shares of its common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (''BioTrackTHC Stock Plan''), pursuant to which options exercisable in the amount of 8,132,410 shares of common stock are outstanding. As a result of the merger, BioTrackTHC stockholders and optionholders own 48% of the Company on a fully diluted basis on the closing date.
Security Grade Protective Services, Ltd [Member]
Description of Business (Textual)
Business acquisition, description			The Company entered into a Membership Interest Purchase Agreement (the ''Agreement'') in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (''Security Grade''), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the ''Initial Stock Options'').

XML

Revision of Prior Period Financial Statements (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Convertible note payable, net of discount	$ 114,746	$ 812,393
Total liabilities	3,247,671	4,862,288
Additional Paid in Capital	79,066,909	18,741,114
Accumulated Deficit	(20,508,733)	(18,241,708)
Total Shareholders' Equity	58,642,094	542,961
Total Liabilities and Shareholders' Equity	$ 61,889,765	5,405,249
Previously Reported [Member]
Convertible note payable, net of discount		1,301,004
Total liabilities		5,350,899
Additional Paid in Capital		3,923,234
Accumulated Deficit		(18,177,819)
Total Shareholders' Equity		54,350
Total Liabilities and Shareholders' Equity		5,405,249
Adjustments [Member]
Convertible note payable, net of discount		(488,611)
Total liabilities		(488,611)
Additional Paid in Capital		552,023
Accumulated Deficit		(63,889)
Total Shareholders' Equity		488,611
Total Liabilities and Shareholders' Equity
Preferred Class A [Member]
Preferred Shares (Class B) Outstanding	1,000,000	1,000,000
Preferred Shares (Class B) Par Amount	$ 1,000	$ 1,000
Total Shareholders' Equity	$ 1,000	$ 1,000
Preferred Class B [Member]
Preferred Shares (Class B) Outstanding	13,784,201	13,784,201
Preferred Shares (Class B) Par Amount	$ 13,784	$ 13,784
Total Shareholders' Equity	$ 13,784	$ 13,784
Preferred Class B [Member] | Previously Reported [Member]
Preferred Shares (Class B) Outstanding		13,306,599
Preferred Shares (Class B) Par Amount		$ 13,307
Preferred Class B [Member] | Adjustments [Member]
Preferred Shares (Class B) Outstanding		477,602
Preferred Shares (Class B) Par Amount		$ 477

XML

Revision of Prior Period Financial Statements (Details Textual) - USD ($)		1 Months Ended			6 Months Ended
	Oct. 11, 2017	Nov. 16, 2017	Oct. 31, 2017	May 17, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Nov. 21, 2017	Sep. 30, 2017	Feb. 13, 2017	Jan. 30, 2017
Revision of Prior Period Financial Statements (Textual)
Convertible shares of common stock									1,000,000
Total proceeds						$ 1,517,500
Additional paid-in capital					79,066,909		$ 18,741,114
Revision of prior period financial statements, description		On November 16, 2017, the Company amended Notes Five, Six, and Seven ("the Amended Notes") with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price ("VWAP") during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. The amendment of Note Six and Seven included terms, permitting the Company the option to tender payment in full on or before November 21, 2017, at a 15% discount of the amended principal amounts.
Retained Earnings (Accumulated Deficit)					(20,508,733)		(18,241,708)
Convertible note payable, net of discount					114,746		812,393
Secured Convertible Promissory Note Five [Member]
Revision of Prior Period Financial Statements (Textual)
Principal amount of notes		$ 281,900
Fair value of notes					$ 114,746		812,393	$ 144,259
Charge to change in fair value							(530,493)
Secured Convertible Promissory Note Six [Member]
Revision of Prior Period Financial Statements (Textual)
Principal amount of notes		38,441
Fair value of notes							110,781
Charge to change in fair value							(72,340)
Remaining principal balance interest rate								15.00%
Secured Convertible Promissory Note Seven [Member]
Revision of Prior Period Financial Statements (Textual)
Principal amount of notes		$ 131,107						$ 144,259
Fair value of notes							377,830
Charge to change in fair value							(246,723)
Remaining principal balance interest rate								15.00%
Convertible Notes Payable [Member]
Revision of Prior Period Financial Statements (Textual)
Unsecured convertible promissory note										$ 180,000	$ 75,000
Fair value of notes								$ 488,611
Remaining principal balance interest rate										8.00%	8.00%
Convertible note payable, net of discount								$ 488,611
Adjustments [Member]
Revision of Prior Period Financial Statements (Textual)
Additional paid-in capital							552,023
Revision of prior period financial statements, description		The Company amended Notes Five, Six, and Seven ("the Amended Notes") with the Fourth Investor. All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price ("VWAP") during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances. The amendment of Note Six and Seven included terms, permitting the Company the option to tender payment in full on or before November 21, 2017, at a 15% discount of the amended principal amounts.			When taking into consideration the two transactions indicated above, the net impact to accumulated deficit was a charge of $63,889, resulting from the netting of the gain of $488,611 from the reduction in the fair value of convertible notes at December 31, 2017 offset by the $552,500 of additional expense associated with the Series B Purchase Agreement.
Retained Earnings (Accumulated Deficit)							(63,889)
Convertible note payable, net of discount							$ (488,611)
Fifth Series B Preferred Stock Purchase Agreement [Member]
Revision of Prior Period Financial Statements (Textual)
Sale of accredited investors, shares	231,097
Exchange for aggregate cash payment	$ 75,000
Total proceeds	$ 150,000
Agreement issued of shares	462,195
Sixth Series B Preferred Stock Purchase Agreement [Member]
Revision of Prior Period Financial Statements (Textual)
Sale of accredited investors, shares			795,833
Exchange for aggregate cash payment			$ 80,000
Total proceeds			$ 557,500
Agreement issued of shares			1,042,337
Series B Preferred Stock [Member]
Revision of Prior Period Financial Statements (Textual)
Sale of accredited investors, shares				5,781,426
Gross proceeds				$ 1,875,000
Unsecured convertible promissory note				$ 500,000
Preferred stock, shares issued					13,784,201		13,784,201
Convertible shares of common stock				7,318,084
Conversion price				$ 0.325
Placement agent fees				$ 1,772,500
Series B Preferred Stock [Member] | Unsecured Convertible Promissory Note [Member]
Revision of Prior Period Financial Statements (Textual)
Preferred stock, shares issued				1,536,658

XML

Going Concern Uncertainty, Financial Condition and Management's Plans (Details) - USD ($)	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Going Concern Uncertainty, Financial Condition and Management's Plans (Textual)
Working capital deficit	$ 1,611,424	$ 3,289,281
Increase of working capital	$ 1,677,857

XML

Summary of Significant Accounting Policies (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Warrants [Member]
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities	3,307,073	2,557,195	3,307,073	2,557,195
Stock options [Member]
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities	8,704,345	414,854	8,704,345	414,854
Convertible notes payable [Member]
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities	135,634	226,320	135,634	226,320
Convertible Preferred A Stock [Member]
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities	1,000,000	17,186,713	1,000,000	17,186,713
Convertible Preferred B Stock [Member]
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities	13,784,201	7,318,084	13,784,201	7,318,084

XML

Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Summary of Significant Accounting Policies (Textual)
Allowance for doubtful accounts	$ 34,767		$ 34,767		$ 3,000
Lease agreements, description			(a) transfer of ownership; (b) bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or (d) the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.
Advertising expense	$ 34,963	$ 1,388	$ 61,737	$ 5,179
Vehicles [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment estimated useful lives			3 years
Furniture and equipment [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment estimated useful lives			5 years

XML

Revenue Recognition (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Types of Revenues:
Security and Guarding	$ 1,535,638	$ 1,015,662	$ 2,629,412	$ 1,707,399
Systems Installation	100,699		135,263
Software	576,142		576,142
Total revenues	$ 2,212,479	$ 1,015,662	$ 3,340,817	$ 1,707,399

XML

Revenue Recognition (Details Textual)	6 Months Ended
	Jun. 30, 2018
Revenue Recognition (Textual)
System installation invoice, percentage	60.00%
Sales team members commissions, description	0-6

XML

Business Combination (Details)	6 Months Ended
	Jun. 30, 2018 USD ($)
Security Grade Acquisition [Member]
Business Acquisition [Line Items]
Base Price - Cash	$ 2,100,373
Base Price - Stock Options	916,643
Contingent Consideration - Stock Options	916,643
Total Purchase Price	3,933,659
Biotrack Acquisition [Member]
Business Acquisition [Line Items]
Base Price - Common Stock	44,905,542
Base Price - Stock Options	12,646,491
Total Purchase Price	$ 57,552,033

XML

Business Combination (Details 1)	6 Months Ended
	Jun. 30, 2018 USD ($)
Security Grade Acquisition [Member]
Assets acquired:
Cash	$ 14,137
Accounts receivable	53,792
Costs & earnings in excess of billings	96,898
Property, plant and equipment, net	27,775
Trademarks	25,000
Customer lists	3,154,578
Web address	5,000
Goodwill	664,329
Other assets	3,880
Total assets acquired	4,045,389
Liabilities assumed:
Billings in excess of costs	23,967
Loans payable	18,414
Credit card payable and other liabilities	69,349
Total liabilities assumed	111,730
Estimated fair value of net assets acquired	3,933,659
Biotrack Acquisition [Member]
Assets acquired:
Cash	448,697
Accounts receivable	128,427
Prepaid expenses	351,615
Property, plant and equipment, net	72,252
Customer lists	8,304,449
Goodwill	39,135,007
Software	9,321,627
Tradename	466,081
Total assets acquired	58,228,155
Liabilities assumed:
Accounts payable	223,581
Other liabilities	452,541
Total liabilities assumed	676,122
Estimated fair value of net assets acquired	$ 57,552,033
Trademarks [Member] | Security Grade Acquisition [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	10 years
Customer lists [Member] | Security Grade Acquisition [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	5 years
Customer lists [Member] | Biotrack Acquisition [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	5 years
Web address [Member] | Security Grade Acquisition [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	5 years
Software [Member] | Biotrack Acquisition [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	4 years 6 months
Tradename [Member] | Biotrack Acquisition [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	4 years 6 months

XML

Business Combination (Details 2) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net loss attributable to common shareholders	$ (9,032,037)	$ (5,580,887)	$ (24,469,219)	$ (11,048,557)
Pro Forma [Member]
Revenues	3,280,872	2,660,197	6,162,373	5,105,097
Net loss	(2,077,322)	(2,806,083)	(2,554,163)	(8,311,917)
Net loss attributable to common shareholders	$ (9,281,011)	$ (5,961,970)	$ (24,756,357)	$ (11,467,804)
Loss per share attributable to common shareholders:
Basic and diluted-as pro forma (unaudited)	$ (0.22)	$ (0.21)	$ (0.69)	$ (0.40)

XML

Business Combination (Details Textual) - USD ($)		1 Months Ended			3 Months Ended	6 Months Ended
	Oct. 01, 2015	Jun. 30, 2018	Jun. 01, 2018	Jun. 02, 2017	Jun. 30, 2018	Jun. 30, 2018
Business Combination (Textual)
Business acquisition, description	Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. in exchange for 20 million common shares and 1 million convertible preferred shares of the Company.		The Company issued 38,184,985 unregistered shares of its common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (''BioTrackTHC Stock Plan''), pursuant to which options exercisable in the amount of 8,132,410 shares of common stock are outstanding. As a result of the merger, BioTrackTHC stockholders and optionholders own 48% of the Company on a fully diluted basis on the closing date.
Liability pursuant to agreement		$ 244,159			$ 244,159	$ 244,159
Cash payment will be payable				$ 800,000
Fair value of contingent consideration				$ 916,643
Total acquisition costs					$ 116,624	$ 116,624
Option issued of acquisition		8,425,485			8,425,485	8,425,485
Security Grade Protective Services, Ltd [Member]
Business Combination (Textual)
Business acquisition, description				The Company entered into a Membership Interest Purchase Agreement (the ''Agreement'') in which the Company purchased all issued and outstanding Units of Security Grade Protective Services, Ltd. (''Security Grade''), which comprised of 800,000 Class A Units and 200,000 Class B Units. At closing, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the ''Initial Stock Options'').
Business combination, contractual relationship, description				Provided that, within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the closing, on the 61st day following the closing, the Company shall deliver an additional $800,000 in cash and issue 207,427 additional stock options (the ''Additional Stock Options''). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Agreement within the first 60 days following the closing, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Agreement in the 180 days immediately preceding such termination.
Option issued of acquisition		70,151			70,151	70,151
Bio Tech Medical Software Inc. [Member]
Business Combination (Textual)
Business acquisition, description			The Company closed the Merger. In connection with closing the Merger, the Company issued 38,184,985 unregistered shares of Company common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc 2014 Stock Incentive Plan (''BioTrackTHC Stock Plan''), pursuant to which options exercisable for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders and optionholders will own 48% of the Company on a fully diluted basis on the closing date.
Revenues		$ 576,142
Net loss		$ 132,109

XML

Asset Acquisition (Details) - USD ($)			6 Months Ended
	Apr. 11, 2016	Mar. 14, 2016	Jun. 30, 2018	Dec. 31, 2017
Asset Acquisition (Textual)
Total consideration	$ 300,000	$ 350,000
Acquisition of assets, description	On April 11, 2016, the Company entered into an asset purchase agreement with Revolutionary, in which the Company purchased all of the intangible rights and property of Revolutionary for total consideration of $300,000 payable in two equal installments pursuant to a promissory note and 2,320,000 shares of restricted common stock of the Company. As of June 30, 2018, the Company owed Revolutionary $0.	On March 14, 2016, the Company purchased one-third of the equity interest in Revolutionary for total consideration of $350,000 in cash and 75,000 shares of common stock of the Company. $50,000 was paid in cash at closing, with the balance ($300,000) being paid in twenty-four monthly installments of $10,417, with a final payment of $50,000 to be paid on the twenty-fifth month.
Liability pursuant to the revolutionary asset acquisition			$ 0	$ 58,370
Purchase price for assets acquired			$ 1,596,750

XML

Property and Equipment, Net (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Property and Equipment, Net [Line Items]
Total	$ 329,473	$ 193,361
Less: Accumulated depreciation	(79,448)	(82,727)
Property and equipment, net	250,025	110,634
Furniture and equipment [Member]
Property and Equipment, Net [Line Items]
Total	86,292	16,332
Vehicles [Member]
Property and Equipment, Net [Line Items]
Total	237,805	175,647
Software [Member]
Property and Equipment, Net [Line Items]
Total	$ 5,376	$ 1,382

XML

Property and Equipment, Net (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Property and Equipment, Net (Textual)
Depreciation expense	$ 32,893	$ 14,830	$ 35,893	$ 23,036

XML

Intangible Assets, Net and Goodwill (Details) - USD ($)		6 Months Ended		12 Months Ended
		Jun. 30, 2018		Dec. 31, 2017
Intangible Assets, Net [Line Items]
Gross Carrying Amount		$ 3,503,005		$ 318,427
Assets Acquired Pursuant to Business Combination		18,092,157	[1]	3,184,578	[2]
Accumulated Amortization		(1,106,325)		(460,746)
Net Book Value		$ 20,488,837		$ 3,042,259
Software [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)		4 years 6 months
Gross Carrying Amount
Assets Acquired Pursuant to Business Combination	[1]	9,321,627
Accumulated Amortization		(164,433)
Net Book Value		$ 9,157,194
Database [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)		5 years		5 years
Gross Carrying Amount		$ 93,427		$ 93,427
Assets Acquired Pursuant to Business Combination			[1]		[2]
Accumulated Amortization		(41,444)		(32,183)
Net Book Value		51,983		$ 61,244
Trade names and trademarks [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)				10 years
Gross Carrying Amount		125,000		$ 100,000
Assets Acquired Pursuant to Business Combination		466,081	[1]	25,000	[2]
Accumulated Amortization		(33,092)		(18,675)
Net Book Value		$ 557,989		$ 106,325
Trade names and trademarks [Member] | Maximum [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)		10 years
Trade names and trademarks [Member] | Minimum [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)		5 years
Web addresses [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)		5 years		5 years
Gross Carrying Amount		$ 130,000		$ 125,000
Assets Acquired Pursuant to Business Combination			[1]	5,000	[2]
Accumulated Amortization		(56,525)		(43,639)
Net Book Value		$ 73,475		$ 86,361
Customer list [Member]
Intangible Assets, Net [Line Items]
Estimated Useful Life (Years)		5 years		5 years
Gross Carrying Amount		$ 3,154,578
Assets Acquired Pursuant to Business Combination		8,304,449	[1]	3,154,578	[2]
Accumulated Amortization		(810,831)		(366,249)
Net Book Value		$ 10,648,196		$ 2,788,329

[1] On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 6).

[2] On June 2, 2017, the Company acquired various assets of Security Grade Protective Services, Ltd. (See Note 6).

XML

Intangible Assets, Net and Goodwill (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Intangible Assets, Net and Goodwill [Abstract]
Balance at January 1, 2018			$ 664,329
Impairment of goodwill			(664,329)
Goodwill attributable to BioTrack acquisition			39,135,007
Balance at March 31, 2018	$ 39,135,007	$ 664,329	$ 39,135,007	$ 664,329

XML

Intangible Assets, Net and Goodwill (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Intangible Assets, Net and Goodwill (Textual)
Amortization expense related to intangible assets	$ 476,003	$ 61,953	$ 645,579	$ 75,374
Goodwill write-off			664,329
Goodwill attributable to BioTrack acquisition			$ 39,135,007

XML

Accounts Payable and Accrued Expenses (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Accounts Payable and Accrued Expenses [Abstract]
Accounts payable	$ 1,130,405	$ 334,751
Accrued expenses	236,319	220,682
Accrued interest	36,680	43,204
Total	$ 1,403,404	$ 598,637

XML

Costs, Estimated Earnings and Billings (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Costs, Estimated Earnings and Billings [Abstract]
Costs incurred on uncompleted contracts	$ 78,108	$ 64,704
Estimated earnings	33,213	27,730
Cost and estimated earnings earned on uncompleted contracts	111,321	92,434
Billings to date	163,619	71,778
Costs and estimated earnings in excess of billings on uncompleted contracts	(52,298)	20,656
Costs in excess of billings	9,277	40,847
Billings in excess of cost	(61,575)	(20,191)
Total	$ (52,298)	$ 20,656

XML

Convertible Note Payable (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Short-term Debt [Line Items]
Convertible note payable	$ 114,746	$ 812,393
Less: Current portion	(114,746)	(812,393)
Long-term portion
Note Five, 5% convertible promissory note, fixed secured, maturing November 16, 2018 [Member]
Short-term Debt [Line Items]
Convertible note payable	$ 114,746	$ 812,393

XML

Convertible Note Payable (Details Textual)

1 Months Ended

3 Months Ended

6 Months Ended

Nov. 21, 2017

USD ($)

Apr. 26, 2017

USD ($)

TradingDays

$ / shares

shares

May 16, 2018

USD ($)

Nov. 16, 2017

USD ($)

Feb. 13, 2017

USD ($)

$ / shares

shares

Sep. 30, 2016

USD ($)

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Mar. 12, 2018

USD ($)

Dec. 31, 2017

USD ($)

Mar. 31, 2017

USD ($)

Jan. 30, 2017

USD ($)

Convertible Notes Payable (Textual)

Loss on extinguishment of debt

$ (4,611,395)

Loss on induced conversion of convertible note

1,503,876

Gain to change in fair value

120,630

$ (353,000)

697,646

$ (353,000)

Unsecured Convertible Promissory Note One [Member]

Convertible Notes Payable (Textual)

Unsecured convertible promissory note

$ 180,000

$ 75,000

Fair value of notes

$ 488,611

Unsecured Convertible Promissory Note Three [Member]

Convertible Notes Payable (Textual)

Loss on extinguishment of debt

4,611,395

Unsecured Convertible Promissory Note Four [Member]

Convertible Notes Payable (Textual)

Change in fair value liability

$ 500,000

Unsecured Convertible Promissory Note Four [Member] | Fourth investor [Member]

Convertible Notes Payable (Textual)

Convertible preferred stock, terms of conversion, description

● Automatic Conversion. The principal balance of the Amended shall automatically convert into shares of Class B Preferred Shares upon execution by the Company and the Fourth Investor of definitive documentation relating to the $500,000, aggregate principal amount, and investment by the Fourth Investor in Class B Preferred Shares of the Company.

● Company Default. In the event of a Company Event of Default, the Fourth Investor the shall have the right to elect to (i) at any time prior to June 30, 2017, convert the aggregate outstanding principal amount of Note Four into Class B Preferred Shares equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis, or (ii) at any time commencing on July 1, 2017 and ending on September 31, 2017, have Note Four redeemed for cash at a redemption price, in aggregate, equal to 150% of the aggregate principal outstanding balance of Note Four or (iii) to convert Note Four into common shares of the Company equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis. In the event the Holder does not elect any remedy in the event of a Company Event of Default, on September 31, 2017 the Amended Note shall be converted in whole into common shares of the Company equal to 6.3% of the Company’s equity capital calculated on a fully-diluted basis.

● Holder Default. In the event of a Holder Event of Default, the Company shall have the right to either (i) redeem the Amended Note at par value at any time prior to June 1, 2017 or (ii) convert the outstanding principal balance into common shares of the Company at market value.

● The $12,000,000 valuation in Note Four is subject to dilution of $600,000 from additional investments in the Company by third parties following the Holder’s $500,000 investment that is memorialized in Note Four. The Holder was to receive the same number of shares as it would have for its investment if it had converted at a $12,000,000 valuation on October 20, 2016 given the 26,587,497 shares outstanding at that time. Note Four was to convert into 1,162,500 shares.

Aggregate principal amount of investment

$ 500,000

Secured Convertible Promissory Note Five [Member]

Convertible Notes Payable (Textual)

Change in fair value liability

$ (530,493)

Retained amount

16,666

Warrants issued amount

22,000

Value of debt

183,333

Beneficial conversion feature

144,666

Interest expense

390,666

Principal amount of notes

$ 281,900

Fair value of notes

144,259

$ 114,746

$ 114,746

812,393

Secured Convertible Promissory Note Five [Member] | Third Investor [Member]

Convertible Notes Payable (Textual)

Unsecured convertible promissory note

$ 183,333

Annual interest rate on debt

10.00%

Convertible notes payable, due date

Sep. 12, 2017

Conversion rate, per share | $ / shares

$ 1.50

Warrant issued to purchase shares of common stock | shares

25,000

Warrants exercise price | $ / shares

$ 1.00

Retained amount

$ 16,666

Value of debt

166,666

Beneficial conversion feature

$ 183,333

Secured Convertible Promissory Note Five [Member] | Fourth investor [Member]

Convertible Notes Payable (Textual)

Discount on debt conversion, description

The Second Amendment states that Note Five shall have a maturity of November 16, 2018 and shall be prepayable at any time at 120% of the unpaid principal and accrued interest balance.

Principal amount of notes

$ 112,305

281,900

Secured Convertible Promissory Note Six [Member]

Convertible Notes Payable (Textual)

Change in fair value liability

(72,340)

Principal amount of notes

38,441

Fair value of notes

110,781

Secured Convertible Promissory Note Six [Member] | Third Investor [Member]

Convertible Notes Payable (Textual)

Annual interest rate on debt

10.00%

Convertible notes payable, due date

Sep. 13, 2017

Conversion rate, per share | $ / shares

$ 6.10

Secured convertible promissory note

$ 25,000

Value of debt

$ 25,000

Secured Convertible Promissory Note Six [Member] | Fourth investor [Member]

Convertible Notes Payable (Textual)

Annual interest rate on debt

10.00%

Trading days related to conversion of debt | TradingDays

30

Convertible preferred stock, terms of conversion, description

At the lower of $1.00 or a 50% discount to the lowest closing bid price of the Company's common stock for the 30 Trading Days prior to conversion.

Secured convertible promissory note

$ 100,000

Warrant issued to purchase shares of common stock | shares

150,000

Warrants exercise price | $ / shares

$ 1

Ownership Percentage

10.00%

Cash proceeds from investors

$ 72,000

Principal amount of notes

38,441

Secured Convertible Promissory Note Seven [Member]

Convertible Notes Payable (Textual)

Change in fair value liability

(246,723)

Principal amount of notes

$ 144,259

131,107

Fair value of notes

$ 377,830

Secured Convertible Promissory Note Seven [Member] | Fourth investor [Member]

Convertible Notes Payable (Textual)

Principal amount of notes

$ 131,107

Notes Five, Six, and Seven [Member]

Convertible Notes Payable (Textual)

Annual interest rate on debt

15.00%

Secured convertible promissory note

$ 144,259

Notes Five, Six, and Seven [Member] | Fourth investor [Member]

Convertible Notes Payable (Textual)

Discount on debt conversion, description

All three notes shall have maturity dates that are six months from November 16, 2017, shall convert at a 40% discount to the lowest one-day Volume Average Weighted Price ("VWAP") during the 30 trading days preceding such conversion, shall incur interest at an annual rate of 5%, and shall be prepayable at any time at 110% of the unpaid principal and accrued interest balances.

Note Five [Member]

Convertible Notes Payable (Textual)

Unsecured convertible promissory note

$ 106,900

XML

Related Party Transactions (Details)

1 Months Ended

3 Months Ended

6 Months Ended

Mar. 11, 2016

USD ($)

TradingDays

Feb. 20, 2018

USD ($)

Mar. 31, 2016

USD ($)

$ / shares

shares

Jun. 30, 2018

USD ($)

$ / shares

shares

Jun. 30, 2017

USD ($)

Mar. 31, 2016

$ / shares

shares

Jun. 30, 2018

USD ($)

$ / shares

shares

Jun. 30, 2017

USD ($)

Dec. 31, 2017

USD ($)

$ / shares

shares

Related Party Transactions (Textual)

Related party loan balance

$ 65,250

$ 65,250

$ 124,750

Fair value of liability

$ 239,343

Shares of restricted common stock | shares

150,000

Common stock per share | $ / shares

$ 0.19

$ 0.19

$ 0.23

Warrants to purchase shares | shares

3,307,073

3,307,073

2,732,073

Subscription Agreement [Member]

Related Party Transactions (Textual)

Shares of restricted common stock | shares

960,000

Total proceeds

$ 150,000

Common stock per share | $ / shares

$ 0.16

$ 0.16

Warrant exercise date, description

The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company’s notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company’s notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company.

Warrants to purchase shares | shares

1,920,000

1,920,000

Note [Member]

Related Party Transactions (Textual)

Principal amount

$ 125,000

Maturity date

Aug. 20, 2018

Promissory note, description

The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of the Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of the Amendment.

Note Five [Member]

Related Party Transactions (Textual)

Principal amount

$ 125,000

Change in fair value of convertible note - related party

$ 0

$ 43,696

$ 118,506

$ 56,107

Interest expense

$ 0

$ 2,618

$ 2,402

$ 5,178

Note Five [Member] | Related Party Holder [Member]

Related Party Transactions (Textual)

Principal amount

$ 150,000

Annual rate of interest

7.00%

Discount on debt conversion, description

Forty percent (40%) discount to the average market closing price.

Trading days related to conversion of debt | TradingDays

5

XML

Promissory Notes (Details) - USD ($)	1 Months Ended		3 Months Ended		6 Months Ended
	Feb. 13, 2017	Jan. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Promissory Notes (Textual)
Interest expense on unsecured promissory note			$ 720	$ 230	$ 1,420	$ 230
Unsecured promissory note [Member]
Promissory Notes (Textual)
Unsecured promissory note	$ 180,000	$ 75,000
Fixed interest rate of unsecured promissory note	8.00%	8.00%
Interest expense on unsecured promissory note			0	1,871	0	2,887
Promissory note due, description	Due and payable on June 30, 2017.
Unsecured promissory note one [Member]
Promissory Notes (Textual)
Interest expense on unsecured promissory note			$ 0	$ 779	$ 0	$ 2,570
Promissory note due, description		Due and payable on June 30, 2017.

XML

Notes Payable (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Notes Payable/Convertible Note Payable/Promissory Notes [Abstract]
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$ 90,348	$ 53,293
Loans Payable - Credit Union	5,940	8,582
Less: Current portion of loans payable	(7,869)	(11,179)
Long-term portion of loans payable	$ 90,348	$ 53,293

XML

Notes Payable (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Notes Payable (Textual)
Interest expense associated with notes payable	$ 720	$ 230	$ 1,420	$ 230
Maturity date, description			Maturing between June 2022 and July 2022.
Maximum [Member]
Notes Payable (Textual)
Loans payable, interest rate	7.00%		7.00%
Minimum [Member]
Notes Payable (Textual)
Loans payable, interest rate	4.70%		4.70%

XML

Shareholders' Equity (Details) - Series B Preferred Stock [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Number of shares	13,784,201	13,784,201
Fair Value of Beneficial Conversion Feature	$ 44,412,714
Amount accreted as a deemed dividend	(22,202,194)	$ (22,210,519)
Unamortized Beneficial Conversion Feature
May 17, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	May 17, 2017
Beneficial Conversion Feature Term (months)	12 months
Number of shares	7,318,084
Fair Value of Beneficial Conversion Feature	$ 25,247,098
Amount accreted as a deemed dividend	(9,467,661)	(15,779,436)
Unamortized Beneficial Conversion Feature
July 29, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	Jul. 29, 2017
Beneficial Conversion Feature Term (months)	9 years 6 months
Number of shares	1,680,000
Fair Value of Beneficial Conversion Feature	$ 6,804,000
Amount accreted as a deemed dividend	(3,129,366)	(3,674,634)
Unamortized Beneficial Conversion Feature
August 29, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	Aug. 29, 2017
Beneficial Conversion Feature Term (months)	8 years 6 months
Number of shares	369,756
Fair Value of Beneficial Conversion Feature	$ 1,148,263
Amount accreted as a deemed dividend	(592,073)	(556,190)
Unamortized Beneficial Conversion Feature
September 15, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	Sep. 15, 2017
Beneficial Conversion Feature Term (months)	8 months
Number of shares	462,195
Fair Value of Beneficial Conversion Feature	$ 1,435,329
Amount accreted as a deemed dividend	(786,728)	(648,601)
Unamortized Beneficial Conversion Feature
October 11, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	Oct. 11, 2017
Beneficial Conversion Feature Term (months)	7 months
Number of shares	462,195
Fair Value of Beneficial Conversion Feature	$ 1,121,036
Amount accreted as a deemed dividend	(694,727)	(426,309)
Unamortized Beneficial Conversion Feature
October 31, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	Oct. 31, 2017
Beneficial Conversion Feature Term (months)	6 years 6 months
Number of shares	1,042,337
Fair Value of Beneficial Conversion Feature	$ 1,735,641
Amount accreted as a deemed dividend	(1,187,071)	(548,570)
Unamortized Beneficial Conversion Feature
December 19, 2017 [Member]
Class of Stock [Line Items]
Issuance Date	Dec. 19, 2017
Beneficial Conversion Feature Term (months)	5 months
Number of shares	2,449,634
Fair Value of Beneficial Conversion Feature	$ 6,921,347
Amount accreted as a deemed dividend	(6,344,568)	$ (576,779)
Unamortized Beneficial Conversion Feature

XML

Shareholders' Equity (Details Textual) - USD ($)

1 Months Ended

3 Months Ended

6 Months Ended

Mar. 12, 2018

Jan. 11, 2018

Oct. 11, 2017

Sep. 15, 2017

Aug. 23, 2017

Jun. 30, 2018

May 30, 2018

May 16, 2018

Apr. 30, 2018

Mar. 31, 2018

Mar. 21, 2018

Feb. 28, 2018

Feb. 20, 2018

Feb. 15, 2018

Dec. 19, 2017

Oct. 31, 2017

Aug. 29, 2017

Jul. 28, 2017

May 17, 2017

Oct. 31, 2015

Jun. 30, 2018

Sep. 30, 2017

Mar. 31, 2016

Jun. 30, 2018

May 31, 2018

Mar. 15, 2018

Dec. 31, 2017

May 12, 2017

Shareholders' Equity (Textual)

Convertible preferred shares

1,000,000

Shares of restricted common stock

150,000

Common stock per share

$ 0.19

$ 0.19

$ 0.19

$ 0.23

Convertible Note to Common Stock [Member]

Shareholders' Equity (Textual)

Conversion of principal amount

$ 50,000

$ 75,000

$ 50,000

Convertible of common stock, shares

63,963

95,945

46,066

Other Common Stock Issuances [Member]

Shareholders' Equity (Textual)

Shares of restricted common stock

38,184,985

Maturity date

Aug. 20, 2018

Amended Convertible Note [Member]

Shareholders' Equity (Textual)

Preferred stock majority voting rights, description

The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of this Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of this Amendment. The principal amount of the note will be reduced to $125,000.

Shares of restricted common stock

15,000

2017 Omnibus Incentive Plan [Member]

Shareholders' Equity (Textual)

Shares of restricted common stock

42,850

Additional number of common stock issued to select employees

100,000

Common stock issued various employees

83,900

Series B Preferred Stock Purchase Agreement [Member]

Shareholders' Equity (Textual)

Accredited investors an aggregate shares

462,195

462,195

2,449,634

1,042,337

369,756

1,680,000

Aggregate cash payment

$ 150,000

$ 150,000

$ 795,000

$ 557,500

$ 120,000

$ 840,000

Subscription Agreements [Member]

Shareholders' Equity (Textual)

Net proceeds

$ 200,000

$ 400,000

$ 450,000

$ 200,000

Shares of restricted common stock

244,444

500,000

500,000

222,222

Second Amendment Agreement [Member]

Shareholders' Equity (Textual)

Preferred conversion rate, description

The holder of a 10% fixed secured convertible promissory note. The new Maturity Date is November 16, 2018. The new interest rate is 5%. The note is prepayable at 120% of the unpaid balance upon 10 business days' notice to the holder, which has the option to convert, in whole or in part, during the notice period. The conversion price shall be equal to a 40% discount to the lowest one-day Volume Average Weighted Price (''VWAP'') during the 30 trading days preceding such conversion.

Consultant [Member] | Other Common Stock Issuances [Member]

Shareholders' Equity (Textual)

Shares of restricted common stock

50,000

Two Selling Shareholders [Member]

Shareholders' Equity (Textual)

Shares of restricted common stock

212,633

Preferred stock (Class A) [Member]

Shareholders' Equity (Textual)

Convertible preferred shares

15,746,127

Preferred stock majority voting rights, description

The Class A Preferred Stock included super majority voting rights and were convertible into 60% of the Company’s common stock.

Preferred stock, shares authorized

3,000,000

3,000,000

3,000,000

3,000,000

Preferred stock, par value

$ 0.001

$ 0.001

$ 0.001

$ 0.001

Ratio split

1:1 ratio

Preferred stock (Class A) [Member] | Security Consultants Group, LLC [Member]

Shareholders' Equity (Textual)

Convertible preferred shares

1,000,000

Equity method investment ownership percentage

100.00%

Preferred stock (Class A) [Member] | Boss Security Solutions, Inc. [Member]

Shareholders' Equity (Textual)

Convertible preferred shares

1,000,000

Equity method investment ownership percentage

100.00%

Preferred stock (Class B) [Member]

Shareholders' Equity (Textual)

Convertible preferred shares

13,306,599

13,306,599

13,306,599

Preferred stock, shares authorized

17,000,000

17,000,000

17,000,000

17,000,000

Preferred stock, par value

$ 0.001

$ 0.001

$ 0.001

$ 0.001

Purchase price per share

$ 3.98

Net cash proceeds

$ 50,000,000

$ 50,000,000

$ 50,000,000

Preferred stock original issue price

$ 0.3253815

$ 0.3253815

$ 0.3253815

Increase in number of shares authorized

17,000,000

Preferred stock (Class B) [Member] | Series B Preferred Stock Purchase Agreement [Member]

Shareholders' Equity (Textual)

Convertible preferred shares

1,536,658

Accredited investors an aggregate shares

5,781,426

Gross proceeds from sold on shares

$ 1,875,000

Unsecured convertible promissory note

$ 500,000

Preferred shares are convertible into common stock

7,318,084

Net proceeds

$ 1,772,500

Warrants issued

462,195

Common stock per share

$ 0.325

Beneficial conversion feature

$ 14,998,505

$ 22,202,194

Series B Preferred Stock [Member]

Shareholders' Equity (Textual)

Convertible preferred shares

7,318,084

Preferred stock, shares authorized

9,000,000

Preferred stock, par value

$ 0.001

Accredited investors an aggregate shares

5,781,426

Purchase price per share

$ 0.325

XML

Stock Options (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Stock Options/Stock-Based Compensation [Abstract]
Beginning Outstanding, Shares Underlying Options	414,854
Granted, Shares Underlying Options	490,000
Assumed options pursuant to acquisition, Shares Underlying Options	8,132,410
Forfeited and expired, Shares Underlying Options	(121,779)
Exercised, Shares Underlying Options	(212,633)
Ending Outstanding, Shares Underlying Options	8,702,852	414,854
Vested options, Shares Underlying Options	8,425,485
Beginning Outstanding, Weighted Average Exercise Price	$ 0.001
Granted, Weighted Average Exercise Price	0.001
Assumed Options pursuant to acquisition, Weighted Average Exercise Price	0.001
Forfeited and expired, Weighted Average Exercise Price	0.001
Exercised, Weighted Average Exercise Price	0.001
Ending Outstanding, Weighted Average Exercise Price	0.001	$ 0.001
Vested options, Weighted Average Exercise Price	$ 0.001
Granted, Weighted Average Remaining Contractual Term (in years)	6 months 7 days
Assumed Options pursuant to acquisition, Weighted Average Remaining Contractual Term (in years)	2 years 4 months 28 days
Outstanding, Weighted Average Remaining Contractual Term (in years)	2 years 11 months 12 days	2 years 5 months 1 day
Vested options, Weighted Average Remaining Contractual Term (in years)	2 years 5 months 5 days

XML

Stock Options (Details Textual) - $ / shares

1 Months Ended

3 Months Ended

Mar. 06, 2018

Jun. 02, 2017

Jun. 01, 2018

Sep. 30, 2017

Stock Options (Textual)

Options to purchase on shares

414,854

Common stock at price per share

$ 0.001

Options to purchase issued shares

207,427

Vesting of remaining shares

207,427

207,427

Options term, description

The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant.

Options granted shares

414,854

Previously issued options cancelled

71,644

Pursuant to options exerciseble price per share

8,132,410

Options exercisable at prices per share, description

Options exercisable at prices of $0.11, $0.79 and $1.66 per share for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders.

Biotrackthc [Member]

Stock Options (Textual)

Equity ownership percentage

48.00%

XML

Warrants (Details)	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Summary of warrant activity
Warrant Shares, Balance at January 1, 2018 | shares	2,732,073
Warrant Shares, Warrants granted | shares	575,000
Warrant Shares, Balance at March 31, 2018 | shares	3,307,073
Weighted Average Exercise Price, Balance at January 1, 2018 | $ / shares	$ 0.23
Weighted Average Exercise Price, Warrants granted | $ / shares	0.01
Weighted Average Exercise Price, Balance at March 31, 2018 | $ / shares	$ 0.19

XML

Warrants (Details 1) - USD ($)		1 Months Ended	6 Months Ended
	Dec. 31, 2017	May 17, 2017	Jun. 30, 2018
Schedule of fair value of the warrants Black-Scholes model
Fair value of company's common stock	$ 3.00	$ 3.98	$ 1.41
Dividend yield	0.00%	0.00%	0.00%
Expected volatility	266.40%	181.20%	237.90%
Risk Free interest rate	1.98%	1.42%	2.63%
Expected life (years)	2 years 7 months 24 days	3 years	2 years 1 month 24 days
Fair value of financial instruments - warrants	$ 2,429,569	$ 1,839,133	$ 1,131,729

XML

Warrants (Details 2) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2017
Summary of warrants
Beginning Balance	$ 1,452,890	$ 2,429,569
Change in fair value of liability to issue warrants	(321,161)	(1,297,840)	$ 124,791
Ending Balance	$ 1,131,729	$ 1,131,729

XML

Warrants (Details Textual) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 13, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Warrants (Textual)
Warrant obligations		$ 321,161	$ (124,791)	$ 1,297,840	$ (124,791)
Issuance of warrants pursuant to consulting agreement		$ 943,000		$ 943,000
Warrants for the purchase of common stock				575,000
Series B Preferred Stock [Member]
Warrants (Textual)
Warrant issued to purchase shares of common stock				812,073
Warrants exercise price				$ 0.325
Warrant [Member]
Warrants (Textual)
Warrant issued to purchase shares of common stock	150,000
Warrants, description	The Warrant is exercisable at any time within five (5) years of issuance and entitles the Purchaser to purchase 150,000 shares of the Common Stock at an exercise price of the lesser of either i) $1.00 or ii) a 50% discount to the lowest closing bid price thirty (30) trading days immediately preceding conversion, subject to certain adjustments.
Consulting Agreement [Member]
Warrants (Textual)
Issuance of common stock resulting from inducement of consulting agreement, Shares				50,000
Secured Convertible Promissory Note Five [Member] | Fourth Investor [Member]
Warrants (Textual)
Secured convertible promissory note	$ 183,333
Cash	166,666
Retained amount	$ 16,666
Warrant issued to purchase shares of common stock	25,000
Warrants exercise price	$ 1.00

XML

Stock-Based Compensation (Details) - shares	Jun. 30, 2018	Dec. 31, 2017	Oct. 17, 2017
Stock-Based Compensation (Textual)
Common stock, shares outstanding	69,133,410	28,771,402
2017 Omnibus Incentive Plan [Member]
Stock-Based Compensation (Textual)
Reserved for issuance of common stock			5,000,000
Common stock, shares outstanding	226,750

XML

Income Taxes (Details) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Income Taxes (Textual)
Tax carryforward, description	These amounts are available for carryforward for use in offsetting taxable income of future years through 2035.
Reduced to offsetting valuation allowance	$ 0
Percentage of valuation reserve deferred tax benefit	100.00%
Net operating loss carry forward	$ 8,365,000	$ 4,362,000

XML

Commitments and Contingencies (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) Agreements	Jun. 30, 2017 USD ($)
Commitments and Contingencies (Textual)
Operating lease, rent expense | $	$ 84,451	$ 40,721	$ 65,888	$ 22,511
Lease agreement expires date			Mar. 31, 2021
Number of operating lease agreements | Agreements			4

XML

Subsequent Events (Details) - Subsequent Events [Member] - USD ($)	1 Months Ended
	Aug. 31, 2018	Jul. 31, 2018
Omnibus Stock Incentive Plan [Member]
Subsequent Events (Textual)
Common stock, shares issued		100,000
Subscription agreement [Member]
Subsequent Events (Textual)
Common stock, shares issued	327,777	327,777
Common stock total proceeds	$ 294,999	$ 294,999
Common stock price per share	$ 0.90	$ 0.90
Leak-out agreement [Member]
Subsequent Events (Textual)
Common stock, shares issued		200,000
Security Grade Acquisition [Member]
Subsequent Events (Textual)
Common stock, shares issued		3,983
Asset acquisition agreement [Member]
Subsequent Events (Textual)
Common stock, shares issued	366,700
Additional common stock, shares issued description	An additional 10,000 shares of the Company's restricted common stock were also issued to two of the former owners of Engeni as part of a consulting agreement entered into between the Company and former owners. Upon the achievement of certain milestones, the owners of Engeni may receive up to 733,300 additional shares of Company restricted Common Stock plus $100,000.
Consultant Agreement [Member]
Subsequent Events (Textual)
Common stock, shares issued	100,000