10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)
☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2018
☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commissions file number: 000-54530

GOPHER PROTOCOL INC.

(Exact name of registrant as specified in its charter)

Nevada	27-0603137
State or other jurisdiction of	I.R.S. Employer Identification Number
incorporation or organization

2500 Broadway, Suite F-125, Santa Monica, CA 90404

Issuer’s telephone number:          424-238-4589 

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 reports), 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer  ☐

Non-accelerated filer  ☐      (Do not check if a smaller reporting company)  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 Exchange Act). Yes ☐ No ☒ 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 

Common Stock, $0.00001 par value	132,538,132  Common Shares
(Class)	(Outstanding at August 10, 2018)

 1

GOPHER PROTOCOL, INC.

TABLE OF CONTENTS

PART I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017 (audited)	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and June 30, 2017 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018, and June 30, 2017 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	Other Information	33
Signatures		44

 2

Item 1: Condensed consolidated financial statements

GOPHER PROTOCOL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS	June 30,			December 31,
	2018			2017
		(unaudited)
Current Assets:
Cash	$	322,126		$	1,305,062
Accounts receivable		694,532			41,947
Inventory		298,354			262,749
Prepaid expenses		88,000			—
Total current assets		1,403,012			1,609,758
Property and equipment, net		304,179			263,082
Intangible assets, net		7,191,696			6,666,667
Other assets		200,000			1,979
Goodwill		4,391,496			950,619
Total assets	$	13,490,383		$	9,492,105
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses (including related parties of $232,707 and $51,167)	$	1,571,764		$	1,199,215
Unearned revenue		57,789			—
Due to Guardian LLC (related party)		408,413			1,350,262
Convertible notes payable, net of discount of $1,084,254 and $54,377		415,746			25,623
Note payable		700,000			—
Derivative liability		—			95,164
Total current liabilities		3,153,712			2,670,264
Note payable		2,600,000			2,600,000
Total liabilities		5,753,712			5,270,264
Contingencies		—			—
Stockholders' Equity:
Series B Preferred stock, $0.00001 par value; 20,000,000 shares authorized; 45,000 and 45,000 shares issued and outstanding at June 30, 2018 and December 31, 2017		—			—
Series C Preferred stock, $0.00001 par value; 10,000 shares authorized; 700 and 700 shares issued and outstanding at June 30, 2018 and December 31, 2017		—			—
Series D Preferred stock, $0.00001 par value; 100,000 shares authorized; 0 and 66,000 shares issued and outstanding at June 30, 2018 and December 31, 2017		—			1
Series G Preferred stock, $0.00001 par value; 2,000,000 shares authorized; 2,000,000 and 2,000,000 shares issued and outstanding at June 30, 2018 and December 31, 2017		20			20
Common stock, $0.00001 par value; 500,000,000 shares authorized; 132,138,132 and 58,215,406 shares issued and outstanding at June 30, 2018 and December 31, 2017		3,321			2,582
Treasury stock, at cost; 1,040 shares at June 30, 2018 and December 31, 2017		(643,059	)		(643,059	)
Additional paid in captial		44,360,778			19,243,959
Accumulated deficit		(35,984,389	)		(14,381,662	)
Total stockholders' equity		7,736,671			4,221,841
Total liabilities and stockholders' equity	$	13,490,383		$	9,492,105

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

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GOPHER PROTOCOL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Sales:
Sales	$	13,421,410		$	—		$	21,281,016		$	—
Related party sales		45,000			45,000			90,000			90,000
Total sales		13,466,410			45,000			21,371,016			90,000
Cost of goods sold		12,919,777			—			20,623,953			—
Gross profit		546,633			45,000			747,063			90,000
Operating expenses:
General and administrative expenses		6,105,134			250,030			10,495,241			420,659
Marketing expenses		140,324			114,365			270,501			170,913
Acquisition costs		1,377,919			—			10,966,791			—
Total operating expenses		7,623,377			364,395			21,732,533			591,572
Loss from operations		(7,076,744	)		(319,395	)		(20,985,470	)		(501,572	)
Other income (expense):
Amortization of debt discount		(355,993	)		(50,213	)		(470,123	)		(50,213	)
Change in fair value of derivative liability		—			496,037			(18,123	)		496,037
Interest expense and financing costs		(61,968	)		(1,518,814	)		(129,011	)		(1,519,819	)
Total other income (expense)		(417,961	)		(1,072,990	)		(617,257	)		(1,073,995	)
Loss before income taxes		(7,494,705	)		(1,392,385	)		(21,602,727	)		(1,575,567	)
Income tax expense		—			—			—			—
Net loss	$	(7,494,705	)	$	(1,392,385	)	$	(21,602,727	)	$	(1,575,567	)
Weighted average common shares outstanding:
Basic and diluted		131,420,134			37,706,759			109,560,508			37,816,078
Net loss per share:
Basic and diluted	$	(0.06	)	$	(0.04	)	$	(0.20	)	$	(0.04	)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

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GOPHER PROTOCOL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended June 30,
	2018			2017
Cash Flows From Operating Activities:
Net loss	$	(21,602,727	)	$	(1,575,567	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation of property and equipment		51,164			699
Amortization of intangible assets		549,971			—
Amortization of debt discount		470,123			50,213
Change in fair value of derivative liability		18,123			(496,037	)
Financing cost					1,517,201
Shares issued for services		11,052,725			26,500
Warrants issued for services		7,570,668			—
Changes in operating assets and liabilities:
Accounts receivable		(652,585	)		4,977
Inventory		(35,605	)		—
Prepaid expenses		(88,000	)		3,499
Accounts payable and accrued expenses		372,549			(469,408	)
Unearned revenue		57,789			—
Due to Guardian, LLC		(941,849	)		679,773
Accrued interest on convertible notes payable		—			2,618
Net cash used in operating activities		(3,177,654	)		(255,532	)
Cash Flows From Investing Activities:
Purchase of property and equipment		(27,261	)		—
Cash paid for acquisitions		(200,000	)		—
Cash paid for investment in Spare		(200,000	)		—
Other		1,979			—
Net cash used in investing activities		(425,282	)		—
Cash Flows From Financing Activities:
Issuance of convertible notes		1,500,000			300,482
Repayment of convertible notes		(80,000	)		—
Payment on acquisition note		(300,000	)
Issuance of common stock		1,500,000			—
Net cash provided by financing activities		2,620,000			300,482
Net decrease in cash		(982,936	)		44,950
Cash, beginning of period		1,305,062			5,096
Cash, end of period	$	322,126		$	50,046
Cash paid for:
Interest	$	36,695		$	—
Income taxes	$	—		$	—
Supplemental non-cash investing and financing activities
Debt discount	$	1,500,000		$	909,919
Transfer of derivative liability to equity	$	113,287		$	—
Shares issued to reduce notes payable	$	—		$	25,217
Reclassification of a payable to Guardian LLC to a convertible note payable	$	—		$	679,773

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

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GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017  

(UNAUDITED)

Note 1 - Organization and Basis of Presentation

Organization and Line of Business

Gopher Protocol Inc. (the “Company”, “Gopher”, “Gopher Protocol” or “GOPH”) was incorporated on July 22, 2009 under the laws of the State of Nevada and relocated its headquarters to Santa Monica, California in 2016. Gopher is a development stage company that is creating innovative mobile microchip (ICs) and software technologies based on GopherInsight ™ . The Company derived revenues from the provision of IT services to Guardian Patch LLC, a related party (“Guardian LLC”) and the Company recognizes revenue from the operations of the acquired assets it acquired in the third quarter of 2017.

The unaudited consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results expected for the year ending December 31, 2018.

GopherInsight ™ is a patented real time, heuristic (self-learning/artificial intelligence) based mobile technology. GopherInsight ™ chip technology, if successfully fully developed, will be able to be installed in mobile devices (smartphones, tablets, laptops, etc.) as well as stand-alone products. It is intended that GopherInsight ™ software applications will work in conjunction with GopherInsight ™ microchips across mobile operating systems, providing computing power, advanced database management/sharing functionalities and more. The technology under development consists of a smart microchip, mobile application software and supporting software. The system contemplates the creation of a global network. Once fully developed, the Company believes that its microchip technologies may be installed within mobile devices or on SIM cards.

On March 29, 2016, the Company contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC and a commitment from Guardian LLC that it is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch, as well as funding the working capital needs of the Company.

On September 1, 2017, the Company entered into an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC, a Georgia corporation. The Company entered into this Asset Purchase Agreement to acquire terminals in approximately 15,000 locations by which the Company will deploy its technology. The operations consist primarily of the sale of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards. The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets.

On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, and a processing software program.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Central State Legal Services Inc. (“CSLS”), a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with the a system to recover funds from returned checks. 

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Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include depreciable lives of property and equipment, valuation of beneficial conversion feature debt discounts, valuation of derivatives, and the valuation allowance on deferred tax assets.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, UGopherServices Corp, since the date of acquisition (September 1, 2017), Ugopherservices Limited (since its date of formation of February 1, 2018), an England and Wales a private limited company that is currently inactive and ECS, Electronic Check and CSLS since their respective dates of acquisition (March 1, 2018, April 2, 2018 and April 2, 2018). All significant intercompany transactions and balances have been eliminated.

Cash Equivalents

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company grants credit to establishments (such as convenience stores) that sell the Company’s products under credit terms that it believes are customary in the industry and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within 10 days of the product sale and the Company has minimal bad debts. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. The Company’s allowance for doubtful accounts was $0 and $0 at June 30, 2018 and December 31, 2017, respectively.

Inventory

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At June 30, 2018 and December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Furniture	7 years
Computers and equipment	3 years
POSA machines	3 years

 7

Long-Lived Assets

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at June 30, 2018 and December 31, 2017, the Company believes there was no impairment of its long-lived assets.

Intangible Assets

The Company’s intangible assets were acquired with the acquisition of certain RWJ assets in 2017, and the acquisition of certain ECS, Electronic Check and CSLS assets in 2018 are being amortized over 84 months. The Company performs a test for impairment annually. As of June 30, 2018 and December 31, 2017, the Company performed the required impairment analysis, which resulted in no impairment adjustments. 

Goodwill

Goodwill represents the excess of purchase price over the underlying book value of the net assets of the businesses that were acquired. Under accounting requirements, goodwill is not amortized, but is subject to annual impairment tests. The Company recorded goodwill of $950,619 related to its acquisition of certain RWJ assets in 2017, and $2,052,958 and $1,387,919, respectively, related to its acquisition of certain ECS and Electronic Check assets in 2018.

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2017, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion. During the six months ended June 30, 2018, the convertible note with the embedded conversion feature was repaid; therefore, there are no derivative financial instruments outstanding at June 30, 2018.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 8

● Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

At December 31, 2017, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

	Fair Value		Fair Value Measurements at
	As of		December 31, 2017
Description	December 31, 2017		Using Fair Value Hierarchy
			Level 1		Level 2		Level 3
Conversion feature on convertible notes	$	95,164	$	—	$	95,164	$	—
Total	$	95,164	$	—	$	95,164	$	—

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 815 at June 30, 2018.

Treasury Stock

Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital. During 2011, the Company bought back 8 post-split shares (38,000 pre-split) shares of its own shares.

Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 606, Revenue From Contracts with Customers. The Company recognizes revenue from the sale of phones, phone card products and prepaid cards at the time of sale to the customer. The Company recognizes revenue from IT-related services at the time the services are performed.

Cost of Goods Sold

Cost of goods sold represents the cost of the phone and phone card products sold by the Company. In 2017 the Company did not have cost of goods sold, as all of its revenue was generated from consulting income. In 2018, the entire cost of goods sold relates to products sold by the Company’s new acquired acquisitions in September 2017, March 2018 and April 2018.

Unearned revenue

Unearned revenue represents the amount received for the purchase of products that have not seen shipped to the Company’s customers. In the second quarter of 2018, the Company ran a pre-sales campaign for its pet tracker product and received $57,789 in unearned revenue as of June 30, 2018.

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Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

	June 30,		June 30,
	2018		2017
Series B preferred stock		3,000		3,000
Series C preferred stock		770		770
Series D preferred stock		—		66,000,000
Series G preferred stock		2,000,000		—
Warrants		28,410,416		93,750
Convertible notes		1,583,333		10,060,102
Total		31,997,519		76,157,622

Recent Accounting Pronouncements

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of this ASU on its 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 interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASU did not have an impact on its financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

 10

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

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 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company has evaluated the impact of ASU 2014-09 on the Company's financial statements and disclosures does not believe the impact will be material. The Company adopted this ASU beginning on January 1, 2018 and used the prospective method of adoption.

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

Note 3 - Acquisitions

On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000. In addition, the Company issued 500,000 shares of common stock of the Company and warrants to purchase 500,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $1.85 per share. The note is secured by the assets acquired by the Company from ECS and the Company is required to make ten equal principal payments of $100,000 commencing on April 15, 2018. The Company may prepay the note at any time without penalty.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check, a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity. The purchase price was $75,000 in cash, and the Company issued 250,000 shares of common stock of the Company and warrants to purchase 250,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $2.70 per share.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with CSLS, a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration for $25,000.

 11

The Company entered into these asset purchase agreements to acquire the software needed to process transactions for its prepaid business, and to acquire additional terminal locations by which the Company will deploy its technology.

A summary of the purchase price and the purchase price allocations at fair value is shown below. The purchase price allocation is preliminary and subject to change. The Company has not yet completed its analysis to determine the fair value of the assets acquired on the acquisition date. Once this analysis is complete, the Company will adjust, if necessary, the provisional amounts assigned to the assets purchased in the accounting period in which the analysis is completed.

				Electronic
	ECS			Check			CSLS		Total
Purchase price
Cash	$	100,000		$	75,000		$	25,000	$	200,000
Shares of common stock		1,010,000	a		695,000	c		—		1,705,000
Secured promissory note		1,000,000			—			—		1,000,000
Warrants		992,958	b		682,919	d		—		1,675,877
	$	3,102,958		$	1,452,919		$	25,000	$	4,580,877
Allocation of purchase price
Property and equipment	$	50,000		$	15,000		$	—	$	65,000
Software		1,000,000			50,000			25,000		1,075,000
Goodwill		2,052,958			1,387,919			—		3,440,877
Purchase price	$	3,102,958		$	1,452,919		$	25,000	$	4,580,877

a. the fair value of the 500,000 shares of common stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

b. the fair value of the 500,000 warrants was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.65%

c. the fair value of the 250,000 shares of common stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

d. the fair value of the 250,000 warrants was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.65%

The revenue from the acquisition of assets included in the results of operations from the date of acquisition to June 30, 2018 was $10,845,896.

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The unaudited pro forma information below present statement of operations data as if the acquisition of assets had taken place on January 1, 2017.

	Six Months Ended June 30,
	2018			2017
Sales	$	26,733,878		$	13,621,042
Cost of goods sold		25,862,148			13,215,967
Gross profit		871,730			405,075
Operating expenses		21,900,805			1,779,178
Loss from operations		(21,029,075	)		(1,374,103	)
Net loss		(21,646,332	)		(2,448,098	)
Loss per share		(0.20	)		(0.06	)

Note 4 - Property and Equipment, Net

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

	June 30,			December 31,
	2018			2017
Furniture	$	33,739		$	33,740
Computers and equipment		56,824			22,816
POSA machines		312,219			253,965
		402,782			310,521
Less accumulated depreciation		(98,603	)		(47,439	)
Property and equipment, net	$	304,179		$	263,082

Depreciation expense for the six months ended June 30, 2018 and 2017 was $51,164 and $699, respectively.

Note 5 – Intangible Assets, Net

The following are the intangible assets at June 30, 2018 and December 31, 2017:

	June 30			December 31,
	2018			2017
Leased locations	$	7,000,000		$	7,000,000
Software		1,075,000			—
		8,075,000			7,000,000
Less accumulated amortization		(883,304	)		(333,333	)
Intangible assets, net	$	7,191,696		$	6,666,667

All of these intangible assets are being amortized over 84 months.

Amortization expense for the six months ended June 30, 2018 and 2017 was $549,971 and $0, respectively.

The estimated future amortization expense related to intangible assets is as follows:

Twelve months ending June 30,
2019	$	1,153,571
2020		1,153,571
2021		1,153,571
2022		1,153,571
2023		1,153,571
Thereafter		1,423,841
	$	7,191,696

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Note 6 - Other Assets

Other assets at June 30, 2018 consist of an acquisition deposit of $200,000 (See Note 12).

Note 7 – Convertible Notes Payable

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

	June 30,			December 31,
	2018			2017
Convertible notes payable to Power Up	$	—		$	80,000
Convertible notes payable to Bellridge Capital		1,500,000			—
Total convertible notes payable		1,500,000			80,000
Unamortized debt discount		(1,084,254	)		(54,377	)
Convertible notes payable	$	415,746		$	25,623

Power Up Lending Group Ltd.

On October 2, 2017, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd., an accredited investor (“Power Up”) pursuant to which the Company issued to Power Up a Convertible Promissory Note (the “Power Note”) in the aggregate principal amount of $80,000. The Power Note has a maturity date of July 10, 2018 and the Company has agreed to pay interest on the unpaid principal balance of the Power Note at the rate of ten percent (10%) per annum from the date on which the Power Note is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Power Note, provided it makes a payment to Power Up as set forth in the Power Note. The transactions described above closed on October 4, 2017.

The outstanding principal amount of the Power Note is convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest trading price with a 15 day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Power Note), the Power Note shall become immediately due and payable and the Company shall pay to Power Up, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Power Note.

In no event shall Power Up be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by Power Up and its affiliates would exceed 4.9% of the outstanding shares of the common stock of the Company.

As of March 6, 2018, the Company has paid off in full all principal, interest and penalties with respect to the Power Up Note, and there are no further obligations owed with respect to such note.

Bellridge Capital LLC

On March 2, 2018, the Company entered into and closed a Securities Purchase Agreement with Bellridge Capital, LLC (“Bellridge”) pursuant to which Bellridge invested $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share. The Bellridge Debenture bears interest of 10% and is payable March 1, 2019. The Bellridge Debenture is convertible into shares of common stock at $0.90 per share subject to antidilution protection. During an event of default, the conversion price in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise its Common Stock Purchase Warrants and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

On March 2, 2018, the Company delivered 1,000,000 shares of Common Stock to an escrow agent. The 1,000,000 escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7^th monthly anniversary of the issuance of the 1,000,000 escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

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(($1.00 – closing price on 1 ^st day of each monthly anniversary beginning on the 1 ^st day of the 7 ^th month (and continuing monthly until all shares are sold) / closing price of the 1 ^st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

In connection with the Bellridge Debenture, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $2.35.

The Company first determined the value of the convertible note and the fair value of the detachable warrants issued in connection with this transaction. The estimated value of the warrants of $827,428 and was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.65%

The face amount of the convertible note of $750,000 was proportionately allocated to the convertible note and the warrant in the amount of $356,593 and $393,407, respectively. The amount allocated to the warrants of $393,407 was recorded as a discount to the convertible note and as additional paid in capital. The value of the convertible note was then allocated between the convertible note and the beneficial conversion feature, which amounted to $0 and $356,593, respectively. The combined total discount is $750,000, and will be amortized over the year life of the convertible note.

On April 9, 2018, Bellridge elected to exercise the Bellridge Option, and as such the Company and Bellridge closed the second financing as contemplated by the Securities Purchase Agreement entered with Bellridge pursuant to which Bellridge invested an additional $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Second Bellridge Debenture” and together with the First Bellridge Debenture, the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “Second Bellridge Warrant” and together with the First Bellridge Warrant, the “Bellridge Warrant”) The Bellridge Debenture bears interest of 10% and is payable one year from issuance. The First Bellridge Debenture and the Second Bellridge Debenture are convertible into shares of common stock at $0.90 per share and $1.00 per share, respectively, subject to limited antidilution protection.

During an event of default, the conversion price for the Bellridge Debenture in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise the Bellridge Warrant and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

In connection with both closings, the Company delivered 1,000,000 shares of common stock to an escrow agent. The escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7 ^th monthly anniversary of the issuance of the escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1 ^st day of each monthly anniversary beginning on the 1 ^st day of the 7 ^th month (and continuing monthly until all shares are sold) / closing price of the 1 ^st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

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In connection with the Second Bellridge Debenture, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $2.35.

The Company first determined the value of the convertible note and the fair value of the detachable warrants issued in connection with this transaction. The estimated value of the warrants of $2,037,713 and was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.60%

The face amount of the convertible note of $750,000 was proportionately allocated to the convertible note and the warrant in the amount of $548,222 and $201,778, respectively. The amount allocated to the warrants of $548,222 was recorded as a discount to the convertible note and as additional paid in capital. The value of the convertible note was then allocated between the convertible note and the beneficial conversion feature, which amounted to $0 and $201,778, respectively. The combined total discount is $750,000, and will be amortized over the year life of the convertible note.

Discounts on convertible notes

The Company recognized interest expense of $470,123 during the six months ended June 30, 2018 related to the amortization of the debt discount. The unamortized debt discount at June 30, 2018 is $1,084,254.

A roll-forward of the convertible note from December 31, 2017 to June 30, 2018 is below:

Convertible notes, December 31, 2017	$	25,623
Issued for cash		1,500,000
Repayment in cash		(80,000	)
Debt discount related to new convertible notes		(1,500,000	)
Amortization of debt discounts		470,123
Convertible notes, June 30, 2018	$	415,746

Note 8 - Derivative Liability

Certain of the convertible notes payable discussed in Note 7 have a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

The Company uses a weighted average Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability at December 31, 2017:

Stock price	$	1.12
Risk free rate		1.76	%
Volatility		175	%
Conversion/ Exercise price	$	0.60
Dividend rate		0	%
Term (years)		0.5 years

The following table represents the Company’s derivative liability activity for the six months ended June 30, 2018:

Derivative liability balance, December 31, 2017	$	95,164
Fair value of beneficial conversion feature of debt repaid		(113,287	)
Change in derivative liability during the period		18,123
Derivative liability balance, June 30, 2018	$	—

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During the six months ended June 30, 2018, the convertible note with the embedded conversion feature was repaid; therefore, there is no derivative liability outstanding at June 30, 2018.

Note 9- Note Payable

In connection with the acquisition RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum is due on December 31, 2019 and is secured by the assets purchased in the acquisition. This note payable of $2,600,000 is classified as long-term in the accompanying consolidated balance sheet.

In connection with the acquisition of ECS as discussed in Note 3, the Company issued a note payable. The note is to be repaid in monthly installment payments of $100,000 with the final payment due on January 15, 2019. As of June 30, 2018, four such payments have occurred. This note with a remaining balance of $700,000 at June 30, 2018 is secured by the assets purchased in the acquisition and is classified as short-term in the accompanying consolidated balance sheet.

Note 10- Stockholders’ Equity

Common Stock

During the six months ended June 30, 2018, the Company had the following transactions in its common stock:

● issued 66,000,000 shares in connection with the conversion of 66,000 shares of Series D Preferred Stock;

● issued 250,000 shares to a consultant for professional services rendered valued at $123,725. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the dates that the shares earned based on the agreement;

● issued an aggregate of 1,400,000 shares to employees and board members as part of their agreements with the Company. The value of the common stock of $3,624,000 was determined based on the closing stock price of the Company’s common stock on the date of the respective agreements;

● issued 3,000,000 to a consultant for services related to assisting the Company with the acquisition of the RWJ assets. The 3,000,000 shares were earned when the operations of the RWJ assets produced revenue in excess of $10,000,000. The value of the common stock of $4,590,000 was determined based on the closing stock price of the Company’s common stock on the date of the shares were earned.

● issued aggregate of 1,250,000 shares to a consultant for services rendered valued at $2,715,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of acquisition of ECS and Electronic Check;

● issued 500,000 shares for the acquisition of the ECS assets valued at $1,010,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;

● issued 250,000 shares for the acquisition of the Electronic Check valued at $695,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date; and

● issued 1,272,726 shares of common stock to an investor for cash proceeds of $1,500,000 (See discussion below).

Eagle Equities, LLC

On December 29, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares of the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). Eagle agreed to potentially purchase an additional 666,666 shares of common stock (the “Second Closing Shares”) on or before June 30, 2018 for a purchase price of $500,000 subject to various closing conditions. On March 21, 2018, Eagle purchased an additional 666,666 shares of common stock for a purchase price of $500,000.

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The Company placed an aggregate of 2,000,000 shares of common stock (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Shares and Second Closing Shares, Eagle has sold any of the First Closing Shares or the Second Closing Shares at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

On May 4, 2018, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which Eagle agreed to purchase up to 1,212,120 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 or $1.65 per share. The closing occurred on May 4, 2018 with respect to the funding of $500,000 resulting in the issuance of 303,030 shares of common stock and on May 25, 2018 with respect to the funding of $500,000 resulting in the issuance of an additional 303,030 shares of common stock. Additional closings of $500,000 for 303,030 shares are scheduled to close on June 15, 2018 and July 5, 2018 each. The additional closings on June 15, 2018 and July 5, 2018 have not occurred.

The Company agreed to place 303,030 shares of common stock each tranche (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the closing of each tranche, Eagle has sold any of its shares of common stock at a sales price of less than $1.65 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($1.65 – Closing Price) / Closing Price) * number of shares sold at a price less than $1.65.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of June 4, 2019 or until all shares are sold.

Series D Preferred Shares

Per the terms of the Exclusive License Agreement and in consideration of the licensing agreement signed between the Company and Hermes Roll LLC, the Company issued 100,000 shares of Series D Preferred Stock of the Company (the “Preferred Shares”). The preferred stock has a value of $ 1,000 based upon the cost of the license; due to the holder of license is the related party of the Company. The Preferred Shares have no liquidation rights. The Holder of the Preferred Shares will be entitled to vote on all matters submitted to shareholders of the Company on an as-converted basis. The Preferred Shares have a conversion price of $0.01 (the “Conversion Price”) and a stated value of $10.00 per share (the “Stated Value”). Each Preferred Share is convertible, at the option of the Holder, into such number of shares of common stock of the Company as determined by dividing the Stated Value by the Conversion Price.

On January 23, 2018, Reko Holdings, LLC converted 66,000 shares of its Series D Preferred Stock into 66,000,000 restricted common shares.

As of June 30, 2018 and December 31, 2017, there are 0 and 66,000 shares of Series D Preferred Shares outstanding, respectively.

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Warrants

The following is a summary of warrant activity since December 31, 2017:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Warrants		Exercise		Contractual		Intrinsic
	Outstanding		Price		Life		Value
Outstanding, December 31, 2017		22,760,416	$	0.55		4.67	$	13,640,000
Granted		5,650,000		2.17
Forfeited		0
Exercised		0
Outstanding, June 30, 2018		28,410,416	$	0.87		4.25	$	26,400,000
Exercisable, June 30, 2018		27,910,416	$	0.89		4.24	$	26,400,000

The exercise price for warrant outstanding and exercisable at June 30, 2018:

Outstanding				Exercisable
	Number of		Exercise		Number of		Exercise
	Warrants		Price		Warrants		Price
	22,000,000	$	0.50		22,000,000	$	0.50
	3,000,000		1.85		3,000,000		1.85
	666,666		2.00		666,666		2.00
	93,750		2.25		93,750		2.25
	1,000,000		2.35		1,000,000		2.35
	650,000		2.50		650,000		2.50
	500,000		2.70		500,000		2.70
	500,000		2.80		—		2.80
	28,410,416				27,910,416

During the six months ended June 30, 2018, the Company issued:

● 1,000,000 warrants in connection with two convertible notes payable;

● 500,000 warrants as consideration for the acquisition of the ECS assets (see Note 3) valued at $992,958;

● 250,000 warrants as consideration for the acquisition of the Electronic Check assets (see Note 3) valued at $682,919;

● 2,150,000 warrants to shares to employees and board members as part of their agreements with the Company valued at $5,276,656;

● 1,750,000 warrants to a consultant for services rendered. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3) valued at $3,661,791.

The fair value of the warrants listed above was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

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● Risk free interest rate of 2.60% to 2.94%

Note 11 - Related Parties

Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences. All of the Company’s revenue for the six months ended June 30, 2017 and $90,000 of the Company’s revenue for the six months ended June 30, 2018 is from IT services delivered to a single customer, Guardian LLC, which is a related party to the Company. The revenue generated from Guardian LLC was paid to the Company via a reduction in the amount that the Company owes Guardian LLC that is classified as Due to Guardian LLC in the accompanying consolidated balance sheet. All expenses in the Company’s operations were incurred as a consequence of delivering Company’s obligations under the joint venture agreement between the parties to commercialize the technology that is being developed by the LLC.

On April 22, 2015, Michael Murray was appointed by the Company as the Chairman of the Board, CEO, and President of the Company. Mr. Murray resigned as an executive officer on September 1, 2017. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes Roll, LLC (“Hermes”), which is the basis for the Company’s current operations. Mr. Murray was the owner of 9,900 shares of Series D Preferred Stock of the Company that was convertible at Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman will assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform. The agreement with Dr. Rittman was contingent upon the Company funding its commitments per the June 16, 2015 - Amended and Restated Territorial License Agreement. Failure of the Company providing this funding, in full, or partially, will automatically terminate any GOPH ownership of the intellectual properties. Dr. Rittman is the Chief Technology Officer and a director of the Company as well as the Chairman of the Company’s Advisory Board, which is in formation. Dr. Rittman and Mr. Murray jointly own 9,900 shares of Series D Preferred Stock of the Company that is convertible at Dr. Rittman’s or Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Rittman has converted all of his Series D Preferred Stock into common shares of the Company.

On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman agreed to assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform, subject to certain conditions. The Company has expensed the stated value of that intellectual property in these financial statements.

On or around March 18, 2016 the Company and Dr. Danny Rittman entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement with Hermes dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement dated June 16, 2015 (the “Amended and Restated Territorial License Agreement”), and that certain Letter Agreement (the “Letter Agreement”) entered into between Dr. Rittman and the Company dated August 20, 2015. The aforementioned agreements were tied to the funding of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need for Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

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In March 2016, the Company and Dr. Danny Rittman, Co-Chairman, CTO and a shareholder, entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Prior to these agreements, the Company is the exclusive license holder for certain intellectual property relating to Hermes’ system and method for scheduling categorized deliverables, according to demand, at the customer’s location based on smartphone application and/or via the internet. As a result of these agreements, the Company shall remain an exclusive licensee per the terms of the original License Agreement and will develop the first products with Dr. Rittman and his partners.

On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month. An additional $70,000 shall be payable within 15 days of the end of the calendar year.

On March 29, 2016, Gopher contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC (the “Joint Venture”). Guardian LLC is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch. In addition, Guardian LLC is required to provide short term loans to Gopher on an as needed basis secured by Gopher’s economic interest in the Joint Venture. The Company will provide IT services to Guardian LLC for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to Guardian LLC as consideration for the JV. Guardian LLC has commenced development of the products. Certain private investors will provide all initial funding to the Company via the LLC for product development. Guardian LLC will fund the development, and the Company will provide IT services via Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of Guardian LLC, the Company and Guardian LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. Guardian LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by Guardian LLC. Moreover, Guardian LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with Guardian LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with Guardian LLC that the same JV principles of the Guardian LLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. During the six months ended June 30, 2018 and 2017, $90,000 and $90,000, respectively, of the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman services, in connection with the development of the Patch.

On July 21, 2016 members of the Guardian LLC, together with Dr. Rittman, incorporated Alpha EDA, LLC (“Alpha”). The members of the LLC appointed Dr. Rittman as the manager of Alpha. The Company, the LLC and Alpha have agreed that all Epsilon Rights, as well as Puzpix rights, will be assigned to Alpha. Alpha and the Company entered into a JV agreement similar to the Patch Joint Venture agreement (as described above), whereby Alpha will fund all of its operational and developmental needs (software development, support, marketing and administrative), and the profits of Alpha will be distributed equally to the two equal Joint venture partners, Guardian LLC and the Company. Alpha will hold all intellectual property rights related to software. Currently, three products will be owned by Alpha – the Epsilon software, the Puzpix social game and the Guardian Pack application. The Company and its technology licensing partners, Guardian LLC and Alpha, are preparing to introduce said new products (Epsilon, Guardian Pack & PuzPix) to the market beginning in 2018, and the Sphere during the second half of fiscal 2017. Certain problems caused by the need to miniaturize both the chip design and the battery caused a delay in the rollout from its planned launch during the first half of the year. The Epsilon product will be presented for time-based license agreements utilizing a designated website on top of customary distributing channels for the product. Epsilon is under confidential evaluation agreement with third party.

During 2016, the Company relocated its headquarters to 2500 Broadway, Suite F-125, Santa Monica, California. The Company paid approximately $5,000 per month in rent for this office space, and paid a $1,979 security deposit that is classified in our financial statements contained herein as a prepaid expense. The lease is being paid for by the Guardian LLC via reimbursement. The Company moved into smaller office space during the quarter, and its security deposit was adjusted downward to cover the smaller space in April 2016. The Company believes its current facilities will be adequate for the foreseeable future.

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The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources, while the Company’s portion of the cost is $67,000 and due to the vendor on August 15, 2017. Guardian took full responsibility for all amounts due to this vendor. The Company intends to enter a new SOW for the purpose of creating fully-commercial products utilizing the manufacturers that it has identified.

On June 20, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 2,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company converted the Preferred Shares into an aggregate of 2,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

On August 9, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 17,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company executed conversion notices to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows: Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its GopherInsight™ technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. The Base Salary of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”

Since April 2016, Guardian LLC has provided loans to the Company for the Company’s working capital purposes, outside of its commitment to develop the Patch, in the aggregate amount of $660,132 (the “Loans”). On May 23, 2017, the Company entered into a Conversion Agreement with Guardian LLC pursuant to which the parties agreed to convert the Loans provided by Guardian LLC to the Company into a Convertible Promissory Note in the principal amount of $660,132 (the “Note”).

The Note bears interest at 6%, matures May 30, 2019 and is convertible into the Company’s common stock, at Guardian LLC’s option, at a conversion price equal to 50% of the lowest closing price for the common stock on the principal market during the ten consecutive trading days immediately preceding the conversion date, which, in no event, will be less than $0.01 per share. Guardian LLC has agreed to restrict their ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of common stock.

Guardian LLC (the “Note Holder”) understands that the Company may be seeking additional capital or funding and believes that the lock-up and leak-out restrictions and provisions, as further described herein, will improve the Company’s prospects for obtaining additional financing and thus improving the overall financial condition of the Company. As such on or around June 26, 2017 the Company and the Note Holder entered into a lock-up and leak-out:

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1. Subject to the terms of this Agreement, the Note Holder agrees that for a period of nine (9) months from the Effective Date of this Agreement (the “Lock-Up Period”), the Note Holder shall not convert the Note into Common Stock for safe keeping or, directly or indirectly, sell, offer to sell, contract to sell, assign, pledge, hypothecate, encumber or otherwise transfer, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, pledge or other disposition of (each a “Transfer”) any beneficial rights with respect to the Note.

2. Leak-Out Provisions. Subject to the terms of this Agreement, the Note Holder agrees that for a period beginning immediately upon the end of the Lock-Up Period and ending fifteen (15) months from the Effective Date of this Agreement (the “Leak-Out Period”), the Note Holder shall have the right to sell the lessor of (i) five (5%) percent of the previous day’s traded volume of the Company’s Common Stock, or (ii) Five Thousand (5,000) shares of the Common Stock on a per daily basis.

On December 29, 2017, all the principal and accrued interest were converted into 2,000,000 share of Series G preferred stock.

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. Mr. Bauer holds a Bachelor of Science degree from University of Maryland College Park. Mr. Bauer is veteran of the United States Navy and was honorably discharged in 1983. He held the title of United States Navy Surface Warfare Qualified. In May 2018, Mr. Bauer’s resigned as Chief Executive Officer and director of the Company.

The Company and Guardian Patch, LLC, which assisted structuring and negotiating the Purchase Agreement and related asset purchase, entered into a Consulting Agreement dated September 1, 2017. In consideration for the services, the Company issued Guardian 2,000,000 shares of common stock and warrants to purchase 9,000,000 shares of common stock. The warrants contain identical terms to the RJW Warrants. If and when the assets acquired under the Purchase Agreement generate revenues of $10,000,000, the Company shall issue Guardian an additional 3,000,000 shares of common stock. The consulting agreement was effective August 1, 2017 and terminates November 30, 2017. Guardian, pursuant to its existing joint venture agreement, agreed to provide the $400,000 in funding needed for the cash purchase price under the Purchase Agreement. Guardian also agreed to provide the needed $100,000 working capital designated to UGopherServices Corp. The parties have agreed to negotiate and finalize the terms of such loans in the near future.

In order to facilitate the transition of the Company, the Company and Michael Murray have agreed to enter into an employment agreement in which Mr. Murray will serve as Executive Vice President in charge of business development. As consideration, the Company issued a warrant to acquire 4,000,000 shares of common stock to Mr. Murray. The warrants contain identical terms to the RJW Warrants.

Regulatory

The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources.

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Note 12 - Contingencies

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

On June 10, 2016, the Company entered into a consulting agreement with Waterford Group LLC (“Waterford”) pursuant to which the Company engaged Waterford to provide sales and marketing consulting and advisory services to the Company in consideration of 100,000 shares of restricted common stock of the Company (the “Shares”) and a common stock purchase warrant (the “Warrant”) to acquire 750,000 shares of restricted common stock of the Company at an exercise price of $2.25 per share for a period of five (5) years. 50,000 of the Shares were issued to Waterford upon the execution of the Agreement. The Warrant vested on a quarterly basis in eight (8) equal quarterly installments each in the amount of 93,750 shares each quarter during the term of the Agreement. The first quarterly installment vested upon the execution of the Agreement and each subsequent quarterly installment was to vest each quarter thereafter. The Company believes that Waterford is in default of its agreement, as it failed to perform or provide any services under the agreement. As such, the Company put Waterford on notice in writing that the Company did not issue shares or warrants during the third or fourth fiscal quarters of 2016 due to the default.

On or around January 23, 2017, the Company filed a complaint against Waterford and the Company’s Transfer Agent, in Superior Court of the State of California, County of Riverside. On February 1, 2017, the Company obtained a temporary restraining order that prohibits Waterford from (x) lifting the restricted legend from the 50,000 shares that it received in connection with signing the Agreement; (y) selling the 50,000 shares to another party; and, (z) from exercising the warrant on 93,750 shares that was issued and vested upon the execution of the Agreement. As ordered by the court, on February 9, 2017, the Company deposited a Corporate Surety Bond in the amount of $42,875 to secure the temporary restraining order. The Company agreed with Waterford to go to binding arbitration, which is currently being scheduled.

On or around February 27, 2017, the Company was issued a stay of the temporary restraining order barring its transfer agent from providing shares in connection with the exercise of the first Waterford warrant on 93,750 shares that was provided to Waterford in connection with the execution of the engagement letter that was executed by the parties on or around June 10, 2016. The matter is currently in arbitration.

On or around April 10, 2017, the Company was billed by its transfer agent (“TA”) for approximately $11,500 for legal fees (“TA Charges”) in connection with a lawsuit brought by one of the Company’s shareholders against the TA. The Company is not a named party in this litigation. The Company disputes the TA Charges, as the Company’s position is that the TA Charges are not covered under the indemnification section of the Company’s agreement with its TA. As the TA refused to provide further services, the Company paid the fees, and booked it as an expense in this quarter. This matter has been resolved amicably, and the Company continues its relationship with the TA.

Spare CS, Inc.

On January 14, 2018, the Company entered into an Initial Term Agreement (the “ITA”) with Spare CS Inc. (“Spare”), a Delaware corporation, pursuant to which the Company agreed to acquire 50% of the equity of Spare. Spare is a mobile banking app that allows customers to access cash with no ATM, no debit or credit card, and no purchase required from participating merchants.

As set forth in the ITA, the Company agreed to provide Spare with all needed operating costs and will fund $100,000 every three months until Spare has positive cash flow. The Company provided the initial $100,000 on January 16, 2018. D’Ontra Hughes, CEO of Spare, will continue as CEO for 24 months at a salary of $10,000 per month and all current management will remain in place for 12 months. In addition, the Company will issue Spare 1,500,000 shares of common stock and a common stock purchase warrant to acquire 1,000,000 shares of common stock at an exercise price of $3.00 per share for a period of three years. The Company also agreed to place 1,500,000 shares of common stock in escrow as a limited form of price protection for six months.

Although the Company considers the terms in the ITA to be binding, and the Company has provided an initial funding of $200,000 to Spare, the closing the transactions is subject to the completion of due diligence and drafting and execution of a definitive purchase agreements and related transaction documents. There is no guarantee that the parties will successfully negotiate and finalize a definitive purchase agreement, that the Board of Directors of each company will approve such agreement, or that the transaction set forth in the ITA will close.

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Note 13 – Concentrations

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

There have been no losses in these accounts through June 30, 2018.

In 2017, the Company had one customer that contributed 100% of its revenues. Per the terms of the JV with Guardian LLC, Guardian LLC has committed to fund all Company’s needs, as well as needs of the JV. Failure of Guardian LLC to provide the Company or the JV with said funding would represent a significant Credit Risk. As of June 30, 2018 and December 31, 2017 the Company has a payable to Guardian LLC of $408,413 and $1,350,262, respectively.

Note 14 - Subsequent Events

Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:

On July 23, 2018, Douglas L. Davis was appointed by to serve as the Interim Chief Executive Officer of the Company. Mansour Khatib resigned as Interim Chief Executive Officer but will continue to serve as Chief Marketing Officer and Director. The Company and Mr. Davis entered into an Employment Agreement dated July 23, 2018 pursuant to which Mr. Davis agreed to serve as Interim Chief Executive Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Davis 300,000 shares of common stock subject to a lock-up/leakout provision. The employment of Mr. Davis is for a period of six months and may be terminated at any time, with or without formal cause, on ten days-notice.

On July 31, 2018, Mitchell K. Tavera was appointed to the Board of Directors of the Company to serve as a director. Mr. Tavera entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Tavera will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Tavera $5,000 per quarter.

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

The following discussion should be read in conjunction with our financial statements and related notes included elsewhere in this report. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions, which could cause actual results to differ materially from management’s expectations. See “Forward-Looking Statements” included in this report.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.

This section of the report should be read together with Footnotes of the Company audited financials for the year ended December 31, 2017. The unaudited statements of operations for the six months ended June 30, 2018 and 2017 are compared in the sections below.

General Overview

Gopher Protocol Inc. (the “Company”, “we”, “us”, “our”, “Gopher”, “Gopher Protocol” or “GOPH”) was incorporated on July 22, 2009 under the laws of the State of Nevada and is headquartered in Santa Monica, California. Gopher is a development-stage company which consider itself Native IoT creator, developing Internet of Things (IoT) and Artificial Intelligence enabled mobile technology. Gopher has a portfolio of Intellectual Property that when commercialized will include smart microchips, mobile application software and supporting cloud software. The system contemplates the creation of a global network. The core of the system will be its advanced microchip technology that can be installed in any mobile device worldwide. Gopher envisions this system as an internal, private network between all enabled mobile devices providing shared processing, advanced mobile database management/sharing and enhanced mobile features.

Recent Developments

On January 14, 2018, the Company entered into an Initial Term Agreement (the “ITA”) with Spare CS Inc. (“Spare”), a Delaware corporation, pursuant to which the Company agreed to acquire 50% of the equity of Spare. Spare is a mobile banking app that allows customers to access cash with no ATM, no debit or credit card, and no purchase required from participating merchants. The Company earns a transaction fee associated with the transaction.

As set forth in the ITA, the Company agreed to provide Spare with all needed operating costs and will fund $100,000 every three months until Spare has positive cash flow. The Company provided the initial $100,000 on January 16, 2018. D’Ontra Hughes, CEO of Spare, will continue as CEO for 24 months at a salary of $10,000 per month and all current management will remain in place for 12 months. In addition, the Company will issue Spare 1,500,000 shares of common stock and a common stock purchase warrant to acquire 1,000,000 shares of common stock at an exercise price of $3.00 per share for a period of three years. The Company also agreed to place 1,500,000 shares of common stock in escrow as a limited form of price protection for six months.

Although the Company consider the terms in the ITA to be binding and the Company has provided an initial funding of $100,000 to Spare, the closing the transactions is subject to the completion of due diligence and drafting and execution of a definitive purchase agreements and related transaction documents. There is no guarantee that the parties will successfully negotiate and finalize a definitive purchase agreement, that the Board of Directors of each company will approve such agreement or that the transaction set forth in the ITA will close.

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On February 1, 2018, the Company formed Ugopherservices Limited (“Ugopher England”), under the laws of England and Wales, as a private limited company and a wholly-owned subsidiary. The purpose of establishing Ugopher England is to expand the Company’s prepaid financial and calling services to international consumers.

On March 16, 2018 ( “Closing Date”), the Company entered into and closed an Asset Purchase Agreement dated March 1, 2018 (the “ECS Purchase Agreement”) with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000 (the “ECS Note”). In addition, the Company issued 500,000 shares of common stock of the Company (the “ECS Shares”) and warrants to purchase 500,000 shares of common stock (the “ECS Warrants”). The ECS Warrants were assigned by ECS to Dennis Winfrey. The ECS Warrants are exercisable for a period of five years at a fixed exercise price of $1.85 per share and contain standard anti-dilution protection. Under the ESC Note, which is secured by the assets acquired by the Company from ECS, the Company is required to make ten equal payments of $100,000 commencing on April 15, 2018. The Company may prepay the ECS Note at any time without penalty. The ECS Note is a short-term debt obligation that is material to the Company.

On April 2, 2018 (“Closing Date”), Gopher Protocol Inc. (the “Company”) entered into and closed an Asset Purchase Agreement (the “Electronic Purchase Agreement”) with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity, in consideration of $75,000 paid on the Closing Date. In addition, the Company issued 250,000 shares of common stock of the Company (the “Electronic Shares”) and warrants to purchase 250,000 shares of common stock (the “Electronic Warrants”). The Electronic Warrants were assigned by Electronic Check to Dennis Winfrey, the shareholder of Electronic Check. The Electronic Warrants are exercisable for a period of five years at a fixed exercise price of $2.70 per share and contain standard anti-dilution protection.

On April 2, 2018, the Company entered into and closed an Asset Purchase Agreement (the “Central Purchase Agreement”) with Central State Legal Services Inc. (“Central”), a Missouri corporation, pursuant to which the Company purchased certain assets from Central, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration of $25,000 paid on the Closing Date. Derron Winfrey, the COO of the Company, is a director and President of Electronic Check and Central. Derron Winfrey’s parents are the shareholders of Check and Central.

Results of Operations:

Three months ended June 30, 2018 and June 30, 2017

A comparison of the statements of operations for the three months ended June 30, 2018 and 2016 is as follows:

	Three Months Ended June 30,						Change
	2018			2017			$			%
Sales	$	13,466,410		$	45,000		$	13,421,410			29825.4	%
Cost of goods sold		12,919,777			—			12,919,777
Gross profit		546,633			45,000			501,633			1114.7	%
Operating expenses		7,623,377			364,395			7,258,982			1992.1	%
Loss from operations		(7,076,744	)		(319,395	)		(6,757,349	)		2115.7	%
Other expense		(417,961	)		(1,072,990	)		655,029			-61.0	%
Loss before provision for income taxes		(7,494,705	)		(1,392,385	)		(6,102,320	)		438.3	%
Provision for income taxes		—			—			—
Net loss	$	(7,494,705	)	$	(1,392,385	)	$	(6,102,320	)		438.3	%

Sales for the three months ended June 30, 2018 were $13,466,410 compared to $45,000 for the same period in 2017. The sales from 2017 to 2018 are not comparable since the increase of $13,421,410 or 29,825% is almost all the result of sales of $13,418,138 generated from the acquisitions of RWJ and ECS.

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Our gross margins for the three months ended June 30, 2018 were 4.1% as compared to 100.0% for the same period in 2017. The decrease in due to the sales generated by the RWJ assets and ECS assets have a much lower gross margin.

Operating expenses for the three months ended June 30, 2018 were $7,623,377 compared to $364,395 for the same period in 2017. The increase of $7,258,982 or 1,992% is due to including the operating cost for the newly acquired acquisitions and common stock and warrants valued at $5,914,880 being issued to consultants and employees for services rendered during the three months ended June 30, 2018.

Other expense for the three months ended June 30, 2018 was $417,961, a decrease of $655,029 from $1,072,990 for the same period in 2017. The decrease is principally due to finance cost associated with convertible debentures issued during the three months ended June 30, 2017 that contained embedded derivatives.

Net loss for the three months ended June 30, 2018 was $7,494,705 compared to $1,392,385 for the same period in 2017 due to the factors described above. The periods are not comparable due to the acquisitions of RWJ, and ECS, Electronic Check and CSLS in the third fiscal quarter of 2017 and the first half of 2018, respectively.

Six months ended June 30, 2018 and June 30, 2017

A comparison of the statements of operations for the six months ended June 30, 2018 and 2016 is as follows:

	Six Months Ended June 30,						Change
	2018			2017			$			%
Sales	$	21,371,016		$	90,000		$	21,281,016			23645.6	%
Cost of goods sold		20,623,953			—			20,623,953
Gross profit		747,063			90,000			657,063			730.1	%
Operating expenses		21,732,533			591,572			21,140,961			3573.7	%
Loss from operations		(20,985,470	)		(501,572	)		(20,483,898	)		4083.9	%
Other expense		(617,257	)		(1,073,995	)		456,738			-42.5	%
Loss before provision for income taxes		(21,602,727	)		(1,575,567	)		(20,027,160	)		1271.1	%
Provision for income taxes		—			—			—
Net loss	$	(21,602,727	)	$	(1,575,567	)	$	(20,027,160	)		1271.1	%

Sales for the six months ended June 30, 2018 were $1,371,016 compared to $90,000 for the same period in 2017. The sales from 2017 to 2018 are not comparable since the increase of $21,281,016 or 23,646% is almost all the result of sales of $21,277,744 generated from the acquisitions of RWJ and ECS.

Our gross margins for the six months ended June 30, 2018 were 3.5% as compared to 100.0% for the same period in 2017. The decrease in due to the sales generated by the RWJ assets and ECS assets have a much lower gross margin.

Operating expenses for the six months ended June 30, 2018 were $21,732,533 compared to $591,572 for the same period in 2017. The increase of $21,140,961 or 3,574% is due to including the operating cost for the newly acquired acquisitions and common stock and warrants valued at $18,623,393 being issued to consultants and employees for services rendered during the six months ended June 30, 2018.

Other expense for the six months ended June 30, 2018 was $617,257, a decrease of $456,738 from $1,073,955 for the same period in 2017. The decrease is principally due to finance cost associated with convertible debentures issued during the six months ended June 30, 2017 that contained embedded derivatives.

Net loss for the six months ended June 30, 2018 was $21,602,727 compared to $1,575,567 for the same period in 2017 due to the factors described above. The periods are not comparable due to the acquisitions of RWJ, and ECS, Electronic Check and CSLS in the third fiscal quarter of 2017 and the first half of 2018, respectively.

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Liquidity and Capital Resources

Our cash was $322,126 and $1,305,062 at June 30, 2018 and December 31, 2017, respectively. Cash used in operating activities during the six months ended June 30, 2018 was $3,177,654, compared to $255,532 during the same period in 2017. Certain items are not comparable between the periods, including common stock and warrants issued for services in 2018, amortization of intangible assets from recent acquisitions and amortization of debt discount which result from the convertible notes issued in 2017. Our working capital position worsened going from a working capital deficit of $1,060,506 at December 31, 2017 to a working capital deficit of $1,750,700 at June 30, 2018, principally as a result of the issuance of a note payable related to the acquisition of certain assets ECS Prepaid LLC with an outstanding balance of $700,000 at June 30, 2018. Cash flows used in investing activities were $425,282 during the six months ended June 30, 2018, compared to $0 for the same period in 2017. The increase is due to the purchase of property and equipment, , the amount paid for acquisitions and the amount paid as an acquisition deposit for Spare CS, Inc. Cash from financing activities for the six months ended June 30, 2018 was $2,620,000, compared to $300,482 for the same period in 2017. The increase is due to the issuance of a convertible notes and the sale of common stock in 2018.

On December 29, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares of the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). On March 21, 2018, Eagle purchased an additional 666,666 shares of common stock (the “Second Closing Shares”) for a purchase price of $500,000 that been wired into the Company’s bank account.

The Company placed 2,000,000 (1,333,334 on prior closing on December 29, 2017 and additional 666,666 on this current closing) shares of common stock (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Shares and Second Closing Shares if the second closing occurs, Eagle has sold any of the First Closing Shares or the Second Closing Shares as the case may be at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

On September 13, 2017, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which the Company issued Eagle two convertible notes. The first note, due September 18, 2018 in the principal amount of $50,000 (“Eagle Equities Note 1”), was issued in exchange for $50,000 in cash. The second note, due September 13, 2018 in the principal amount of $50,000 (“Eagle Equities Note 2” and, together with Eagle Equities Note 1, the “Eagle Equities Notes”), was issued in exchange for a full-recourse, collateralized promissory note from Eagle Equities in the amount of $45,000 (“Eagle Equities Payment Note”). The Eagle Equities Payment Note is due on May 13, 2018, unless the Company does not meet the current public information requirement pursuant to Rule 144, in which case both Eagle Equities Note 2 and the Eagle Equities Payment Note may be cancelled. The Eagle Equities Payment Note is secured by the Eagle Equities Note 1. The above financing closed on September 20, 2017. On December 29, 2017, Eagle converted the Eagle Equities Note 1 into 503,726 shares of common stock.

On March 2, 2018, the Company entered into and closed a Securities Purchase Agreement with Bellridge Capital, LLC (“Bellridge”) pursuant to which Bellridge invested $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share. The Bellridge Debenture bears interest of 10% and is payable March 1, 2019. The Bellridge Debenture is convertible into shares of common stock at $0.90 per share subject to antidilution protection. During an event of default, the conversion price in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise its Common Stock Purchase Warrants and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. On or about May 2, 2018, at the election of Bellridge, Bellridge may acquire an additional Bellridge Debenture in the principal amount of $750,000 and a Common Stock Purchase Warrant on the terms of the initial closing.

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On March 2, 2018, the Company delivered 1,000,000 shares of Common Stock to an escrow agent. The 1,000,000 escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7 ^th monthly anniversary of the issuance of the 1,000,000 escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1 ^st day of each monthly anniversary beginning on the 1 ^st day of the 7 ^th month (and continuing monthly until all shares are sold) / closing price of the 1 ^st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

On April 9, 2018, Bellridge elected to exercise the Bellridge Option, as such the Company and Bellridge closed the second financing as contemplated by the Securities Purchase Agreement entered with Bellridge pursuant to which Bellridge invested an additional $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Second Bellridge Debenture” and together with the First Bellridge Debenture, the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “Second Bellridge Warrant” and together with the First Bellridge Warrant, the “Bellridge Warrant”) The Bellridge Debenture bears interest of 10% and is payable one year from issuance. The First Bellridge Debenture and the Second Bellridge Debenture are convertible into shares of common stock at $0.90 per share and $1.00 per share, respectively, subject to limited antidilution protection.

During an event of default, the conversion price for the Bellridge Debenture in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise the Bellridge Warrant and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

In connection with both closings, the Company delivered 1,000,000 shares of common stock to an escrow agent. The escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7 ^th monthly anniversary of the issuance of the escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1 ^st day of each monthly anniversary beginning on the 1 ^st day of the 7 ^th month (and continuing monthly until all shares are sold) / closing price of the 1 ^st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

As of the date hereof, the Company is obligated on the Bellridge Debenture in the principal amount of $1,500,000 in connection with the offering. The Bellridge Debenture is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. Other than the Bellridge Debentures, the Company does not have any other convertible debt on its balance sheet.

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On May 4, 2018, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which Eagle agreed to purchase up to 1,212,120 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 or $1.65 per share. The closing occurred on May 4, 2018 with respect to the funding of $500,000 resulting in the issuance of 303,030 shares of common stock and on May 25, 2018 with respect to the funding of $500,000 resulting in the issuance of an additional 303,030 shares of common stock. Additional closings of $500,000 for 303,030 shares are scheduled to close on June 15, 2018 and July 5, 2018 each. The additional closings on June 15, 2018 and July 5, 2018 have not occurred.

The Company agreed to place 303,030 shares of common stock each tranche (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the closing of each tranche, Eagle has sold any of its shares of common stock at a sales price of less than $1.65 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($1.65 – Closing Price) / Closing Price) * number of shares sold at a price less than $1.65.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of June 4, 2019 or until all shares are sold.

We sustained net losses of $21,602,727 for the six months ended June 30, 2018. In addition, we had a working capital deficit of $1,750,700 and accumulated deficit of $35,984,389 at June 30, 2018. We recently purchased the assets of RWJ Advanced Marketing, LLC in 2017, and ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. in 2018. RWJ and ECS have historically generated significant revenues which we expect to continue in the future. In addition, during the first half of 2018, the Company has raised or secured $3,000,000 in convertible debt and equity capital, and expects to raise additional capital in the future. With the cash flow from operations from the recent acquisitions, and the cash received from recent convertible debt and equity capital, we believe we will have sufficient cash to meet our obligations for the next 12 months.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Use of Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements, the reported amounts and classification of revenues and expenses during the periods presented, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis and material changes in these estimates or assumptions could occur in the future. Changes in estimates are recorded on the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances and at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily-apparent from other sources. Actual results may differ materially from these estimates if past experience or other assumptions do not turn out to be substantially accurate.

We believe that the accounting policies described below are critical to understanding our business, results of operations, and financial condition because they involve significant judgments and estimates used in the preparation of our financial statements. An accounting is deemed to be critical if it requires a judgment or accounting estimate to be made based on assumptions about matters that are highly uncertain, and if different estimates that could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed below, are also critical to understanding our financial statements. The notes to our financial statements contain additional information related to our accounting policies and should be read in conjunction with this discussion.

Presentation of Financial Statements

The accompanying financial statements include the accounts of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

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Accounts Receivable

The Company grants credit to establishments (such as convenient stores) who sell the Company’s products under credit terms that it believes are customary in the industry and does not require collateral to support customer receivables. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer.

Inventory

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.

Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue from the sale of phones and phone products at the time of sale to the customer. The Company recognizes revenue from IT-related services at the time the services are performed.

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2017, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.

Fair Value Measurements

The Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:

● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

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The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, 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 disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of the end of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

As a smaller reporting company, without a viable business and revenues, the Company does not have the resources to install a dedicated staff with deep expertise in all facets of SEC disclosure and GAAP compliance. As is the case with many smaller reporting companies, the Company will continue to consult with its external auditors and attorneys as it relates to new accounting principles and changes to SEC disclosure requirements. In order to correct this material weakness, the Company engaged Kevin F. Pickard as Chief Financial Officer. The Company has found that this approach worked well in the past and believes it to be the most cost-effective solution available for the foreseeable future. The Company will conduct a review of existing sign-off and review procedures as well as document control protocols for critical accounting spreadsheets. The Company will also increase management’s review of key financial documents and records.

As a smaller reporting company, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of, financial statements on a monthly basis, and the Company’s external auditor conducts reviews on a quarterly basis. These actions, in addition to the improvements identified above, will minimize any risk of a potential material misstatement occurring.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2018, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

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On June 10, 2016, the Company entered into a consulting agreement with Waterford Group LLC (“Waterford”) pursuant to which the Company engaged Waterford to provide sales and marketing consulting and advisory services to the Company in consideration of 100,000 shares of restricted common stock of the Company (the “Shares”) and a common stock purchase warrant (the “Warrant”) to acquire 750,000 shares of restricted common stock of the Company at an exercise price of $2.25 per share for a period of five (5) years. 50,000 of the Shares were issued to Waterford upon the execution of the Agreement. The Warrant vested on a quarterly basis in eight (8) equal quarterly installments each in the amount of 93,750 shares each quarter during the term of the Agreement. The first quarterly installment vested upon the execution of the Agreement and each subsequent quarterly installment was to vest each quarter thereafter. The Company believes that Waterford is in default of its agreement, as it failed to perform or provide any services under the agreement. As such, the Company put Waterford on notice in writing that the Company did not issue shares or warrants during the third or fourth fiscal quarters of 2016 due to the default.

On or around January 23, 2017, the Company filed a complaint against Waterford and the Company’s Transfer Agent, in Superior Court of the State of California, County of Riverside. On February 1, 2017, the Company obtained a temporary restraining order that prohibits Waterford from (x) lifting the restricted legend from the 50,000 shares that it received in connection with signing the Agreement; (y) selling the 50,000 shares to another party; and, (z) from exercising the warrant on 93,750 shares that was issued and vested upon the execution of the Agreement. As ordered by the court, on February 9, 2017, the Company deposited a Corporate Surety Bond in the amount of $42,875 to secure the temporary restraining order. The Company agreed with Waterford to go to binding arbitration, which is currently being scheduled.

On or around February 27, 2017, the Company was issued a stay of the temporary restraining order barring its transfer agent from providing shares in connection with the exercise of the first Waterford warrant on 93,750 shares that was provided to Waterford in connection with the execution of the engagement letter that was executed by the parties on or around June 10, 2016. The matter is currently in arbitration.

On or around April 10, 2017, the Company was billed by its transfer agent (“TA”) for approximately $11,500 for legal fees (“TA Charges”) in connection with a lawsuit brought by one of the Company’s shareholders against the TA. The Company is not a named party in this litigation. The Company disputes the TA Charges, as the Company’s position is that the TA Charges are not covered under the indemnification section of the Company’s agreement with its TA. As the TA refused to provide further services, the Company paid the fees, and booked it as an expense in this quarter. This matter has been resolved amicably, and the Company continues its relationship with the TA.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this item.

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

Eagle Equities

On December 29, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares of the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). On March 21, 2018, Eagle purchased an additional 666,666 shares of common stock (the “Second Closing Shares”) for a purchase price of $500,000 that been wired into the Company’s bank account.

The Company placed 2,000,000 (1,333,334 on prior closing on December 29, 2017 and additional 666,666 on this current closing) shares of common stock (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Shares and Second Closing Shares if the second closing occurs, Eagle has sold any of the First Closing Shares or the Second Closing Shares as the case may be at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

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The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

On September 13, 2017, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which the Company issued Eagle two convertible notes. The first note, due September 18, 2018 in the principal amount of $50,000 (“Eagle Equities Note 1”), was issued in exchange for $50,000 in cash. The second note, due September 13, 2018 in the principal amount of $50,000 (“Eagle Equities Note 2” and, together with Eagle Equities Note 1, the “Eagle Equities Notes”), was issued in exchange for a full-recourse, collateralized promissory note from Eagle Equities in the amount of $45,000 (“Eagle Equities Payment Note”). The Eagle Equities Payment Note is due on May 13, 2018, unless the Company does not meet the current public information requirement pursuant to Rule 144, in which case both Eagle Equities Note 2 and the Eagle Equities Payment Note may be cancelled. The Eagle Equities Payment Note is secured by the Eagle Equities Note 1. The above financing closed on September 20, 2017. On December 29, 2017, Eagle converted the Eagle Equities Note 1 into 503,726 shares of common stock.

Upon any of its securities being available for resale under Rule 144 as promulgated under the Securities Act of 1933, Eagle shall limit its sales with regard to any shares of common stock it owns to the greater of $10,000 in gross sales per day or 10% of the aggregate trading volume per day.

Bellridge

On March 1, 2018, the Company entered into and closed a Securities Purchase Agreement (the “Bellridge Agreement”) with Bellridge Capital, LP (“Bellridge”) pursuant to which Bellridge invested $750,000 into the Company in consideration of a 10% Convertible Debenture (the “First Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “First Bellridge Warrant”). The Bellridge Agreement provided that Bellridge was entitled to acquire an additional 10% Convertible Debenture in the principal amount of $750,000 and a Common Stock Purchase Warrant on the terms of the initial closing (“Bellridge Option”).

On April 9, 2018, Bellridge elected to exercise the Bellridge Option, as such the Company and Bellridge closed the second financing as contemplated by the Securities Purchase Agreement entered with Bellridge pursuant to which Bellridge invested an additional $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Second Bellridge Debenture” and together with the First Bellridge Debenture, the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “Second Bellridge Warrant” and together with the First Bellridge Warrant, the “Bellridge Warrant”) The Bellridge Debenture bears interest of 10% and is payable one year from issuance. The First Bellridge Debenture and the Second Bellridge Debenture are convertible into shares of common stock at $0.90 per share and $1.00 per share, respectively, subject to limited antidilution protection.

During an event of default, the conversion price for the Bellridge Debenture in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise the Bellridge Warrant and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

In connection with both closings, the Company delivered 1,000,000 shares of common stock to an escrow agent. The escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7^th monthly anniversary of the issuance of the escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1^st day of each monthly anniversary beginning on the 1^st day of the 7^th month (and continuing monthly until all shares are sold) / closing price of the 1^st monthly day in question) * number of shares sold at a price less than $1.10.

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As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

As of the date hereof, the Company is obligated on the Bellridge Debenture in the principal amount of $1,500,000 in connection with the offering. The Bellridge Debenture is a debt obligations arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. Other than the Bellridge Debentures, the Company does not have any other convertible debt on its balance sheet.

ECS Prepaid

On March 16, 2018 (“Closing Date”), the Company entered into and closed an Asset Purchase Agreement dated March 1, 2018 (the “ECS Purchase Agreement”) with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000 (the “ECS Note”). In addition, the Company issued 500,000 shares of common stock of the Company (the “ECS Shares”) and warrants to purchase 500,000 shares of common stock (the “ECS Warrants”). The ECS Warrants were assigned by ECS to Dennis Winfrey. The ECS Warrants are exercisable for a period of five years at a fixed exercise price of $1.85 per share and contain standard anti-dilution protection. Under the ESC Note, which is secured by the assets acquired by the Company from ECS, the Company is required to make ten equal payments of $100,000 commencing on April 15, 2018. The Company may prepay the ECS Note at any time without penalty. The ECS Note is a short-term debt obligation that is material to the Company.

At closing, the Company and Derron Winfrey entered into an Employment Agreement pursuant to which Mr. Winfrey was retained as Chief Operating Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $144,000 and an annual bonus of $25,000 in shares of common stock of the Company subject to the discretion of the Board of Directors of the Company. In addition, Mr. Winfrey received a signing bonus of 250,000 shares of common stock, a Common Stock Purchase Warrant to acquire 500,000 shares of common stock at an exercise price of $1.85 per share and a $50,000 bonus with $25,000 paid on the Closing Date and $25,000 payable on May 1, 2018. The Company also entered into an Employment Agreement with Mark Garner pursuant to which Mr. Garner was retained as Vice President of Operations for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $120,000 and an annual bonus of $25,000 in shares of common stock of the Company subject to the discretion of the Board of Directors of the Company. In addition, Mr. Garner received a signing bonus of 250,000 shares of common stock, a Common Stock Purchase Warrant to acquire 500,000 shares of common stock at an exercise price of $1.85 per share and a $50,000 bonus with $25,000 paid on the Closing Date and $25,000 payable on May 1, 2018. On March 16, 2018, Mr. Bauer was appointed as Chairman of the Board of the Company.

On the Closing Date, the Company and J.I.L. Venture LLC (“JIL Venture”), a non-related party, which assisted structuring and negotiating the ECS Purchase Agreement and related asset purchase, entered a Consulting Agreement dated March 1, 2018. In consideration for the services, the Company issued JIL Venture 1,000,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock exercisable for a term of five years at an exercise price of $1.85 per share. JIL Venture assigned 500,000 shares of common stock and 750,000 warrants to acquire 750,000 shares of common stock to Michelle Bauer, the wife of Gregory Bauer, CEO and a director of the Company.

Electronic Check Services

On April 2, 2018 (“Closing Date”), the Company entered into and closed an Asset Purchase Agreement (the “Electronic Purchase Agreement”) with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity, in consideration of $75,000 paid on the Closing Date. In addition, the Company issued 250,000 shares of common stock of the Company (the “Electronic Shares”) and warrants to purchase 250,000 shares of common stock (the “Electronic Warrants”). The Electronic Warrants were assigned by Electronic Check to Dennis Winfrey, the shareholder of Electronic Check. The Electronic Warrants are exercisable for a period of five years at a fixed exercise price of $2.70 per share and contain standard anti-dilution protection.

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On April 2, 2018, the Company entered into and closed an Asset Purchase Agreement (the “Central Purchase Agreement”) with Central State Legal Services Inc. (“Central”), a Missouri corporation, pursuant to which the Company purchased certain assets from Central, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration of $25,000 paid on the Closing Date. Derron Winfrey, the COO of the Company, is a director and President of Electronic Check and Central. Derron Winfrey’s parents are the shareholders of Check and Central.

On the Closing Date, the Company and J.I.L. Venture LLC (“JIL Venture”), a non-related party, which assisted structuring and negotiating the ECS Purchase Agreement and related asset purchase, entered a Consulting Agreement dated April 2, 2018. In consideration for the services, the Company issued JIL Venture 250,000 shares of common stock and warrants to purchase 250,000 shares of common stock exercisable for a term of five years at an exercise price of $2.70 per share.

Chief Financial Officer

On April 16, 2018, Kevin F. Pickard was appointed by the Company to serve as the Chief Financial Officer of the Company.

The Company and Mr. Pickard entered into an Executive Retention Agreement dated April 16, 2018 pursuant to which Mr. Pickard agreed to serve as Chief Financial Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Pickard 250,000 shares of common stock and granted Mr. Pickard a Stock Option to acquire 500,000 shares of common stock of the Company at an exercise price of $2.80 per share for a period of five years. The Stock Options vest in tranches of 100,000 shares commencing on the one-year anniversary and continuing thereafter on an annual basis or in full in the event of a change of control.

New Director

On April 25, 2018, Muhammad Khilji was appointed to the Board of Directors of the Company to serve as a director of the Company. Mr. Khilji entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will one tine grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Khilji will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Khilji $5,000 per quarter.

Eagle Equities – May 2018

On May 4, 2018, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 1,212,120 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 or $1.65 per share. The closing occurred on May 4, 2018 with respect to the funding of $500,000 resulting in the issuance of 303,030 shares of common stock. Additional closings of $500,000 for 303,030 shares are scheduled to close on May 25, 2018, June 15, 2018 and July 5, 2018 each.

The Company agreed to place 303,030 shares of common stock each tranche (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the closing of each tranche, Eagle has sold any of its shares of common stock at a sales price of less than $1.65 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($1.65 – Closing Price) / Closing Price) * number of shares sold at a price less than $1.65.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of June 4, 2019 or until all shares are sold.

Series D Conversion

The Company issued 66,000,000 shares in connection with the conversion of 66,000 shares of Series D Preferred Stock.

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Board/Officer Appointments

On May 17, 2018, Robert Yaspan, Judit Nagypal and Ambassador Ned L. Siegel were appointed to the Board of Directors of the Company to serve as directors of the Company. Mr. Yaspan will also serve as Chairman of the Board of Directors. Ms. Nagypal and Ambassador Siegel are considered independent directors and entered into agreements pursuant to which each will serve as a director. The director agreements provide that each will received a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. Mr. Yaspan, in consideration for serving as Chairman of the Board, entered into an agreement providing a one-time grant of 250,000 shares of common stock and a stock option to acquire 250,000 shares of common stock exercisable for a period of five years at $2.50 per share. Each director will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. On June 18, 2018, Eva Bitter was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Ms. Bitter entered into an agreement pursuant to which she will serve as a director. The director agreement provides that she will receive a one time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Ms. Bitter will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. On July 23, 2018, Douglas L. Davis was appointed by the Company to serve as the Interim Chief Executive Officer of the Company. The Company and Mr. Davis entered into an Employment Agreement dated July 23, 2018 pursuant to which Mr. Davis agreed to serve as Interim Chief Executive Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Davis 300,000 shares of common stock subject to a lock-up/leakout provision. The employment of Mr. Davis is for a period of six months and may be terminated at any time, with or without formal cause, on ten days’ notice. On July 31, 2018, Mitchell K. Tavera was appointed to the Board of Directors of the Company to serve as a director of the Company. Mr. Tavera entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will receive a one time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Tavera will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019.

The issuance of the securities set forth herein were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and/or Regulation D promulgated under the Securities Act. The Company’s reliance upon Section 4(a)(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the note was an accredited investor.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 

Exhibit No.	Description
3.1	Certificate of Incorporation of Forex International Trading Corp. (6)
3.2	Bylaws of Forex International Trading Corp. (6)
3.3	Certificate of Designation for Series A Preferred Stock (14)
3.4	Certificate of Designation for Series B Preferred Stock (21)
3.5	Certificate of Designation – Series C Preferred Stock (22)
3.6	Amendment to the Certificate of Designation for the Series B Preferred Stock (25)
3.7	Amendment to the Certificate of Designation for the Series C Preferred Stock(25)
3.8	Certificate of Change filed pursuant to NRS 78.209 (31)

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3.9	Articles of Merger filed pursuant to NRS 92.A.200 (31)
3.10	Certificate of Amendment to the Articles of Incorporation of Gopher Protocol Inc. (34)
4.1	Convertible Promissory Note issued by the Company to ATL dated July 8, 2010 (3)
4.2	Secured and Collateralized Promissory Note issued by ATL to the Company dated July 8, 2010 (3)
4.3	Collateral and Security Agreement by and between Forex International Trading Group and ATL dated July 7, 2010 (3)
4.4	Promissory Note issued to Rasel Ltd. Dated October 6, 2009(7)
4.5	Promissory Note issued to Rasel Ltd. Dated October 20, 2009 (7)
4.6	Letter Agreement between Rasel Ltd. and Forex International Trading Corp. dated January 22, 2011 (8)
4.7	Letter Agreement by and between Forex International Trading Group and ATL dated November 8, 2010(9)
4.8	6% Convertible Note issued to APH (11)
4.9	6% Convertible Debenture issued to HAM dated April 5, 2011 (14)
4.10	Promissory Note dated November 30, 2011 issued to Cordellia dioxo. in the amount of $1,000,000 (18)
4.11	$500,000 Convertible Promissory Note issued by Forex International Trading Corp. (23)
4.12	$400,000 Secured and Collateralized Promissory Note issued by Vulcan Oil & Gas Inc. (23)
4.13	Securities Purchase Agreement dated July 24, 2013 entered with Asher Enterprise Inc. (26)
4.14	Convertible Promissory Note issued to Asher Enterprises Inc. (26)
4.15	10% Convertible Debenture issued to GV Global Communications Inc. (30)
4.16	Amendment to 10% Convertible Promissory Debenture held by GV Global Communications, Inc. (32)
4.17	Series D Preferred Stock Certificate of Designation (32)
4.18	Common Stock Purchase Warrant (40)
4.19	6% Convertible Promissory Note issued by the Company to Guardian Patch LLC dated May 23, 2017 (41)
4.20	Securities Purchase Agreement entered with Crown Bridge Partners, LLC dated June 9, 2017 (42)
4.21	Convertible Promissory Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
4.22	Convertible Promissory Note Back End Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
4.23	Collateralized Secured Promissory Note Back End Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
4.24	Securities Purchase Agreement entered with Eagle Equities, LLC dated June 9, 2017 (42)
4.25	Convertible Promissory Note issued to Eagle Equities, LLC dated June 9, 2017 (42)
4.26	Convertible Promissory Note issued to Eagle Equities, LLC dated June 9, 2017 (Back End Note) (42)
4.27	Form of Collateralized Secured Promissory Note dated June 9, 2017 issued by Eagle Equities, LLC (42)
4.28	Convertible Promissory Note dated June 7, 2017 issued to JSJ Investments Inc. (42)
4.29	Convertible Promissory Note dated June 29, 2017 issued to JSJ Investments Inc. (44)
4.30	Form of Warrant issued to Robert Warren Jackson, Gregory Bauer, Michael Murray and Guardian Patch, LLC dated September 1, 2017 (45)
4.31	Balloon Note payable by Gopher Protocol Inc. to RWJ Advanced Marketing, LLC dated September 1, 2017 (45)
4.32	Securities Purchase Agreement entered with Eagle Equities, LLC dated September 13, 2017 (46)
4.33	Convertible Promissory Note issued to Eagle Equities, LLC dated September 13, 2017(46)
4.34	Convertible Promissory Note issued to Eagle Equities, LLC dated September 13, 2017 (Back End Note) (46)
4.35	Form of Collateralized Secured Promissory Note dated September 13, 2017 issued by Eagle Equities, LLC(46)
4.36	Securities Purchase Agreement dated October 2, 2017 between Gopher Protocol Inc. and Power Up Lending Group Ltd. (47)
4.37	Convertible Promissory Note dated October 2, 2017 issued to Power Up Lending Group Ltd. (47)
4.38	Securities Purchase Agreement entered with Labrys Fund, LP dated October 26, 2017 (49)
4.39	Convertible Promissory Note issued to Labrys Fund, LP dated October 26, 2017 (49)
4.40	Rescission Agreement entered between Gopher Protocol Inc. and Crown Bridge Partners, LLC dated October 23, 2017 (49)
4.41	Securities Purchase Agreement by and between Gopher Protocol Inc. and Eagle Equities, LLC dated December 29, 2017 (50)
4.42	Common Stock Purchase Warrant issued to Eagle Equities, LLC dated December 29, 2017 (50)
4.43	Certificate of Designation of the Preferences, Rights and Limitations of the Series G Convertible Preferred Stock (51)
4.44	Form of Securities Purchase Agreement entered with Bellridge Capital, LLC (52)
4.45	10% Convertible Debenture issued to Bellridge Capital, LLC dated March 2, 2018 (52)
4.46	Common Stock Purchase Warrant issued to Bellridge Capital, LLC dated March 2, 2018 (52)
4.47	Form of Warrant issued to Derron Winfrey, Dennis Winfrey, Mark Garner and JIL Venture dated March 1, 2018 (53)

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4.48	Note payable by Gopher Protocol Inc. to ECS, LLC dated March 1, 2018 (53)
4.49	10% Convertible Debenture issued to Bellridge Capital, LP dated April 9, 2018 (54)
4.50	Common Stock Purchase Warrant issued to Bellridge Capital, LP dated April 9, 2018 (54)
4.51	Stock Option issued to Kevin Pickard dated April 16, 2018 (55)
4.52	Stock Option issued to Muhammad Khilji dated April 25, 2018 (56)
4.53	Securities Purchase Agreement by and between Gopher Protocol Inc. and Eagle Equities, LLC dated May 4, 2018 (57)

10.1	Software Licensing Agreement dated April 12, 2010, by and between Forex International Trading Corp and Triple (1)
10.2	Employment Agreement dated April 23, 2010, by and between Forex International Trading Corp and Darren Dunckel (2)
10.3	Letter Agreement by and between Forex International Trading Corp. and Anita Atlas, dated July 29, 2010 (4)
10.4	Letter Agreement by and between Forex International Trading Corp. and Stewart Reich, dated July 29, 2010 (4)
10.5	Letter Agreement by and between Forex International Trading Corp. and Mr. William Glass, dated August 6, 2010 (5)
10.6	Share Exchange Agreement by and between Forex International Trading Corp. and APH (10)
10.7	Letter Agreement by and between Forex International Trading Corp., APH, Medirad Inc. and Rasel Ltd. (11)
10.8	Letter Amendment by and between Forex International Trading Corp. and William Glass, dated March 4, 2011 (13)
10.9	Letter Amendment by and between Forex International Trading Corp. and Stewart Reich, dated March 4, 2011 (13)
10.10	Employment Agreement by and between Forex International Trading Corp. and Liat Franco, dated March 7, 2011 (13)
10.11	Agreement between Forex International Trading Corp. and APH dated April 5, 2011 (14)
10.12	Conversion Agreement between MP and Forex International Trading Corp. dated April 5, 2011 (14)
10.13	Share Exchange Agreement between Forex International Trading Corp. and dated April 5, 2011 (14)
10.14	Agreement to Unwind and Mutual Release dated as of July 11, 2011 by and between Forex International Trading Corp., Forex NYC and Wheatley Investment Agreement by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27, 2011 (16)
10.15	Registration Rights Agreement with Centurion by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27, 2011 (16)
10.16	Intentionally Left Blank
10.17	Settlement Agreement by and between Forex International Trading Corp., A.T. Limited, Watford Holding Inc. and James Bay Holdings, Inc. dated November 1, 2011 (17)
10.18	Settlement and Foreclosure Agreement between Forex International Trading Corp., AP Holdings Limited, H.A.M Group Limited and Cordellia d.o.o.(18)
10.19	Annulment of Share Purchase Agreement dated December 5, 2011 between Triple 8 Limited, AP Holdings Limited, H.A.M Group Limited and 888 Markets (Jersey) Limited (18)
10.20	Promissory Note issued to Forex International Trading Corp. dated December 13, 2011 (19)
10.21	Stock Pledge Agreement executed by Fortune Market Media Inc. dated December 13, 2011 (19)
10.22	Conversion Agreement between the Company and GV Global Communications, Inc. (22)
10.23	Agreement by and between and Direct JV Investments Inc., Forex International Trading Corporation and Vulcan Oil & Gas Inc. dated January 7, 2013 (23)
10.24	Evaluation License Agreement dated September 2, 2013, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (27)
10.25	Letter Agreement dated January 2, 2014, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (28)
10.26	Settlement Agreement by and between Forex International Trading Corp. and Leova Dobris dated November 14, 2014 (29)
10.27	Exchange Agreement by and between Forex International Trading Corp. and Vladimir Kirish dated January 22, 2015 (30)
10.28	Exchange Agreement by and between Forex International Trading Corp. and GV Global Communications Inc. dated January 22, 2015 (30)
10.29	Agreement by and between Forex International Trading Corp. and Fleming PLLC dated January 22, 2015 (30)
10.30	Territorial License Agreement dated March 4, 2015, by and between Gopher Protocol Inc. and Hermes Roll LLC (32)
10.31	Amended and Restated Territorial License Agreement dated June 16, 2015 by and between Gopher Protocol Inc. and Hermes Roll LLC (35)
10.32	Letter Agreement dated August 20, 2015 by and between Gopher Protocol Inc. and Dr. Danny Rittman (36)
10.33	Consulting Agreement dated August 11, 2015, by and between Gopher Protocol Inc. and Michael Korsunsky (37)
10.34	Letter Agreement dated March 14, 2016 by and between Gopher Protocol Inc. and Dr. Danny Rittman. (38)
10.35	Amended and Restated Employment Agreement by and between Gopher Protocol Inc. and Dr. Danny Rittman dated April 19, 2016 (39)
10.36	Consulting Agreement dated September 10, 2016, by and between Gopher Protocol Inc. and Waterford Group LLC (40)
10.37	Conversion Agreement between the Company and Guardian Patch LLC dated May 23, 2017 (41)
10.38	Lock-Up and Leak-Out Agreement between the Company and Guardian Patch LLC dated June 26, 2017 (43)
10.39	Lock-Up and Leak-Out Agreement between the Company and Stanley Hills LLC dated June 29, 2017 (43)
10.40	Letter Agreement between the Company and Danny Rittman dated June 29, 2017 (43)

 40

10.41	Asset Purchase Agreement between Gopher Protocol Inc. and RWJ Advanced Marketing, LLC dated September 1, 2017 (45)
10.42	Addendum to Asset Purchase Agreement between Gopher Protocol Inc. and RWJ Advanced Marketing, LLC dated September 1, 2017 (45)
10.43	Employment Agreement between Gopher Protocol Inc. and Gregory Bauer dated September 1, 2017 (45)
10.44	Consulting Agreement between Gopher Protocol Inc. and Guardian Patch, LLC dated September 1, 2017 (45)
10.45	Rescission Agreement between Gopher Protocol Inc. and Eagle Equities LLC dated December 31, 2017 (51)
10.46	Amendment of Lock-Up and Leak-Out Agreement between Gopher Protocol Inc. and Stanley Hills, LLC dated December 29, 2017(51)
10.47	Amendment of Lock-Up and Leak-Out Agreement between Gopher Protocol Inc. and Guardian Patch, LLC dated December 29, 2017(51)
10.48	Asset Purchase Agreement between Gopher Protocol Inc. and ECS Prepaid LLC dated March 1, 2018 (53)
10.49	Employment Agreement between Gopher Protocol Inc. and Derron Winfrey dated March 1, 2018(53)
10.50	Employment Agreement between Gopher Protocol Inc. and Mark Garner dated March 1, 2018(53)

10.51	Consulting Agreement between Gopher Protocol Inc. and J.I.L. Venture LLC dated March 1, 2018(53)
10.52	Executive Retention Agreement by and between Gopher Protocol Inc. and Kevin Pickard dated April 16, 2018 (55)
10.53	Indemnification Agreement by and between Gopher Protocol Inc. and Kevin Pickard dated April 16, 2018 (55)
10.54	Director Agreement by and between Gopher Protocol Inc. and Muhammad Khilji dated April 25, 2018 (56)
10.55	Indemnification Agreement by and between Gopher Protocol Inc. and Muhammad Khilji dated April 25, 2018 (56)
10.56	Director Agreement by and between Gopher Protocol Inc. and Robert Yaspan dated May 17, 2018 (58)
10.57	Director Agreement by and between Gopher Protocol Inc. and Judit Nagypal dated May 17, 2018 (58)
10.58	Director Agreement by and between Gopher Protocol Inc. and Ambassador Siegel dated May 17, 2018 (58)
10.59	Director Agreement by and between Gopher Protocol Inc. and Eva Bitter dated June 18, 2018 (59)
10.60	Employment Agreement by and between Gopher Protocol Inc. and Douglas L. Davis dated July 23, 2018 (60)
10.61	Director Agreement by and between Gopher Protocol Inc. and Mitchell K. Tavera dated July 31, 2018 (61)

16.1	Letter from Alan R. Swift, CPA, P.A. (33)
16.2	Letter from Anton & Chia, LLP (48)
21.1	List of Subsidiaries (24)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Guardian – Global Tracking Technology (42)
(1)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2010
(2)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 28, 2010
(3)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 13, 2010
(4)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 3, 2010
(5)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 9, 2010
(6)	Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on September 9, 2009.
(7)	Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on November 2, 2009.
(8)	Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on January 29, 2010.
(9)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 22, 2010
(10)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 17, 2010
(11)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2011
(12)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2011
(13)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2011

(14)	Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 6, 2011
(15)	Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 20, 2011

 41

(16)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 29, 2011
(17)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 9, 2011
(18)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 12, 2011
(19)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 16, 2011
(20)	Incorporated by referenced to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 13, 2012
(21)	Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 14, 2012
(22)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 27, 2012.
(23)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 9, 2013.
(24)	Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 15, 2013.
(25)	Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 20, 2012.
(26)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 1, 2013.
(27)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 4, 2013.
(28)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2014.
(29)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 20, 2014
(30)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 27, 2015
(31)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 18, 2015
(32)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 12, 2015
(33)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 24, 2015
(34)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 1, 2015
(35)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 16, 2015
(36)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 21, 2015
(37)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 28, 2015
(38)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016
(39)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016
(40)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2016
(41)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 26, 2017
(42)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2017

 42

(43)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 30, 2017
(44)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 7, 2017
(45)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 7, 2017
(46)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2017
(47)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 10, 2017
(48)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 27, 2017
(49)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 30, 2017
(50)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 2, 2018
(51)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2018
(52)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 6, 2018
(53)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2018
(54)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 13, 2018
(55)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 18, 2018
(56)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2018.
(57)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 8, 2018.

(58) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 22, 2018.

(59) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 22, 2018.

(60) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2018.

(61) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 31, 2018.

 43

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

	GOPHER PROTOCOL INC. (Registrant)
Date: August 13, 2018	By:	/s/ Douglas Davis
		Douglas Davis
	Interim Chief Executive Officer  (Principal Executive Officer)

Date: August 13, 2018	By:	/s/ Kevin Pickard
		Kevin Pickard
	Chief Financial Officer (Principal Financial and Accounting Officer)

 44

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Douglas Davis, Interim Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gopher Protocol 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 officers 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant) and have:

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

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

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

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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 controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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

Date:  August 13, 2018	/s/ Douglas Davis
	Douglas Davis,
	Interim Chief Executive Officer  (Principal Executive Officer)

45 

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Kevin Pickard, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gopher Protocol 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 officers 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant) and have:

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

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

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

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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 controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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

Date: August 13, 2018	/s/ Kevin Pickard
	Kevin Pickard,
	Chief Financial Officer
	(Principal Financial Officer)

46 

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 the Quarterly report of Gopher Protocol Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas Davis, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date:  August 13, 2018	/s/ Douglas Davis
	Douglas Davis,
	Interim Chief Executive Officer  (Principal Executive Officer)

47 

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 the Quarterly report of Gopher Protocol Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Pickard, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date:  August 13, 2018	/s/ Kevin Pickard
	Kevin Pickard,
	Chief Financial Officer  (Principal Financial Officer)

48 

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 10, 2018
Document And Entity Information
Entity Registrant Name	Gopher Protocol Inc.
Entity Central Index Key	0001471781
Document Type	10-Q
Trading Symbol	GOPH
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		132,538,132
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)		Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash		$ 322,126	$ 1,305,062
Accounts receivable		694,532	41,947
Inventory		298,354	262,749
Prepaid expenses		88,000
Total current assets		1,403,012	1,609,758
Property and equipment, net		304,179	263,082
Intangible assets, net		7,191,696	6,666,667
Other assets		200,000	1,979
Goodwill		4,391,496	950,619
Total assets		13,490,383	9,492,105
Current liabilities:
Accounts payable and accrued expenses (including related parties of $232,707 and $51,167)		1,571,764	1,199,215
Unearned revenue		57,789
Due to Guardian LLC (related party)		408,413	1,350,262
Convertible notes payable, net of discount of $1,084,254 and $54,377		415,746	25,623
Note payable		700,000
Derivative liability			95,164
Total current liabilities		3,153,712	2,670,264
Note payable		2,600,000	2,600,000
Total liabilities		5,753,712	5,270,264
Contingencies
Stockholders' Equity
Common stock, $0.00001 par value; 500,000,000 shares authorized; 132,138,132 and 58,215,406 shares issued and outstanding at June 30, 2018 and December 31, 2017		3,321	2,582
Treasury stock, at cost; 1,040 shares at June 30, 2018 and December 31, 2017		(643,059)	(643,059)
Additional Paid In Capital		44,360,778	19,243,959
Accumulated deficit		(35,984,389)	(14,381,662)
Total stockholders' equity		7,736,671	4,221,841
Total liabilities and stockholders' equity		13,490,383	9,492,105
Series B Convertible Preferred Stock [Member]
Stockholders' Equity
Preferred stock value	[1]
Series C Convertible Preferred Stock [Member]
Stockholders' Equity
Preferred stock value	[2]
Series D Convertible Preferred Stock [Member]
Stockholders' Equity
Preferred stock value	[3]		1
Series G Convertible Preferred Stock [Member]
Stockholders' Equity
Preferred stock value	[4]	$ 20	$ 20

[1] Series B Preferred stock, $0.00001 par value; 20,000,000 shares authorized; 45,000 and 45,000 shares issued and outstanding at June 30, 2018 and December 31, 2017.

[2] Series C Preferred stock, $0.00001 par value; 10,000 shares authorized; 700 and 700 shares issued and outstanding at June 30, 2018 and December 31, 2017.

[3] Series D Preferred stock, $0.00001 par value; 100,000 shares authorized; 0 and 66,000 shares issued and outstanding at June 30, 2018 and December 31, 2017

[4] Series G Preferred stock, $0.00001 par value; 2,000,000 shares authorized; 2,000,000 and 2,000,000 shares issued and outstanding at June 30, 2018 and December 31, 2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Accounts payable and accrued expenses related party	$ 232,707	$ 51,167
Discount	$ 1,084,254	$ 54,377
Common stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Common stock, authorized	500,000,000	500,000,000
Common stock, issued	132,138,132	58,215,406
Common stock, outstanding	132,138,132	58,215,406
Treasury stock	1,040	1,040
Series B Convertible Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, authorized	20,000,000	20,000,000
Preferred stock, issued	45,000	45,000
Preferred stock, Outstanding	45,000	45,000
Series C Convertible Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, authorized	10,000	10,000
Preferred stock, issued	700	700
Preferred stock, Outstanding	700	700
Series D Convertible Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, authorized	100,000	100,000
Preferred stock, issued	0	66,000
Preferred stock, Outstanding	0	66,000
Series G Convertible Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, authorized	2,000,000	2,000,000
Preferred stock, issued	2,000,000	2,000,000
Preferred stock, Outstanding	2,000,000	2,000,000

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
Sales:
Sales	$ 13,421,410		$ 21,281,016
Related party sales	45,000	45,000	90,000	90,000
Total sales	13,466,410	45,000	21,371,016	90,000
Cost of goods sold	12,919,777		20,623,953
Gross profit	546,633	45,000	747,063	90,000
Operating expenses:
General and administrative expenses	6,105,134	250,030	10,495,241	420,659
Marketing expenses	140,324	114,365	270,501	170,913
Acquisition costs	1,377,919		10,966,791
Total operating expenses	7,623,377	364,395	21,732,533	591,572
Loss from operations	(7,076,744)	(319,395)	(20,985,470)	(501,572)
Other income (expense):
Amortization of debt discount	(355,993)	(50,213)	(470,123)	(50,213)
Change in fair value of derivative liability		496,037	(18,123)	496,037
Interest expense and financing costs	(61,968)	(1,518,814)	(129,011)	(1,519,819)
Total other income (expense)	(417,961)	(1,072,990)	(617,257)	(1,073,995)
Loss before income taxes	(7,494,705)	(1,392,385)	(21,602,727)	(1,575,567)
Income tax expense
Net loss	$ (7,494,705)	$ (1,392,385)	$ (21,602,727)	$ (1,575,567)
Weighted average number of common shares outstanding:
Basic and diluted	131,420,134	37,706,759	109,560,508	37,816,078
Net loss per share:
Basic and diluted	$ (0.06)	$ (0.04)	$ (0.20)	$ (0.04)

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	$ (21,602,727)	$ (1,575,567)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	51,164	699
Amortization of intangible assets	549,971
Amortization of debt discount	470,123	50,213
Change in fair value of derivative liability	18,123	(496,037)
Financing cost		1,517,201
Shares issued for services	11,052,725	26,500
Warrant issued for services	7,570,668
Changes in operating assets and liabilities:
Accounts receivable	(652,585)	4,977
Inventory	(35,605)
Prepaid expenses	(88,000)	3,499
Accounts payable and accrued expenses	372,549	(469,408)
Unearned revenue	57,789
Due to Guardian, LLC	(941,849)	679,773
Accrued interest on convertible notes payable		2,618
Net cash used in operating activities	(3,177,654)	(255,532)
Cash Flows From Investing Activities:
Purchase of property and equipment	(27,261)
Cash paid for acquisition	(200,000)
Cash paid for investment in Spare	(200,000)
Other	1,979
Net cash used in investing activities	(425,282)
Cash flows from financing activities:
Issuance of convertible notes	1,500,000	300,482
Repayment of convertible notes	(80,000)
Payment on acquisition note	(300,000)
Issuance of common stock	1,500,000
Net cash provided by financing activities	2,620,000	300,482
Net decrease in cash	(982,936)	44,950
Cash, beginning of period	1,305,062	5,096
Cash, end of period	322,126	50,046
Cash paid for interest	36,695
Cash paid for income taxes
Supplemental non-cash investing and financing activities
Debt discount	1,500,000	909,919
Transfer of derivative liability to equity	113,287
Shares issued to reduce notes payable		25,217
Reclassification of a payable to Guardian LLC to a convertible note payable		$ 679,773

XML

Organization and Nature of Business

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Business

Note 1 - Organization and Basis of Presentation

Organization and Line of Business

Gopher Protocol Inc. (the “Company”, “Gopher”, “Gopher Protocol” or “GOPH”) was incorporated on July 22, 2009 under the laws of the State of Nevada and relocated its headquarters to Santa Monica, California in 2016. Gopher is a development stage company that is creating innovative mobile microchip (ICs) and software technologies based on GopherInsight ™ . The Company derived revenues from the provision of IT services to Guardian Patch LLC, a related party (“Guardian LLC”) and the Company recognizes revenue from the operations of the acquired assets it acquired in the third quarter of 2017.

The unaudited consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results expected for the year ending December 31, 2018.

GopherInsight ™ is a patented real time, heuristic (self-learning/artificial intelligence) based mobile technology. GopherInsight ™ chip technology, if successfully fully developed, will be able to be installed in mobile devices (smartphones, tablets, laptops, etc.) as well as stand-alone products. It is intended that GopherInsight ™ software applications will work in conjunction with GopherInsight ™ microchips across mobile operating systems, providing computing power, advanced database management/sharing functionalities and more. The technology under development consists of a smart microchip, mobile application software and supporting software. The system contemplates the creation of a global network. Once fully developed, the Company believes that its microchip technologies may be installed within mobile devices or on SIM cards.

On March 29, 2016, the Company contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC and a commitment from Guardian LLC that it is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch, as well as funding the working capital needs of the Company.

On September 1, 2017, the Company entered into an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC, a Georgia corporation. The Company entered into this Asset Purchase Agreement to acquire terminals in approximately 15,000 locations by which the Company will deploy its technology. The operations consist primarily of the sale of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards. The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets.

On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, and a processing software program.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Central State Legal Services Inc. (“CSLS”), a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with the a system to recover funds from returned checks. 

Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include depreciable lives of property and equipment, valuation of beneficial conversion feature debt discounts, valuation of derivatives, and the valuation allowance on deferred tax assets.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, UGopherServices Corp, since the date of acquisition (September 1, 2017), Ugopherservices Limited (since its date of formation of February 1, 2018), an England and Wales a private limited company that is currently inactive and ECS, Electronic Check and CSLS since their respective dates of acquisition (March 1, 2018, April 2, 2018 and April 2, 2018). All significant intercompany transactions and balances have been eliminated.

Cash Equivalents

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company grants credit to establishments (such as convenience stores) that sell the Company’s products under credit terms that it believes are customary in the industry and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within 10 days of the product sale and the Company has minimal bad debts. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. The Company’s allowance for doubtful accounts was $0 and $0 at June 30, 2018 and December 31, 2017, respectively.

Inventory

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At June 30, 2018 and December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Furniture	7 years
Computers and equipment	3 years
POSA machines	3 years

Long-Lived Assets

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at June 30, 2018 and December 31, 2017, the Company believes there was no impairment of its long-lived assets.

Intangible Assets

The Company’s intangible assets were acquired with the acquisition of certain RWJ assets in 2017, and the acquisition of certain ECS, Electronic Check and CSLS assets in 2018 are being amortized over 84 months. The Company performs a test for impairment annually. As of June 30, 2018 and December 31, 2017, the Company performed the required impairment analysis, which resulted in no impairment adjustments. 

Goodwill

Goodwill represents the excess of purchase price over the underlying book value of the net assets of the businesses that were acquired. Under accounting requirements, goodwill is not amortized, but is subject to annual impairment tests. The Company recorded goodwill of $950,619 related to its acquisition of certain RWJ assets in 2017, and $2,052,958 and $1,387,919, respectively, related to its acquisition of certain ECS and Electronic Check assets in 2018.

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2017, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion. During the six months ended June 30, 2018, the convertible note with the embedded conversion feature was repaid; therefore, there are no derivative financial instruments outstanding at June 30, 2018.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

At December 31, 2017, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

	Fair Value		Fair Value Measurements at
	As of		December 31, 2017
Description	December 31, 2017		Using Fair Value Hierarchy
			Level 1		Level 2		Level 3
Conversion feature on convertible notes	$	95,164	$	—	$	95,164	$	—
Total	$	95,164	$	—	$	95,164	$	—

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 815 at June 30, 2018.

Treasury Stock

Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital. During 2011, the Company bought back 8 post-split shares (38,000 pre-split) shares of its own shares.

Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 606, Revenue From Contracts with Customers. The Company recognizes revenue from the sale of phones, phone card products and prepaid cards at the time of sale to the customer. The Company recognizes revenue from IT-related services at the time the services are performed.

Cost of Goods Sold

Cost of goods sold represents the cost of the phone and phone card products sold by the Company. In 2017 the Company did not have cost of goods sold, as all of its revenue was generated from consulting income. In 2018, the entire cost of goods sold relates to products sold by the Company’s new acquired acquisitions in September 2017, March 2018 and April 2018.

Unearned revenue

Unearned revenue represents the amount received for the purchase of products that have not seen shipped to the Company’s customers. In the second quarter of 2018, the Company ran a pre-sales campaign for its pet tracker product and received $57,789 in unearned revenue as of June 30, 2018.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

	June 30,		June 30,
	2018		2017
Series B preferred stock		3,000		3,000
Series C preferred stock		770		770
Series D preferred stock		—		66,000,000
Series G preferred stock		2,000,000		—
Warrants		28,410,416		93,750
Convertible notes		1,583,333		10,060,102
Total		31,997,519		76,157,622

Recent Accounting Pronouncements

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of this ASU on its 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 interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASU did not have an impact on its financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

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 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company has evaluated the impact of ASU 2014-09 on the Company's financial statements and disclosures does not believe the impact will be material. The Company adopted this ASU beginning on January 1, 2018 and used the prospective method of adoption.

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

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Acquisitions

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Acquisitions

Note 3 - Acquisitions

On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000. In addition, the Company issued 500,000 shares of common stock of the Company and warrants to purchase 500,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $1.85 per share. The note is secured by the assets acquired by the Company from ECS and the Company is required to make ten equal principal payments of $100,000 commencing on April 15, 2018. The Company may prepay the note at any time without penalty.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check, a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity. The purchase price was $75,000 in cash, and the Company issued 250,000 shares of common stock of the Company and warrants to purchase 250,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $2.70 per share.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with CSLS, a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration for $25,000.

The Company entered into these asset purchase agreements to acquire the software needed to process transactions for its prepaid business, and to acquire additional terminal locations by which the Company will deploy its technology.

A summary of the purchase price and the purchase price allocations at fair value is shown below. The purchase price allocation is preliminary and subject to change. The Company has not yet completed its analysis to determine the fair value of the assets acquired on the acquisition date. Once this analysis is complete, the Company will adjust, if necessary, the provisional amounts assigned to the assets purchased in the accounting period in which the analysis is completed.

				Electronic
	ECS			Check			CSLS		Total
Purchase price
Cash	$	100,000		$	75,000		$	25,000	$	200,000
Shares of common stock		1,010,000	a		695,000	c		—		1,705,000
Secured promissory note		1,000,000			—			—		1,000,000
Warrants		992,958	b		682,919	d		—		1,675,877
	$	3,102,958		$	1,452,919		$	25,000	$	4,580,877
Allocation of purchase price
Property and equipment	$	50,000		$	15,000		$	—	$	65,000
Software		1,000,000			50,000			25,000		1,075,000
Goodwill		2,052,958			1,387,919			—		3,440,877
Purchase price	$	3,102,958		$	1,452,919		$	25,000	$	4,580,877

a. the fair value of the 500,000 shares of common stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

b. the fair value of the 500,000 warrants was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.65%

c. the fair value of the 250,000 shares of common stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

d. the fair value of the 250,000 warrants was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.65%

The revenue from the acquisition of assets included in the results of operations from the date of acquisition to June 30, 2018 was $10,845,896.

The unaudited pro forma information below present statement of operations data as if the acquisition of assets had taken place on January 1, 2017.

	Six Months Ended June 30,
	2018			2017
Sales	$	26,733,878		$	13,621,042
Cost of goods sold		25,862,148			13,215,967
Gross profit		871,730			405,075
Operating expenses		21,900,805			1,779,178
Loss from operations		(21,029,075	)		(1,374,103	)
Net loss		(21,646,332	)		(2,448,098	)
Loss per share		(0.20	)		(0.06	)

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Note 4 - Property and Equipment, Net

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

	June 30,			December 31,
	2018			2017
Furniture	$	33,739		$	33,740
Computers and equipment		56,824			22,816
POSA machines		312,219			253,965
		402,782			310,521
Less accumulated depreciation		(98,603	)		(47,439	)
Property and equipment, net	$	304,179		$	263,082

Depreciation expense for the six months ended June 30, 2018 and 2017 was $51,164 and $699, respectively.

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Intangible Assets, Net

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets, Net

Note 5 – Intangible Assets, Net

The following are the intangible assets at June 30, 2018 and December 31, 2017:

	June 30			December 31,
	2018			2017
Leased locations	$	7,000,000		$	7,000,000
Software		1,075,000			—
		8,075,000			7,000,000
Less accumulated amortization		(883,304	)		(333,333	)
Intangible assets, net	$	7,191,696		$	6,666,667

All of these intangible assets are being amortized over 84 months.

Amortization expense for the six months ended June 30, 2018 and 2017 was $549,971 and $0, respectively.

The estimated future amortization expense related to intangible assets is as follows:

Twelve months ending June 30,
2019	$	1,153,571
2020		1,153,571
2021		1,153,571
2022		1,153,571
2023		1,153,571
Thereafter		1,423,841
	$	7,191,696

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Other Assets

6 Months Ended

Jun. 30, 2018

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

Note 6 - Other Assets

Other assets at June 30, 2018 consist of an acquisition deposit of $200,000 (See Note 12).

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Convertible Notes Payable

6 Months Ended

Jun. 30, 2018

Notes Payable [Abstract]

Convertible Notes Payable

Note 7 – Convertible Notes Payable

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

	June 30,			December 31,
	2018			2017
Convertible notes payable to Power Up	$	—		$	80,000
Convertible notes payable to Bellridge Capital		1,500,000			—
Total convertible notes payable		1,500,000			80,000
Unamortized debt discount		(1,084,254	)		(54,377	)
Convertible notes payable	$	415,746		$	25,623

Power Up Lending Group Ltd.

On October 2, 2017, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd., an accredited investor (“Power Up”) pursuant to which the Company issued to Power Up a Convertible Promissory Note (the “Power Note”) in the aggregate principal amount of $80,000. The Power Note has a maturity date of July 10, 2018 and the Company has agreed to pay interest on the unpaid principal balance of the Power Note at the rate of ten percent (10%) per annum from the date on which the Power Note is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Power Note, provided it makes a payment to Power Up as set forth in the Power Note. The transactions described above closed on October 4, 2017.

The outstanding principal amount of the Power Note is convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest trading price with a 15 day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Power Note), the Power Note shall become immediately due and payable and the Company shall pay to Power Up, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Power Note.

In no event shall Power Up be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by Power Up and its affiliates would exceed 4.9% of the outstanding shares of the common stock of the Company.

As of March 6, 2018, the Company has paid off in full all principal, interest and penalties with respect to the Power Up Note, and there are no further obligations owed with respect to such note.

Bellridge Capital LLC

On March 2, 2018, the Company entered into and closed a Securities Purchase Agreement with Bellridge Capital, LLC (“Bellridge”) pursuant to which Bellridge invested $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share. The Bellridge Debenture bears interest of 10% and is payable March 1, 2019. The Bellridge Debenture is convertible into shares of common stock at $0.90 per share subject to antidilution protection. During an event of default, the conversion price in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise its Common Stock Purchase Warrants and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

On March 2, 2018, the Company delivered 1,000,000 shares of Common Stock to an escrow agent. The 1,000,000 escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7^th monthly anniversary of the issuance of the 1,000,000 escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1 ^st day of each monthly anniversary beginning on the 1 ^st day of the 7 ^th month (and continuing monthly until all shares are sold) / closing price of the 1 ^st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

In connection with the Bellridge Debenture, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $2.35.

The Company first determined the value of the convertible note and the fair value of the detachable warrants issued in connection with this transaction. The estimated value of the warrants of $827,428 and was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.65%

The face amount of the convertible note of $750,000 was proportionately allocated to the convertible note and the warrant in the amount of $356,593 and $393,407, respectively. The amount allocated to the warrants of $393,407 was recorded as a discount to the convertible note and as additional paid in capital. The value of the convertible note was then allocated between the convertible note and the beneficial conversion feature, which amounted to $0 and $356,593, respectively. The combined total discount is $750,000, and will be amortized over the year life of the convertible note.

On April 9, 2018, Bellridge elected to exercise the Bellridge Option, and as such the Company and Bellridge closed the second financing as contemplated by the Securities Purchase Agreement entered with Bellridge pursuant to which Bellridge invested an additional $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Second Bellridge Debenture” and together with the First Bellridge Debenture, the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “Second Bellridge Warrant” and together with the First Bellridge Warrant, the “Bellridge Warrant”) The Bellridge Debenture bears interest of 10% and is payable one year from issuance. The First Bellridge Debenture and the Second Bellridge Debenture are convertible into shares of common stock at $0.90 per share and $1.00 per share, respectively, subject to limited antidilution protection.

During an event of default, the conversion price for the Bellridge Debenture in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise the Bellridge Warrant and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

In connection with both closings, the Company delivered 1,000,000 shares of common stock to an escrow agent. The escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7 ^th monthly anniversary of the issuance of the escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1 ^st day of each monthly anniversary beginning on the 1 ^st day of the 7 ^th month (and continuing monthly until all shares are sold) / closing price of the 1 ^st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

In connection with the Second Bellridge Debenture, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $2.35.

The Company first determined the value of the convertible note and the fair value of the detachable warrants issued in connection with this transaction. The estimated value of the warrants of $2,037,713 and was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.60%

The face amount of the convertible note of $750,000 was proportionately allocated to the convertible note and the warrant in the amount of $548,222 and $201,778, respectively. The amount allocated to the warrants of $548,222 was recorded as a discount to the convertible note and as additional paid in capital. The value of the convertible note was then allocated between the convertible note and the beneficial conversion feature, which amounted to $0 and $201,778, respectively. The combined total discount is $750,000, and will be amortized over the year life of the convertible note.

Discounts on convertible notes

The Company recognized interest expense of $470,123 during the six months ended June 30, 2018 related to the amortization of the debt discount. The unamortized debt discount at June 30, 2018 is $1,084,254.

A roll-forward of the convertible note from December 31, 2017 to June 30, 2018 is below:

Convertible notes, December 31, 2017	$	25,623
Issued for cash		1,500,000
Repayment in cash		(80,000	)
Debt discount related to new convertible notes		(1,500,000	)
Amortization of debt discounts		470,123
Convertible notes, June 30, 2018	$	415,746

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Derivative Liability

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Derivative Liability

Note 8 - Derivative Liability

Certain of the convertible notes payable discussed in Note 7 have a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

The Company uses a weighted average Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability at December 31, 2017:

Stock price	$	1.12
Risk free rate		1.76	%
Volatility		175	%
Conversion/ Exercise price	$	0.60
Dividend rate		0	%
Term (years)		0.5 years

The following table represents the Company’s derivative liability activity for the six months ended June 30, 2018:

Derivative liability balance, December 31, 2017	$	95,164
Fair value of beneficial conversion feature of debt repaid		(113,287	)
Change in derivative liability during the period		18,123
Derivative liability balance, June 30, 2018	$	—

During the six months ended June 30, 2018, the convertible note with the embedded conversion feature was repaid; therefore, there is no derivative liability outstanding at June 30, 2018.

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Note Payable

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Note Payable

Note 9- Note Payable

In connection with the acquisition RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum is due on December 31, 2019 and is secured by the assets purchased in the acquisition. This note payable of $2,600,000 is classified as long-term in the accompanying consolidated balance sheet.

In connection with the acquisition of ECS as discussed in Note 3, the Company issued a note payable. The note is to be repaid in monthly installment payments of $100,000 with the final payment due on January 15, 2019. As of June 30, 2018, four such payments have occurred. This note with a remaining balance of $700,000 at June 30, 2018 is secured by the assets purchased in the acquisition and is classified as short-term in the accompanying consolidated balance sheet.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Note 10- Stockholders’ Equity

Common Stock

During the six months ended June 30, 2018, the Company had the following transactions in its common stock:

● issued 66,000,000 shares in connection with the conversion of 66,000 shares of Series D Preferred Stock;

● issued 250,000 shares to a consultant for professional services rendered valued at $123,725. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the dates that the shares earned based on the agreement;

● issued an aggregate of 1,400,000 shares to employees and board members as part of their agreements with the Company. The value of the common stock of $3,624,000 was determined based on the closing stock price of the Company’s common stock on the date of the respective agreements;

● issued 3,000,000 to a consultant for services related to assisting the Company with the acquisition of the RWJ assets. The 3,000,000 shares were earned when the operations of the RWJ assets produced revenue in excess of $10,000,000. The value of the common stock of $4,590,000 was determined based on the closing stock price of the Company’s common stock on the date of the shares were earned.

● issued aggregate of 1,250,000 shares to a consultant for services rendered valued at $2,715,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of acquisition of ECS and Electronic Check;

● issued 500,000 shares for the acquisition of the ECS assets valued at $1,010,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;

● issued 250,000 shares for the acquisition of the Electronic Check valued at $695,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date; and

● issued 1,272,726 shares of common stock to an investor for cash proceeds of $1,500,000 (See discussion below).

Eagle Equities, LLC

On December 29, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares of the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). Eagle agreed to potentially purchase an additional 666,666 shares of common stock (the “Second Closing Shares”) on or before June 30, 2018 for a purchase price of $500,000 subject to various closing conditions. On March 21, 2018, Eagle purchased an additional 666,666 shares of common stock for a purchase price of $500,000.

The Company placed an aggregate of 2,000,000 shares of common stock (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Shares and Second Closing Shares, Eagle has sold any of the First Closing Shares or the Second Closing Shares at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

On May 4, 2018, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which Eagle agreed to purchase up to 1,212,120 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 or $1.65 per share. The closing occurred on May 4, 2018 with respect to the funding of $500,000 resulting in the issuance of 303,030 shares of common stock and on May 25, 2018 with respect to the funding of $500,000 resulting in the issuance of an additional 303,030 shares of common stock. Additional closings of $500,000 for 303,030 shares are scheduled to close on June 15, 2018 and July 5, 2018 each. The additional closings on June 15, 2018 and July 5, 2018 have not occurred.

The Company agreed to place 303,030 shares of common stock each tranche (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the closing of each tranche, Eagle has sold any of its shares of common stock at a sales price of less than $1.65 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($1.65 – Closing Price) / Closing Price) * number of shares sold at a price less than $1.65.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of June 4, 2019 or until all shares are sold.

Series D Preferred Shares

Per the terms of the Exclusive License Agreement and in consideration of the licensing agreement signed between the Company and Hermes Roll LLC, the Company issued 100,000 shares of Series D Preferred Stock of the Company (the “Preferred Shares”). The preferred stock has a value of $ 1,000 based upon the cost of the license; due to the holder of license is the related party of the Company. The Preferred Shares have no liquidation rights. The Holder of the Preferred Shares will be entitled to vote on all matters submitted to shareholders of the Company on an as-converted basis. The Preferred Shares have a conversion price of $0.01 (the “Conversion Price”) and a stated value of $10.00 per share (the “Stated Value”). Each Preferred Share is convertible, at the option of the Holder, into such number of shares of common stock of the Company as determined by dividing the Stated Value by the Conversion Price.

On January 23, 2018, Reko Holdings, LLC converted 66,000 shares of its Series D Preferred Stock into 66,000,000 restricted common shares.

As of June 30, 2018 and December 31, 2017, there are 0 and 66,000 shares of Series D Preferred Shares outstanding, respectively.

Warrants

The following is a summary of warrant activity since December 31, 2017:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Warrants		Exercise		Contractual		Intrinsic
	Outstanding		Price		Life		Value
Outstanding, December 31, 2017		22,760,416	$	0.55		4.67	$	13,640,000
Granted		5,650,000		2.17
Forfeited		0
Exercised		0
Outstanding, June 30, 2018		28,410,416	$	0.87		4.25	$	26,400,000
Exercisable, June 30, 2018		27,910,416	$	0.89		4.24	$	26,400,000

The exercise price for warrant outstanding and exercisable at June 30, 2018:

Outstanding				Exercisable
	Number of		Exercise		Number of		Exercise
	Warrants		Price		Warrants		Price
	22,000,000	$	0.50		22,000,000	$	0.50
	3,000,000		1.85		3,000,000		1.85
	666,666		2.00		666,666		2.00
	93,750		2.25		93,750		2.25
	1,000,000		2.35		1,000,000		2.35
	650,000		2.50		650,000		2.50
	500,000		2.70		500,000		2.70
	500,000		2.80		—		2.80
	28,410,416				27,910,416

During the six months ended June 30, 2018, the Company issued:

● 1,000,000 warrants in connection with two convertible notes payable;

● 500,000 warrants as consideration for the acquisition of the ECS assets (see Note 3) valued at $992,958;

● 250,000 warrants as consideration for the acquisition of the Electronic Check assets (see Note 3) valued at $682,919;

● 2,150,000 warrants to shares to employees and board members as part of their agreements with the Company valued at $5,276,656;

● 1,750,000 warrants to a consultant for services rendered. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3) valued at $3,661,791.

The fair value of the warrants listed above was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 210%;

● Dividend yield of 0%;

● Risk free interest rate of 2.60% to 2.94%

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Related Parties

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Parties

Note 11 - Related Parties

Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences. All of the Company’s revenue for the six months ended June 30, 2017 and $90,000 of the Company’s revenue for the six months ended June 30, 2018 is from IT services delivered to a single customer, Guardian LLC, which is a related party to the Company. The revenue generated from Guardian LLC was paid to the Company via a reduction in the amount that the Company owes Guardian LLC that is classified as Due to Guardian LLC in the accompanying consolidated balance sheet. All expenses in the Company’s operations were incurred as a consequence of delivering Company’s obligations under the joint venture agreement between the parties to commercialize the technology that is being developed by the LLC.

On April 22, 2015, Michael Murray was appointed by the Company as the Chairman of the Board, CEO, and President of the Company. Mr. Murray resigned as an executive officer on September 1, 2017. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes Roll, LLC (“Hermes”), which is the basis for the Company’s current operations. Mr. Murray was the owner of 9,900 shares of Series D Preferred Stock of the Company that was convertible at Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman will assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform. The agreement with Dr. Rittman was contingent upon the Company funding its commitments per the June 16, 2015 - Amended and Restated Territorial License Agreement. Failure of the Company providing this funding, in full, or partially, will automatically terminate any GOPH ownership of the intellectual properties. Dr. Rittman is the Chief Technology Officer and a director of the Company as well as the Chairman of the Company’s Advisory Board, which is in formation. Dr. Rittman and Mr. Murray jointly own 9,900 shares of Series D Preferred Stock of the Company that is convertible at Dr. Rittman’s or Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Rittman has converted all of his Series D Preferred Stock into common shares of the Company.

On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman agreed to assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform, subject to certain conditions. The Company has expensed the stated value of that intellectual property in these financial statements.

On or around March 18, 2016 the Company and Dr. Danny Rittman entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement with Hermes dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement dated June 16, 2015 (the “Amended and Restated Territorial License Agreement”), and that certain Letter Agreement (the “Letter Agreement”) entered into between Dr. Rittman and the Company dated August 20, 2015. The aforementioned agreements were tied to the funding of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need for Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

In March 2016, the Company and Dr. Danny Rittman, Co-Chairman, CTO and a shareholder, entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Prior to these agreements, the Company is the exclusive license holder for certain intellectual property relating to Hermes’ system and method for scheduling categorized deliverables, according to demand, at the customer’s location based on smartphone application and/or via the internet. As a result of these agreements, the Company shall remain an exclusive licensee per the terms of the original License Agreement and will develop the first products with Dr. Rittman and his partners.

On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month. An additional $70,000 shall be payable within 15 days of the end of the calendar year.

On March 29, 2016, Gopher contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC (the “Joint Venture”). Guardian LLC is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch. In addition, Guardian LLC is required to provide short term loans to Gopher on an as needed basis secured by Gopher’s economic interest in the Joint Venture. The Company will provide IT services to Guardian LLC for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to Guardian LLC as consideration for the JV. Guardian LLC has commenced development of the products. Certain private investors will provide all initial funding to the Company via the LLC for product development. Guardian LLC will fund the development, and the Company will provide IT services via Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of Guardian LLC, the Company and Guardian LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. Guardian LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by Guardian LLC. Moreover, Guardian LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with Guardian LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with Guardian LLC that the same JV principles of the Guardian LLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. During the six months ended June 30, 2018 and 2017, $90,000 and $90,000, respectively, of the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman services, in connection with the development of the Patch.

On July 21, 2016 members of the Guardian LLC, together with Dr. Rittman, incorporated Alpha EDA, LLC (“Alpha”). The members of the LLC appointed Dr. Rittman as the manager of Alpha. The Company, the LLC and Alpha have agreed that all Epsilon Rights, as well as Puzpix rights, will be assigned to Alpha. Alpha and the Company entered into a JV agreement similar to the Patch Joint Venture agreement (as described above), whereby Alpha will fund all of its operational and developmental needs (software development, support, marketing and administrative), and the profits of Alpha will be distributed equally to the two equal Joint venture partners, Guardian LLC and the Company. Alpha will hold all intellectual property rights related to software. Currently, three products will be owned by Alpha – the Epsilon software, the Puzpix social game and the Guardian Pack application. The Company and its technology licensing partners, Guardian LLC and Alpha, are preparing to introduce said new products (Epsilon, Guardian Pack & PuzPix) to the market beginning in 2018, and the Sphere during the second half of fiscal 2017. Certain problems caused by the need to miniaturize both the chip design and the battery caused a delay in the rollout from its planned launch during the first half of the year. The Epsilon product will be presented for time-based license agreements utilizing a designated website on top of customary distributing channels for the product. Epsilon is under confidential evaluation agreement with third party.

During 2016, the Company relocated its headquarters to 2500 Broadway, Suite F-125, Santa Monica, California. The Company paid approximately $5,000 per month in rent for this office space, and paid a $1,979 security deposit that is classified in our financial statements contained herein as a prepaid expense. The lease is being paid for by the Guardian LLC via reimbursement. The Company moved into smaller office space during the quarter, and its security deposit was adjusted downward to cover the smaller space in April 2016. The Company believes its current facilities will be adequate for the foreseeable future.

The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources, while the Company’s portion of the cost is $67,000 and due to the vendor on August 15, 2017. Guardian took full responsibility for all amounts due to this vendor. The Company intends to enter a new SOW for the purpose of creating fully-commercial products utilizing the manufacturers that it has identified.

On June 20, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 2,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company converted the Preferred Shares into an aggregate of 2,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

On August 9, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 17,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company executed conversion notices to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows: Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its GopherInsight™ technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. The Base Salary of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”

Since April 2016, Guardian LLC has provided loans to the Company for the Company’s working capital purposes, outside of its commitment to develop the Patch, in the aggregate amount of $660,132 (the “Loans”). On May 23, 2017, the Company entered into a Conversion Agreement with Guardian LLC pursuant to which the parties agreed to convert the Loans provided by Guardian LLC to the Company into a Convertible Promissory Note in the principal amount of $660,132 (the “Note”).

The Note bears interest at 6%, matures May 30, 2019 and is convertible into the Company’s common stock, at Guardian LLC’s option, at a conversion price equal to 50% of the lowest closing price for the common stock on the principal market during the ten consecutive trading days immediately preceding the conversion date, which, in no event, will be less than $0.01 per share. Guardian LLC has agreed to restrict their ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of common stock.

Guardian LLC (the “Note Holder”) understands that the Company may be seeking additional capital or funding and believes that the lock-up and leak-out restrictions and provisions, as further described herein, will improve the Company’s prospects for obtaining additional financing and thus improving the overall financial condition of the Company. As such on or around June 26, 2017 the Company and the Note Holder entered into a lock-up and leak-out:

1. Subject to the terms of this Agreement, the Note Holder agrees that for a period of nine (9) months from the Effective Date of this Agreement (the “Lock-Up Period”), the Note Holder shall not convert the Note into Common Stock for safe keeping or, directly or indirectly, sell, offer to sell, contract to sell, assign, pledge, hypothecate, encumber or otherwise transfer, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, pledge or other disposition of (each a “Transfer”) any beneficial rights with respect to the Note.

2. Leak-Out Provisions. Subject to the terms of this Agreement, the Note Holder agrees that for a period beginning immediately upon the end of the Lock-Up Period and ending fifteen (15) months from the Effective Date of this Agreement (the “Leak-Out Period”), the Note Holder shall have the right to sell the lessor of (i) five (5%) percent of the previous day’s traded volume of the Company’s Common Stock, or (ii) Five Thousand (5,000) shares of the Common Stock on a per daily basis.

On December 29, 2017, all the principal and accrued interest were converted into 2,000,000 share of Series G preferred stock.

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. Mr. Bauer holds a Bachelor of Science degree from University of Maryland College Park. Mr. Bauer is veteran of the United States Navy and was honorably discharged in 1983. He held the title of United States Navy Surface Warfare Qualified. In May 2018, Mr. Bauer’s resigned as Chief Executive Officer and director of the Company.

The Company and Guardian Patch, LLC, which assisted structuring and negotiating the Purchase Agreement and related asset purchase, entered into a Consulting Agreement dated September 1, 2017. In consideration for the services, the Company issued Guardian 2,000,000 shares of common stock and warrants to purchase 9,000,000 shares of common stock. The warrants contain identical terms to the RJW Warrants. If and when the assets acquired under the Purchase Agreement generate revenues of $10,000,000, the Company shall issue Guardian an additional 3,000,000 shares of common stock. The consulting agreement was effective August 1, 2017 and terminates November 30, 2017. Guardian, pursuant to its existing joint venture agreement, agreed to provide the $400,000 in funding needed for the cash purchase price under the Purchase Agreement. Guardian also agreed to provide the needed $100,000 working capital designated to UGopherServices Corp. The parties have agreed to negotiate and finalize the terms of such loans in the near future.

In order to facilitate the transition of the Company, the Company and Michael Murray have agreed to enter into an employment agreement in which Mr. Murray will serve as Executive Vice President in charge of business development. As consideration, the Company issued a warrant to acquire 4,000,000 shares of common stock to Mr. Murray. The warrants contain identical terms to the RJW Warrants.

Regulatory

The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources.

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Contingencies

6 Months Ended

Jun. 30, 2018

Loss Contingency [Abstract]

Contingencies

Note 12 - Contingencies

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

On June 10, 2016, the Company entered into a consulting agreement with Waterford Group LLC (“Waterford”) pursuant to which the Company engaged Waterford to provide sales and marketing consulting and advisory services to the Company in consideration of 100,000 shares of restricted common stock of the Company (the “Shares”) and a common stock purchase warrant (the “Warrant”) to acquire 750,000 shares of restricted common stock of the Company at an exercise price of $2.25 per share for a period of five (5) years. 50,000 of the Shares were issued to Waterford upon the execution of the Agreement. The Warrant vested on a quarterly basis in eight (8) equal quarterly installments each in the amount of 93,750 shares each quarter during the term of the Agreement. The first quarterly installment vested upon the execution of the Agreement and each subsequent quarterly installment was to vest each quarter thereafter. The Company believes that Waterford is in default of its agreement, as it failed to perform or provide any services under the agreement. As such, the Company put Waterford on notice in writing that the Company did not issue shares or warrants during the third or fourth fiscal quarters of 2016 due to the default.

On or around January 23, 2017, the Company filed a complaint against Waterford and the Company’s Transfer Agent, in Superior Court of the State of California, County of Riverside. On February 1, 2017, the Company obtained a temporary restraining order that prohibits Waterford from (x) lifting the restricted legend from the 50,000 shares that it received in connection with signing the Agreement; (y) selling the 50,000 shares to another party; and, (z) from exercising the warrant on 93,750 shares that was issued and vested upon the execution of the Agreement. As ordered by the court, on February 9, 2017, the Company deposited a Corporate Surety Bond in the amount of $42,875 to secure the temporary restraining order. The Company agreed with Waterford to go to binding arbitration, which is currently being scheduled.

On or around February 27, 2017, the Company was issued a stay of the temporary restraining order barring its transfer agent from providing shares in connection with the exercise of the first Waterford warrant on 93,750 shares that was provided to Waterford in connection with the execution of the engagement letter that was executed by the parties on or around June 10, 2016. The matter is currently in arbitration.

On or around April 10, 2017, the Company was billed by its transfer agent (“TA”) for approximately $11,500 for legal fees (“TA Charges”) in connection with a lawsuit brought by one of the Company’s shareholders against the TA. The Company is not a named party in this litigation. The Company disputes the TA Charges, as the Company’s position is that the TA Charges are not covered under the indemnification section of the Company’s agreement with its TA. As the TA refused to provide further services, the Company paid the fees, and booked it as an expense in this quarter. This matter has been resolved amicably, and the Company continues its relationship with the TA.

Spare CS, Inc.

On January 14, 2018, the Company entered into an Initial Term Agreement (the “ITA”) with Spare CS Inc. (“Spare”), a Delaware corporation, pursuant to which the Company agreed to acquire 50% of the equity of Spare. Spare is a mobile banking app that allows customers to access cash with no ATM, no debit or credit card, and no purchase required from participating merchants.

As set forth in the ITA, the Company agreed to provide Spare with all needed operating costs and will fund $100,000 every three months until Spare has positive cash flow. The Company provided the initial $100,000 on January 16, 2018. D’Ontra Hughes, CEO of Spare, will continue as CEO for 24 months at a salary of $10,000 per month and all current management will remain in place for 12 months. In addition, the Company will issue Spare 1,500,000 shares of common stock and a common stock purchase warrant to acquire 1,000,000 shares of common stock at an exercise price of $3.00 per share for a period of three years. The Company also agreed to place 1,500,000 shares of common stock in escrow as a limited form of price protection for six months.

Although the Company considers the terms in the ITA to be binding, and the Company has provided an initial funding of $200,000 to Spare, the closing the transactions is subject to the completion of due diligence and drafting and execution of a definitive purchase agreements and related transaction documents. There is no guarantee that the parties will successfully negotiate and finalize a definitive purchase agreement, that the Board of Directors of each company will approve such agreement, or that the transaction set forth in the ITA will close.

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Concentrations

6 Months Ended

Jun. 30, 2018

Risks and Uncertainties [Abstract]

Concentrations

Note 13 – Concentrations

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

There have been no losses in these accounts through June 30, 2018.

In 2017, the Company had one customer that contributed 100% of its revenues. Per the terms of the JV with Guardian LLC, Guardian LLC has committed to fund all Company’s needs, as well as needs of the JV. Failure of Guardian LLC to provide the Company or the JV with said funding would represent a significant Credit Risk. As of June 30, 2018 and December 31, 2017 the Company has a payable to Guardian LLC of $408,413 and $1,350,262, respectively.

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 14 - Subsequent Events

Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:

On July 23, 2018, Douglas L. Davis was appointed by to serve as the Interim Chief Executive Officer of the Company. Mansour Khatib resigned as Interim Chief Executive Officer but will continue to serve as Chief Marketing Officer and Director. The Company and Mr. Davis entered into an Employment Agreement dated July 23, 2018 pursuant to which Mr. Davis agreed to serve as Interim Chief Executive Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Davis 300,000 shares of common stock subject to a lock-up/leakout provision. The employment of Mr. Davis is for a period of six months and may be terminated at any time, with or without formal cause, on ten days-notice.

On July 31, 2018, Mitchell K. Tavera was appointed to the Board of Directors of the Company to serve as a director. Mr. Tavera entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Tavera will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Tavera $5,000 per quarter.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include depreciable lives of property and equipment, valuation of beneficial conversion feature debt discounts, valuation of derivatives, and the valuation allowance on deferred tax assets.

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, UGopherServices Corp, since the date of acquisition (September 1, 2017), Ugopherservices Limited (since its date of formation of February 1, 2018), an England and Wales a private limited company that is currently inactive and ECS, Electronic Check and CSLS since their respective dates of acquisition (March 1, 2018, April 2, 2018 and April 2, 2018). All significant intercompany transactions and balances have been eliminated.

Cash Equivalents

Cash Equivalents

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less.

Accounts Receivable

Accounts Receivable

The Company grants credit to establishments (such as convenience stores) that sell the Company’s products under credit terms that it believes are customary in the industry and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within 10 days of the product sale and the Company has minimal bad debts. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. The Company’s allowance for doubtful accounts was $0 and $0 at June 30, 2018 and December 31, 2017, respectively.

Inventory

Inventory

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At June 30, 2018 and December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Furniture	7 years
Computers and equipment	3 years
POSA machines	3 years

Long-Lived Assets

Long-Lived Assets

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at June 30, 2018 and December 31, 2017, the Company believes there was no impairment of its long-lived assets.

Intangible Assets

Intangible Assets

The Company’s intangible assets were acquired with the acquisition of certain RWJ assets in 2017, and the acquisition of certain ECS, Electronic Check and CSLS assets in 2018 are being amortized over 84 months. The Company performs a test for impairment annually. As of June 30, 2018 and December 31, 2017, the Company performed the required impairment analysis, which resulted in no impairment adjustments. 

Goodwill

Goodwill

Goodwill represents the excess of purchase price over the underlying book value of the net assets of the businesses that were acquired. Under accounting requirements, goodwill is not amortized, but is subject to annual impairment tests. The Company recorded goodwill of $950,619 related to its acquisition of certain RWJ assets in 2017, and $2,052,958 and $1,387,919, respectively, related to its acquisition of certain ECS and Electronic Check assets in 2018.

Derivative Financial Instruments

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2017, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion. During the six months ended June 30, 2018, the convertible note with the embedded conversion feature was repaid; therefore, there are no derivative financial instruments outstanding at June 30, 2018.

Fair value measurements

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

At December 31, 2017, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

	Fair Value		Fair Value Measurements at
	As of		December 31, 2017
Description	December 31, 2017		Using Fair Value Hierarchy
			Level 1		Level 2		Level 3
Conversion feature on convertible notes	$	95,164	$	—	$	95,164	$	—
Total	$	95,164	$	—	$	95,164	$	—

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 815 at June 30, 2018.

Treasury Stock

Treasury Stock

Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital. During 2011, the Company bought back 8 post-split shares (38,000 pre-split) shares of its own shares.

Revenue Recognition

Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 606, Revenue From Contracts with Customers. The Company recognizes revenue from the sale of phones, phone card products and prepaid cards at the time of sale to the customer. The Company recognizes revenue from IT-related services at the time the services are performed.

Cost of Goods Sold

Cost of Goods Sold

Cost of goods sold represents the cost of the phone and phone card products sold by the Company. In 2017 the Company did not have cost of goods sold, as all of its revenue was generated from consulting income. In 2018, the entire cost of goods sold relates to products sold by the Company’s new acquired acquisitions in September 2017, March 2018 and April 2018.

Unearned revenue

Unearned revenue

Unearned revenue represents the amount received for the purchase of products that have not seen shipped to the Company’s customers. In the second quarter of 2018, the Company ran a pre-sales campaign for its pet tracker product and received $57,789 in unearned revenue as of June 30, 2018.

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

Basic and Diluted Earnings Per Share

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

	June 30,		June 30,
	2018		2017
Series B preferred stock		3,000		3,000
Series C preferred stock		770		770
Series D preferred stock		—		66,000,000
Series G preferred stock		2,000,000		—
Warrants		28,410,416		93,750
Convertible notes		1,583,333		10,060,102
Total		31,997,519		76,157,622

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of this ASU on its 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 interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASU did not have an impact on its financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

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 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company has evaluated the impact of ASU 2014-09 on the Company's financial statements and disclosures does not believe the impact will be material. The Company adopted this ASU beginning on January 1, 2018 and used the prospective method of adoption.

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Schedule of estimated lives of property and equipment

Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Furniture	7 years
Computers and equipment	3 years
POSA machines	3 years

Schedule of Fair Value Measurements

At December 31, 2017, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

	Fair Value		Fair Value Measurements at
	As of		December 31, 2017
Description	December 31, 2017		Using Fair Value Hierarchy
			Level 1		Level 2		Level 3
Conversion feature on convertible notes	$	95,164	$	—	$	95,164	$	—
Total	$	95,164	$	—	$	95,164	$	—

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

	June 30,		June 30,
	2018		2017
Series B preferred stock		3,000		3,000
Series C preferred stock		770		770
Series D preferred stock		—		66,000,000
Series G preferred stock		2,000,000		—
Warrants		28,410,416		93,750
Convertible notes		1,583,333		10,060,102
Total		31,997,519		76,157,622

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Acquisition (Tables)

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Summary of purchase price

				Electronic
	ECS			Check			CSLS		Total
Purchase price
Cash	$	100,000		$	75,000		$	25,000	$	200,000
Shares of common stock		1,010,000	a		695,000	c		—		1,705,000
Secured promissory note		1,000,000			—			—		1,000,000
Warrants		992,958	b		682,919	d		—		1,675,877
	$	3,102,958		$	1,452,919		$	25,000	$	4,580,877
Allocation of purchase price
Property and equipment	$	50,000		$	15,000		$	—	$	65,000
Software		1,000,000			50,000			25,000		1,075,000
Goodwill		2,052,958			1,387,919			—		3,440,877
Purchase price	$	3,102,958		$	1,452,919		$	25,000	$	4,580,877

Summary of Pro Forma Financial Information

The unaudited pro forma information below present statement of operations data as if the acquisition of assets had taken place on January 1, 2017.

	Six Months Ended June 30,
	2018			2017
Sales	$	26,733,878		$	13,621,042
Cost of goods sold		25,862,148			13,215,967
Gross profit		871,730			405,075
Operating expenses		21,900,805			1,779,178
Loss from operations		(21,029,075	)		(1,374,103	)
Net loss		(21,646,332	)		(2,448,098	)
Loss per share		(0.20	)		(0.06	)

XML

Property and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

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

	June 30,			December 31,
	2018			2017
Furniture	$	33,739		$	33,740
Computers and equipment		56,824			22,816
POSA machines		312,219			253,965
		402,782			310,521
Less accumulated depreciation		(98,603	)		(47,439	)
Property and equipment, net	$	304,179		$	263,082

XML

Intangible Assets, Net (Table)

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

The following are the intangible assets at June 30, 2018 and December 31, 2017:

	June 30			December 31,
	2018			2017
Leased locations	$	7,000,000		$	7,000,000
Software		1,075,000			—
		8,075,000			7,000,000
Less accumulated amortization		(883,304	)		(333,333	)
Intangible assets, net	$	7,191,696		$	6,666,667

Schedule of Intangible Assets, Future Amortization Expense

The estimated future amortization expense related to intangible assets is as follows:

Twelve months ending June 30,
2019	$	1,153,571
2020		1,153,571
2021		1,153,571
2022		1,153,571
2023		1,153,571
Thereafter		1,423,841
	$	7,191,696

XML

Convertible Notes Payable (Table)

6 Months Ended

Jun. 30, 2018

Notes Payable [Abstract]

Summary of Convertible notes payable

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

	June 30,			December 31,
	2018			2017
Convertible notes payable to Power Up	$	—		$	80,000
Convertible notes payable to Bellridge Capital		1,500,000			—
Total convertible notes payable		1,500,000			80,000
Unamortized debt discount		(1,084,254	)		(54,377	)
Convertible notes payable	$	415,746		$	25,623

Rollfoward of convertible note

A roll-forward of the convertible note from December 31, 2017 to June 30, 2018 is below:

Convertible notes, December 31, 2017	$	25,623
Issued for cash		1,500,000
Repayment in cash		(80,000	)
Debt discount related to new convertible notes		(1,500,000	)
Amortization of debt discounts		470,123
Convertible notes, June 30, 2018	$	415,746

XML

Derivative Liability (Tables)

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Assumptions to measure fair value

The Company uses a weighted average Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability at December 31, 2017:

Stock price	$	1.12
Risk free rate		1.76	%
Volatility		175	%
Conversion/ Exercise price	$	0.60
Dividend rate		0	%
Term (years)		0.5 years

Schedule of Derivative Liabilities at Fair Value

The following table represents the Company’s derivative liability activity for the six months ended June 30, 2018:

Derivative liability balance, December 31, 2017	$	95,164
Fair value of beneficial conversion feature of debt repaid		(113,287	)
Change in derivative liability during the period		18,123
Derivative liability balance, June 30, 2018	$	—

XML

Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2018

Stockholders' Equity Note [Abstract]

Summary of warrant activity

The following is a summary of warrant activity since December 31, 2017:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Warrants		Exercise		Contractual		Intrinsic
	Outstanding		Price		Life		Value
Outstanding, December 31, 2017		22,760,416	$	0.55		4.67	$	13,640,000
Granted		5,650,000		2.17
Forfeited		0
Exercised		0
Outstanding, June 30, 2018		28,410,416	$	0.87		4.25	$	26,400,000
Exercisable, June 30, 2018		27,910,416	$	0.89		4.24	$	26,400,000

Summary of exercise price for warrant outstanding

The exercise price for warrant outstanding and exercisable at June 30, 2018:

Outstanding				Exercisable
	Number of		Exercise		Number of		Exercise
	Warrants		Price		Warrants		Price
	22,000,000	$	0.50		22,000,000	$	0.50
	3,000,000		1.85		3,000,000		1.85
	666,666		2.00		666,666		2.00
	93,750		2.25		93,750		2.25
	1,000,000		2.35		1,000,000		2.35
	650,000		2.50		650,000		2.50
	500,000		2.70		500,000		2.70
	500,000		2.80		—		2.80
	28,410,416				27,910,416

XML

Summary of Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2018
Furniture [Member]
Useful life	7 years
Computer And Equipment [Member]
Useful life	3 years
POSA machines [Member]
Useful life	3 years

XML

Summary of Significant Accounting Policies (Details 1)	Dec. 31, 2017 USD ($)
Conversion feature on convertible notes	$ 95,164
Total	95,164
Fair Value, Inputs, Level 1 [Member]
Conversion feature on convertible notes
Total
Fair Value, Inputs, Level 2 [Member]
Conversion feature on convertible notes	95,164
Total	95,164
Fair Value, Inputs, Level 3 [Member]
Conversion feature on convertible notes
Total

XML

Summary of Significant Accounting Policies (Details 2) - shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Convertible note	1,583,333	10,060,102
Number of potentially dilutive securities	31,997,519	76,157,622
Warrant [Member]
Number of potentially dilutive securities	28,410,416	93,750
Series B Convertible Preferred Stock [Member]
Preferred shares	3,000	3,000
Series C Convertible Preferred Stock [Member]
Preferred shares	770	770
Series D Convertible Preferred Stock [Member]
Preferred shares		66,000,000
Series G Convertible Preferred Stock [Member]
Preferred shares	2,000,000

XML

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2011
Allowance for doubtful accounts	$ 0		$ 0
Impairment Losses	0	$ 0
Derivative financial instruments	0
Unearned revenue	57,789
Uncertain tax positions	0		0
RWJ Advanced Marketing, LLC
Goodwill Acquired			$ 950,619
ECS Prepaid LLC [Member]
Goodwill Acquired	2,052,958
Electronic Check [Member]
Goodwill Acquired	$ 1,387,919
Treasury Stock [Member]
Stock issued during period, shares, stock splits				8
Number of shares bought back				38,000

XML

Acquisition (Details) - USD ($)	Jun. 30, 2018	Apr. 02, 2018	Mar. 16, 2018	Dec. 31, 2017
Allocation of purchase price
Goodwill	$ 4,391,496			$ 950,619
ECS Prepaid LLC [Member]
Purchase price
Cash			$ 100,000
Shares of common stock			1,010,000
Secured promissory note			1,000,000
Warrants			992,958
Purchase price			3,102,958
Allocation of purchase price
Property and equipment			50,000
Software			1,000,000
Goodwill			2,052,958
Purchase price			$ 3,102,958
Electronic Check [Member]
Purchase price
Cash		$ 75,000
Shares of common stock		695,000
Secured promissory note
Warrants		682,919
Purchase price		1,452,919
Allocation of purchase price
Property and equipment		15,000
Software		50,000
Goodwill		1,387,919
Purchase price		1,452,919
CSLS[Member]
Purchase price
Cash		25,000
Shares of common stock
Secured promissory note
Warrants
Purchase price		25,000
Allocation of purchase price
Property and equipment
Software		25,000
Goodwill
Purchase price		$ 25,000
Total [Member]
Purchase price
Cash	200,000
Shares of common stock	1,705,000
Secured promissory note	1,000,000
Warrants	1,675,877
Purchase price	4,580,877
Allocation of purchase price
Property and equipment	65,000
Software	1,075,000
Goodwill	3,440,877
Purchase price	$ 4,580,877

XML

Acquisition (Details 1) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Business Combinations [Abstract]
Sales	$ 26,733,878	$ 13,621,042
Cost of goods sold	25,862,148	13,215,967
Gross profit	871,730	405,075
Operating expenses	21,900,805	1,779,178
Loss from operations	(21,029,075)	(1,374,103)
Net loss	$ (21,646,332)	$ (2,448,098)
Loss per share	$ (0.20)	$ (0.06)

XML

Acquisition (Details Narrative) - USD ($)			1 Months Ended	6 Months Ended
	Jun. 30, 2018	Apr. 02, 2018	Mar. 16, 2018	Jun. 30, 2018
Volatility				175.00%
Risk free interest rate				1.76%
ECS Prepaid LLC [Member]
Warrants fixed exercise price			$ 1.85
Cash			$ 100,000
Secured promissory note			$ 1,000,000
Purchase of warrants			500,000
Purchase of common stock			500,000
Principal periodic payments			$ 100,000
Revenue from acquisition	$ 10,845,896
Determination method			Black-Scholes option pricing model
Expected life			5 years
Volatility			210.00%
Dividend yield			0.00%
Risk free interest rate			2.65%
Electronic Check [Member]
Warrants fixed exercise price		$ 2.70
Cash		$ 75,000
Secured promissory note
Purchase of warrants		250,000
Purchase of common stock		250,000
Determination method		Black-Scholes option pricing model
Expected life		5 years
Volatility		210.00%
Dividend yield		0.00%
Risk free interest rate		2.65%

XML

Property and Equipment, Net (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 402,782	$ 310,521
Less accumulated depreciation	(98,603)	(47,439)
Property and equipment, net	304,179	263,082
Furniture [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	33,739	33,740
Computer And Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	56,824	22,816
POSA machines [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 312,219	$ 253,965

XML

Property and Equipment, Net (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Property, Plant and Equipment [Abstract]
Depreciation expenses	$ 51,164	$ 699

XML

Intangible Assets, Net (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Leased locations	$ 7,000,000	$ 7,000,000
Software	1,075,000
Intangible assets, Gross	8,075,000	7,000,000
Less accumulated amortization	(883,304)	(333,333)
Intangible assets, net	$ 7,191,696	$ 6,666,667

XML

Intangible Assets, Net (Details 1) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
2019	$ 1,153,571
2020	1,153,571
2021	1,153,571
2022	1,153,571
2023	1,153,571
Thereafter	1,423,841
Intangible assets, net	$ 7,191,696	$ 6,666,667

XML

Intangible Assets, Net (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible asstes	84 months
Amortization expense	$ 549,971

XML

Other Assets (Details Narrative)	Jun. 30, 2018 USD ($)
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Other asset	$ 200,000

XML

Convertible Notes Payable (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Convertible note payable	$ 1,500,000	$ 80,000
Unamortized debt discount	(1,084,254)	(54,377)
Convertible notes payable	415,746	25,623
Power Up Lending Group Ltd.
Convertible note payable		80,000
Bellridge Capital LLC
Convertible note payable	$ 1,500,000

XML

Convertible Notes Payable (Details 1) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Notes Payable [Abstract]
Convertible notes at beginning	$ 25,623
Issued for cash	1,500,000
Repayment in cash	(80,000)
Debt discount related to new convertible notes	(1,500,000)
Amortization of debt discounts	470,123	$ 50,213
Convertible notes, at end	$ 415,746

XML

Convertible Notes Payable (Detail Narrative)				6 Months Ended
	Apr. 09, 2018 USD ($) Number $ / shares shares	Mar. 02, 2018 USD ($) Number $ / shares shares	Oct. 02, 2017 USD ($)	Jun. 30, 2018 USD ($) $ / shares	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Conversion price (in dollars per share) | $ / shares				$ 0.60
Volatility				175.00%
Risk free interest rate				1.76%
Beneficial conversion feature				$ 113,287
Amortization of debt discount				470,123	$ 50,213
Unamortized debt discount				$ 1,084,254		$ 54,377
Warrant [Member]
Debt Instrument [Line Items]
Determination method				Black-Scholes option pricing model
Expected life				5 years
Volatility				210.00%
Dividend yield				0.00%
Convertible Notes Payable ("Power Up Lending Group Ltd") [Member]
Debt Instrument [Line Items]
Note payable, principal amount			$ 80,000
Note payable, interest rate			10.00%
Note maturity date			Jul. 10, 2018
Convertible Notes Payable ("Bellridge Capital LLC ") [Member]
Debt Instrument [Line Items]
Note payable, principal amount	$ 750,000	$ 750,000
Note payable, interest rate	10.00%	10.00%
Note maturity date		Mar. 01, 2019
Purchase of warrants | shares	500,000	500,000
Exercise Price | $ / shares	$ 2.35	$ 2.35
Term	5 years	5 years
Common stock issued to escrow agent | shares	1,000,000	1,000,000
Closing price | $ / shares	$ 1.00	$ 1.10
Value of share converted	$ 750,000	$ 750,000
Trading Days | Number	20	20
Fair Value of warrants	$ 2,037,713	$ 827,428
Determination method	Black-Scholes option pricing model	Black-Scholes option pricing model
Expected life	5 years	5 years
Volatility	210.00%	210.00%
Dividend yield	0.00%	0.00%
Risk free interest rate	2.60%	2.65%
Discount on convertible note	$ 548,222	$ 393,407
Beneficial conversion feature	201,778	356,593
Debt Discount	750,000	750,000
Convertible Notes Payable ("Bellridge Capital LLC ") [Member] | Convertible Note
Debt Instrument [Line Items]
Note payable, principal amount	548,222	356,593
Convertible Notes Payable ("Bellridge Capital LLC ") [Member] | Warrant [Member]
Debt Instrument [Line Items]
Note payable, principal amount	$ 201,778	$ 393,407

XML

Derivative Liability (Details)	6 Months Ended
	Jun. 30, 2018 $ / shares
Notes to Financial Statements
Stock price	$ 1.12
Risk free rate	1.76%
Volatility	175.00%
Conversion/ Exercise price	$ 0.60
Dividend rate	0.00%
Term (years)	6 months

XML

Derivative Liability (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Notes to Financial Statements
Derivative liability balance, Beginning			$ 95,164
Fair value of beneficial conversion feature of debt repaid/converted			(113,287)
Change in derivative liability during the period		$ (496,037)	18,123	$ (496,037)
Derivative liability balance, end

XML

Note Payable (Details Narrative) - USD ($)	1 Months Ended
	Mar. 16, 2018	Sep. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Note payable			$ 2,600,000	$ 2,600,000
RWJ Advanced Marketing, LLC
Interest rate		3.50%
Interst payable date		Dec. 31, 2019
ECS Prepaid LLC [Member]
Interst payable date	Jan. 15, 2019
Principal periodic payments	$ 100,000
Note payable			$ 700,000

XML

Stockholders' Equity (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Stockholders' Equity Note [Abstract]
Warrants Outstanding, Beginning	22,760,416
Warrants Granted	5,650,000
Warrants Forfeited	0
Warrants Exercised	0
Warrants Outstanding, End	28,410,416	22,760,416
Warrants Exercisable, End	27,910,416
Weighted Average Exercise Price Warrants Outstanding, Beginning	$ 0.55
Weighted Average Exercise Price Warrants Granted	2.17
Weighted Average Exercise Price Warrants Outstanding, End	0.87
Weighted Average Exercise Price Warrants Exercisable at End	$ 0.89
Weighted Average Remaining Contractual Life, Outstanding	4 years 2 months 30 days	4 years 8 months 2 days
Weighted Average Remaining Contractual Life Exercisable at End	4 years 2 months 27 days
Aggregate Intrinsic Value Outstanding, Beginning	$ 13,640,000
Aggregate Intrinsic Value Outstanding, End	26,400,000	$ 13,640,000
Aggregate Intrinsic Value Outstanding, Exercisable at End	$ 26,400,000

XML

Stockholders' Equity (Details 1) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Number of warrants Outstanding	28,410,416	22,760,416
Number of warrants Exercisable	27,910,416
Exercise price of warrants Outstanding	$ 27,910,416
$0.50
Number of warrants Outstanding	22,000,000
Number of warrants Exercisable	0.50
Exercise price of warrants Outstanding	$ 22,000,000
Exercise price of warrants Exercisable	$ 0.50
$1.85
Number of warrants Outstanding	3,000,000
Number of warrants Exercisable	1.85
Exercise price of warrants Outstanding	$ 3,000,000
Exercise price of warrants Exercisable	$ 1.85
$2.00
Number of warrants Outstanding	666,666
Number of warrants Exercisable	2.00
Exercise price of warrants Outstanding	$ 666,666
Exercise price of warrants Exercisable	$ 2.00
$2.25
Number of warrants Outstanding	93,750
Number of warrants Exercisable	2.25
Exercise price of warrants Outstanding	$ 93,750
Exercise price of warrants Exercisable	$ 2.25
$2.35
Number of warrants Outstanding	1,000,000
Number of warrants Exercisable	2.35
Exercise price of warrants Outstanding	$ 1,000,000
Exercise price of warrants Exercisable	$ 2.35
$2.50
Number of warrants Outstanding	650,000
Number of warrants Exercisable	2.50
Exercise price of warrants Outstanding	$ 650,000
Exercise price of warrants Exercisable	$ 2.50
$2.70
Number of warrants Outstanding	500,000
Number of warrants Exercisable	2.70
Exercise price of warrants Outstanding	$ 500,000
Exercise price of warrants Exercisable	$ 2.70
$2.80
Number of warrants Outstanding	500,000
Number of warrants Exercisable	2.80
Exercise price of warrants Outstanding
Exercise price of warrants Exercisable	$ 2.80

XML

Stockholders Equity (Details Narrative) - USD ($)				1 Months Ended			6 Months Ended
		May 04, 2018	Apr. 02, 2018	Mar. 16, 2018	Jan. 23, 2018	Dec. 29, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Mar. 04, 2015
Common stock, authorized							500,000,000		500,000,000
Conversion price (in dollars per share)							$ 0.60
Volatility							175.00%
Risk free interest rate							1.76%
Convertible note payable
Number of warrants issued							1,000,000
ECS Prepaid LLC [Member]
Stock Issued for Acquisitions, Shares							500,000
Stock Issued for Acquisitions, Value							$ 1,010,000
Warrants issued for acquisition, Shares							500,000
Warrants issued for acquisition, Value							$ 992,958
Determination method				Black-Scholes option pricing model
Expected life				5 years
Volatility				210.00%
Dividend yield				0.00%
Risk free interest rate				2.65%
Electronic Check [Member]
Stock Issued for Acquisitions, Shares							250,000
Stock Issued for Acquisitions, Value							$ 695,000
Warrants issued for acquisition, Shares							250,000
Warrants issued for acquisition, Value							$ 682,919
Determination method			Black-Scholes option pricing model
Expected life			5 years
Volatility			210.00%
Dividend yield			0.00%
Risk free interest rate			2.65%
Securities Purchase Agreement
Stock issued for Services, Shares		303,030				666,666
Stock issued for Services, Value		$ 500,000				$ 500,000
Stock issued for cash, Shares		303,030				1,333,334
Stock issued for cash, Value		$ 500,000				$ 1,000,000
Securities Purchase Agreement | Eagle Equities, LLC
Stock issued for Services, Shares		1,212,120				2,000,000
Stock issued for Services, Value		$ 2,000,000				$ 1,500,000
Closing price		$ 1.65				$ 0.72
Exercise Price						$ 2.00
Series D Convertible Preferred Stock [Member]
Number of shares converted								66,000,000
Value of Share converted								$ 66,000
Preferred stock, value	[1]								$ 1
Preferred stock, issued							0		66,000
Preferred stock, Outstanding							0		66,000
Preferred stock, par value (in dollars per share)							$ 0.00001		$ 0.00001
Series D Convertible Preferred Stock [Member] | RekoHoldingsLLC
Number of shares converted					66,000
Number of restricted shares					66,000,000
Series D Convertible Preferred Stock [Member] | Hermes Roll LLC (Territorial License Agreement) [Member] | Hermes Roll LLC [Member]
Common stock, authorized										500,000,000
Preferred stock, value										$ 1,000
Preferred stock, issued										100,000
Preferred stock, par value (in dollars per share)										$ 10.00
Conversion price (in dollars per share)										$ 0.01
Consultants
Stock issued for Services, Shares							250,000
Stock issued for Services, Value							$ 123,725
Stock Issued for Acquisitions, Shares							3,000,000
Stock Issued for Acquisitions, Value							$ 4,590,000
Employees and board members | Employment agreements
Stock issued for Services, Shares							1,400,000
Stock issued for Services, Value							$ 3,624,000
Warrants issued for services, Shares							2,150,000
Warrants issued for services, Value							$ 5,276,656
Consultants
Stock issued for Services, Shares							1,250,000
Stock issued for Services, Value							$ 2,715,000
Warrants issued for services, Shares							1,750,000
Warrants issued for services, Value							$ 3,661,791
Investor
Stock issued for cash, Shares							1,272,726
Stock issued for cash, Value							$ 1,500,000
Warrant [Member]
Determination method							Black-Scholes option pricing model
Expected life							5 years
Volatility							210.00%
Dividend yield							0.00%
Warrant [Member] | Minimum [Member]
Risk free interest rate							2.60%
Warrant [Member] | Maximum [Member]
Risk free interest rate							2.94%

[1] Series D Preferred stock, $0.00001 par value; 100,000 shares authorized; 0 and 66,000 shares issued and outstanding at June 30, 2018 and December 31, 2017

XML

Related Parties (Details Narrative) - USD ($)

1 Months Ended

3 Months Ended

6 Months Ended

Apr. 06, 2018

Sep. 01, 2017

Aug. 15, 2016

Aug. 09, 2016

Jun. 20, 2016

Dec. 29, 2017

Jun. 30, 2018

Jun. 30, 2017

Jun. 30, 2018

Jun. 30, 2017

Dec. 31, 2017

Aug. 15, 2017

Dec. 31, 2016

Apr. 30, 2016

Jun. 30, 2015

Apr. 22, 2015

Related Party Transaction [Line Items]

Revenue for providng IT services

$ 45,000

$ 45,000

$ 90,000

$ 90,000

Rent for office space

$ 5,000

Security deposit

$ 1,979

Due to Related Parties

$ 67,000

Director [Member]

Related Party Transaction [Line Items]

Base Salary

$ 250,000

Additional salary payable

$ 70,000

Series D Convertible Preferred Stock [Member]

Related Party Transaction [Line Items]

Preferred stock, outstanding

0

0

66,000

Number of shares converted

66,000,000

Series G Convertible Preferred Stock [Member]

Related Party Transaction [Line Items]

Preferred stock, outstanding

2,000,000

2,000,000

2,000,000

Principal and accrued interest converted into Shares

2,000,000

Michael Murray [Member]

Related Party Transaction [Line Items]

Preferred stock, outstanding

9,900,000

Warrants issued for acquisition, Shares

4,000,000

Michael Murray [Member] | Series D Convertible Preferred Stock [Member]

Related Party Transaction [Line Items]

Preferred stock, outstanding

9,900

Advisory Board [Member]

Related Party Transaction [Line Items]

Preferred stock, outstanding

9,900,000

Advisory Board [Member] | Series D Convertible Preferred Stock [Member]

Related Party Transaction [Line Items]

Preferred stock, outstanding

9,900

Dr. Rittman Services

Related Party Transaction [Line Items]

Revenue for providng IT services

$ 90,000

$ 90,000

Preferred Stock Holders [Member] | Series D Convertible Preferred Stock [Member]

Related Party Transaction [Line Items]

Number of shares converted

17,400

2,400

Number of common shares issued from conversion

17,400,000

2,400,000

Shares price (in dollars per shares)

$ 0.01

$ 0.01

Director [Member] | Employment Agreement [Member]

Related Party Transaction [Line Items]

Description of compensation and other benefits

Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the "Monthly Salary Advance") commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its GopherInsight™ technology into the consumer markets. 

Guardian LLC [Member]

Related Party Transaction [Line Items]

Convertible Promissory Note

$ 660,132

RWJ Advanced Marketing, LLC

Related Party Transaction [Line Items]

Base Salary

$ 250,000

Related party description

The Company and Guardian Patch, LLC, which assisted structuring and negotiating the Purchase Agreement and related asset purchase, entered into a Consulting Agreement dated September 1, 2017. In consideration for the services, the Company issued Guardian 2,000,000 shares of common stock and warrants to purchase 9,000,000 shares of common stock. The warrants contain identical terms to the RJW Warrants. If and when the assets acquired under the Purchase Agreement generate revenues of $10,000,000, the Company shall issue Guardian an additional 3,000,000 shares of common stock. The consulting agreement was effective August 1, 2017 and terminates November 30, 2017. Guardian, pursuant to its existing joint venture agreement, agreed to provide the $400,000 in funding needed for the cash purchase price under the Purchase Agreement. Guardian also agreed to provide the needed $100,000 working capital designated to UGopherServices Corp. The parties have agreed to negotiate and finalize the terms of such loans in the near future.

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Contingencies (Details Narrative)				12 Months Ended
	Jan. 14, 2018 USD ($) shares	Apr. 10, 2017 USD ($)	Jun. 10, 2016 $ / shares shares	Dec. 31, 2016 Number shares	Feb. 09, 2017 USD ($)
Legal Fees | $		$ 11,500
Initial Term Agreement [Member]
Operating costs | $	$ 100,000
Common stock issued	1,500,000
Stock issued for purchase of warrants	1,000,000
Common stock in escrow	1,500,000
Initial funding | $	$ 200,000
Consulting Agreement [Member] | Waterford Group LLC [Member]
Deposits | $					$ 42,875
Consulting Agreement [Member] | Waterford Group LLC [Member] | Warrant [Member]
Stock issued during period, shares, new issues			750,000	93,750
Number of quarterly installments | Number				8
Exercise price (in dollars per share) | $ / shares			$ 2.25
Warrant term			5 years
Consulting Agreement [Member] | Waterford Group LLC [Member] | Restricted Common Stock [Member]
Stock issued during period, issued for services (in shares)			100,000	50,000

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Concentrations (Details Narrative)	12 Months Ended
	Dec. 31, 2017 USD ($) Number	Jun. 30, 2018 USD ($)	Dec. 31, 2016 Number
Guardian LLC [Member]
Concentration Risk [Line Items]
Trade payable | $	$ 1,350,262	$ 408,413
Revenue & Accounts Receivable [Member]
Concentration Risk [Line Items]
Number of customers | Number	1		1
Revenue & Accounts Receivable [Member] | One Customer
Concentration Risk [Line Items]
Concentration of revenue and accounts receivable	100.00%

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Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($)	1 Months Ended
	Jul. 31, 2018	Jul. 23, 2018
Director [Member]
Common stock issued	100,000
Exercise Price	$ 2.50
Term	5 years
Option granted	100,000
Common stock acquired	100,000
Option vested	100,000
EmploymentRetentionAgreement | Interim Chief Executive Officer [Member]
Common stock issued		300,000
Base salary		$ 120,000