10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

or

☐   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-55722

HELIX TCS, INC.

(Exact name of registrant as specified in its charter)

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

10200 E. Girard Avenue, Suite B420

Denver, CO 80231

(Address of Principal Executive Offices) (Zip Code)

Telephone: (720) 328-5372

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	HLIX	OTCQB

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒    No ☐

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

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

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

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

As of August 14, 2019, the registrant had 75,747,718 shares of its common stock, par value $0.001 per share, outstanding. 

Table of Contents

		PAGE
PART I	FINANCIAL INFORMATION	1
ITEM 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	2
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)	7
	Notes to the Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	49
ITEM 4.	Controls and Procedures	49
PART II	OTHER INFORMATION	51
ITEM 1.	Legal Proceedings	51
ITEM 1A.	Risk Factors	51
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
ITEM 3	Defaults upon Senior Securities	51
ITEM 4.	Mine Safety Disclosures	51
ITEM 5.	Other Information	51
ITEM 6.	Exhibits	52
SIGNATURES		53

i

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

HELIX TCS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash	$	800,015		$	285,761
Accounts receivable, net		1,640,996			1,184,923
Prepaid expenses and other current assets		540,342			409,800
Costs & earnings in excess of billings		12,017			42,869
Total current assets		2,993,370			1,923,353
Property and equipment, net		545,818			349,518
Intangible assets, net		16,312,706			18,604,078
Goodwill		40,735,366			39,913,559
Deposits and other assets		1,413,493			146,990
Promissory note receivable		75,000			-
Total assets	$	62,075,753		$	60,937,498
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,463,136		$	1,702,713
Advances from related parties		-			45,250
Billings in excess of costs		126,862			155,192
Deferred rent		-			2,937
Notes payable, current portion		24,805			24,805
Obligation pursuant to acquisition		75,000			201,667
Convertible notes payable, net of discount		423,700			187,177
Convertible notes payable, net of discount - related party		1,395,623			-
Due to related party		-			32,489
Contingent consideration		-			908,604
Warrant liability		2,199,266			896,171
Total current liabilities		6,708,392			4,157,005
Long-term liabilities:
Notes payable, net of current portion		40,232			51,554
Other long-term liabilities		962,716			-
Total long-term liabilities		1,002,948			51,554
Total liabilities		7,711,340			4,208,559
Shareholders’ equity:
Preferred stock (Class A), $0.001 par value, 3,000,000 shares authorized; 1,000,000 issued and outstanding as of June 30, 2019 and December 31, 2018		1,000			1,000
Preferred stock (Class B), $0.001 par value, 17,000,000 shares authorized; 13,784,201 issued and outstanding as of June 30, 2019 and December 31, 2018		13,784			13,784
Common stock; par value $0.001; 200,000,000 shares authorized; 75,747,718 shares issued and outstanding as of June 30, 2019; 72,660,825 shares issued and outstanding as of December 31, 2018		75,748			72,660
Additional paid-in capital		86,489,136			82,831,014
Accumulated other comprehensive income		21,648			17,991
Accumulated deficit		(32,236,903	)		(26,207,510	)
Total shareholders’ equity		54,364,413			56,728,939
Total liabilities and shareholders’ equity	$	62,075,753		$	60,937,498

See accompanying notes to the unaudited condensed consolidated financial statements

1

HELIX TCS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Security and guarding	$	1,347,529		$	1,197,201		$	2,552,240		$	2,290,975
Systems installation		174,067			100,699			202,608			135,263
Software		2,377,277			576,142			4,515,132			576,142
Total revenues	$	3,898,873		$	1,874,042		$	7,269,980		$	3,002,380
Cost of revenue		1,996,699			1,560,387			3,921,918			2,351,092
Gross margin		1,902,174			313,655			3,348,062			651,288
Operating expenses:
Selling, general and administrative		1,170,491			527,999			2,107,369			875,879
Salaries and wages		1,214,969			1,216,082			2,466,546			2,082,402
Professional and legal fees		792,101			268,795			1,480,556			888,554
Depreciation and amortization		1,190,336			864,375			2,355,977			1,063,278
Loss on impairment of Goodwill		-			-			-			664,329
Total operating expenses		4,367,897			2,877,251			8,410,448			5,574,442
Loss from operations		(2,465,723	)		(2,563,596	)		(5,062,386	)		(4,923,154	)
Other income (expenses):
Change in fair value of convertible note		845,622			120,630			(142,341	)		697,646
Change in fair value of convertible note - related party		2,818,739			-			(705,270	)		118,506
Change in fair value of warrant liability		3,871,101			321,161			2,238,145			1,297,840
Change in fair value of contingent consideration		256,650			-			(880,050	)		-
Loss on issuance of warrants		-			-			(787,209	)		-
Gain on reduction of obligation pursuant to acquisition		-			290,441			-			557,054
Interest (expense) income		(514,081	)		3,016			(690,282	)		(14,917	)
Other income (expenses)		7,278,031			735,248			(967,007	)		2,656,129
Net income (loss)	$	4,812,308		$	(1,828,348	)	$	(6,029,393	)	$	(2,267,025	)
Other comprehensive (loss) income:
Changes in foreign currency translation adjustment		(590	)		-			3,657			-
Total other comprehensive (loss) income		(590	)		-			3,657			-
Total comprehensive income (loss)		4,811,718			(1,828,348	)		(6,025,736	)		(2,267,025	)
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		-			(7,203,689	)		-			(22,202,194	)
Net income (loss) attributable to common shareholders	$	4,811,718		$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Net income (loss) per share attributable to common shareholders:
Basic	$	0.06		$	(0.21	)	$	(0.08	)	$	(0.68	)
Diluted	$	(0.03	)	$	(0.21	)	$	(0.08	)	$	(0.68	)
Weighted average common shares outstanding:
Basic		75,470,238			42,673,528			74,324,689			35,907,118
Diluted		81,236,678			42,673,528			74,324,689			35,907,118

See accompanying notes to the unaudited condensed consolidated financial statements.

2

HELIX TCS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Preferred Stock (Class A)				Preferred Stock (Class B)				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Income			Deficit			Equity
Balance at March 31, 2019		74,410,397	$	74,410		1,000,000	$	1,000		13,784,201	$	13,784	$	83,357,328		$	22,238		$	(37,049,211	)	$	46,419,549
Issuance of common stock per stock investment unit agreements		166,667		167										66,247									66,414
Share-based compensation expense														485,333									485,333
Issuance of common stock resulting from exercise of stock options		72,562		73										21,735									21,808
Issuance of common stock resulting from cashless exercise of stock options		47,084		47										(47	)								-
Restricted common stock issued as part of Tan Security acquisition		250,000		250										709,750									710,000
Issuance of common stock in satisfaction of contingent consideration		733,300		733										1,787,921									1,788,654
Issuance of common stock resulting from convertible note PIK interest (paid)		67,708		68										60,869									60,937
Foreign currency translation																	(590	)					(590	)
Net income																				4,812,308			4,812,308
Balance at June 30, 2019		75,747,718	$	75,748		1,000,000	$	1,000		13,784,201	$	13,784	$	86,489,136		$	21,648		$	(32,236,903	)	$	54,364,413

3

	Common Stock				Preferred Stock (Class A)				Preferred Stock (Class B)				Additional Paid-In			Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance at March 31, 2018		29,857,448	$	29,857		1,000,000	$	1,000		13,784,201	$	13,784	$	19,927,689		$	(18,680,385	)	$	1,291,945
Beneficial conversion feature of Series B convertible preferred stock														7,203,689						7,203,689
Deemed dividend on conversion of Series B convertible preferred stock to common stock														(7,203,689	)					(7,203,689	)
Issuance of common stock per stock subscription agreements		744,444		745										669,254						669,999
Reduction in Additional Paid-In Capital due to Security Grade acquisition settlement agreement														(210,522	)					(210,522	)
Restricted common stock issued as part of BioTrackTHC acquisition		38,184,985		38,185										57,513,848						57,552,033
Share-based compensation expense		133,900		134										223,640						223,774
Issuance of warrants pursuant to consulting agreement														943,000						943,000
Issuance of common stock resulting from exercise of stock options		212,633		213																213
Net loss																	(1,828,348	)		(1,828,348	)
Balance at June 30, 2018		69,133,410	$	69,134		1,000,000	$	1,000		13,784,201	$	13,784	$	79,066,909		$	(20,508,733	)	$	58,642,094

4

	Common Stock				Preferred Stock (Class A)				Preferred Stock (Class B)				Additional Paid-In			Accumulated Other Comprehensive		Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Income		Deficit			Equity
Balance at December 31, 2018		72,660,825	$	72,660		1,000,000	$	1,000		13,784,201	$	13,784	$	82,831,014		$	17,991	$	(26,207,510	)	$	56,728,939
Issuance of common stock per investment unit agreements		1,421,889		1,422										66,247								67,669
Issuance of common stock resulting from convertible note conversion		155,421		156										117,781								117,937
Share-based compensation expense		270,000		270										889,130								889,400
Issuance of common stock resulting from exercise of stock options		78,644		79										26,534								26,613
Issuance of common stock resulting from cashless exercise of stock options		109,931		110										(110	)							-
Restricted common stock issued as part of Tan Security acquisition		250,000		250										709,750								710,000
Issuance of common stock in satisfaction of contingent consideration		733,300		733										1,787,921								1,788,654
Issuance of common stock resulting from convertible note PIK interest (paid)		67,708		68										60,869								60,937
Foreign currency translation																	3,657					3,657
Net loss																			(6,029,393	)		(6,029,393	)
Balance at June 30, 2019		75,747,718	$	75,748		1,000,000	$	1,000		13,784,201	$	13,784	$	86,489,136		$	21,648	$	(32,236,903	)	$	54,364,413

5

	Common Stock				Preferred Stock (Class A)				Preferred Stock (Class B)				Additional Paid-In			Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance at December 31, 2017		28,771,402	$	28,771		1,000,000	$	1,000		13,784,201	$	13,784	$	18,741,114		$	(18,241,708	)	$	542,961
Beneficial conversion feature of Series B convertible preferred stock														22,202,194						22,202,194
Deemed dividend on conversion of Series B convertible preferred stock to common stock														(22,202,194	)					(22,202,194	)
Issuance of common stock per stock subscription agreements		1,466,666		1,467										1,318,532						1,319,999
Issuance of common stock resulting from convertible note conversion		205,974		206										174,794						175,000
Share-based compensation expense		291,750		292										676,461						676,753
Reduction in Additional Paid-In Capital due to Security Grade acquisition settlement agreement														(300,840	)					(300,840	)
Restricted common stock issued as part of BioTrackTHC acquisition		38,184,985		38,185										57,513,848						57,552,033
Issuance of warrants pursuant to consulting agreement														943,000						943,000
Issuance of common stock resulting from exercise of stock options		212,633		213																213
Net loss																	(2,267,025	)		(2,267,025	)
Balance at June 30, 2018		69,133,410	$	69,134		1,000,000	$	1,000		13,784,201	$	13,784	$	79,066,909		$	(20,508,733	)	$	58,642,094

See accompanying notes to the unaudited condensed consolidated financial statements.

6

HELIX TCS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,029,393	)	$	(2,267,025	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,355,977			1,063,278
Accretion of debt discounts		519,472			-
Loss on issuance of warrants		787,209			-
Provision for doubtful accounts		104,288			-
Share-based compensation expense		889,400			1,619,753
Change in fair value of convertible notes, net of discount		142,341			(522,646	)
Change in fair value of obligation to issue warrants		(2,238,145	)		(1,297,840	)
Change in fair value of convertible notes, net of discount - related party		705,270			(118,506	)
Change in fair value of contingent consideration		880,050			-
Loss on impairment of goodwill		-			664,329
Gain on reduction of obligation pursuant to acquisition		-			(557,054	)
Gain on reduction of contingent consideration		(100,000	)		-
Change in operating assets and liabilities:
Accounts receivable		(563,744	)		(353,355	)
Prepaid expenses		(134,876	)		-
Deposits		26,743			(50,069	)
Due from related party		(32,489	)		-
Costs in excess of billings		30,852			31,570
Accounts payable and accrued expenses		718,162			128,645
Deferred rent		(2,937	)		(6,077	)
Billings in excess of costs		(28,330	)		41,384
Right of use assets and liabilities		80,296			-
Net cash used in operating activities		(1,889,854	)		(1,623,613	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(505,904	)		(484,838	)
Purchase of domain names		(17,383	)		-
Payments for business combination, net of cash acquired		(123,727	)		448,697
Payments for asset acquisition		-			(58,730	)
Net cash used in investing activities		(647,014	)		(94,871	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances for related parties		-			(59,500	)
Advance for note receivable		(75,000	)		-
Payments pursuant to advances from related parties		(45,250	)		-
Payments pursuant to notes payable		(11,322	)		-
Payments pursuant to a promissory note		(280,000	)		-
Proceeds from notes payable		-			33,745
Proceeds from the issuance of a promissory note		280,000			-
Proceeds from the issuance of convertible notes payable		1,925,000			-
Proceeds from the issuance of common stock		1,306,313			1,320,212
Net cash provided by financing activities		3,099,741			1,294,457
Effect of foreign exchange rate changes on cash		(48,619	)		-
Net change in cash		514,254			(424,027	)
Cash, beginning of period		285,761			868,554
Cash, end of period	$	800,015		$	444,527
Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	40,625		$	-
Conversion of convertible note into common stock	$	117,937		$	175,000
Debt discount for warrant liability	$	(1,542,000	)	$	-
Equity issued pursuant to asset acquisition	$	710,000		$	57,552,033
Security Grade acquisition consideration settlement	$	-		$	(300,840	)
Cash payable pursuant to acquisition	$	75,000		$	-
PIK interest payment of common stock	$	60,937		$	-
Common stock issued pursuant to consideration as part of acquisition	$	1,788,654		$	-
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets	$	1,485,511		$	-

See accompanying notes to the unaudited condensed consolidated financial statements.

7

HELIX TCS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of Business

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

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

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

The acquisition of Helix was treated as a recapitalization for financial accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and their historical financial statements before the Acquisition Agreement were replaced with the historical financial statements of the Company. The common stock account of the Company continues post-merger, while the retained earnings of the acquiree is eliminated. Furthermore, on April 11, 2016, the Company acquired the assets of Revolutionary Software, LLC (“Revolutionary”).

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

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

On August 3, 2018 (the “Engeni Closing Date”), the Company and its wholly owned subsidiary, Engeni Merger Sub, LLC (“Engeni Merger Sub”), entered into an Agreement and Plan of Merger (the “Engeni Merger Agreement”) with Engeni LLC (“Engeni US”), Engeni S.A (“Engeni SA”), Scott Zienkewicz, Nicolas Heller and Alberto Pardo Saleme (the Engeni US members), and Scott Zienkewicz, as the representative of the Engeni US members. Pursuant to the Engeni Merger Agreement, Engeni Merger Sub merged with and into Engeni US, with Engeni US surviving the merger as a wholly-owned subsidiary of the Company (the “Engeni Merger”).

On the Engeni Closing Date, in connection with closing the Engeni Merger Agreement, the Company issued 366,700 shares of Company common stock to Engeni US members. Furthermore, the Company subsequently issued Engeni US members 733,300 shares of Company common stock on April 2, 2019.

On February 5, 2019, the Company and its wholly owned subsidiary, Merger Sub, entered into an Agreement and Plan of Merger (the “Amercanex Merger Agreement”) with Green Tree International, Inc., a corporation incorporated under the laws of the state of Colorado operating under the tradename “Amercanex International Exchange” (“Amercanex”). Pursuant to the Amercanex Merger Agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with and into Amercanex, with Amercanex surviving the merger as a wholly-owned subsidiary of the Company. The Merger is expected to close during the third quarter of 2019.

On April 1, 2019 (“Tan Security Closing Date”), the Company entered into a Membership Interest and Stock Purchase Agreement (the “Tan Security Acquisition Agreement”) with Tan’s International Security and Tan’s International LLC (collectively, “Tan Security”). Pursuant to the Tan Security Acquisition Agreement, the Company purchased all membership interests and capital stock of Tan Security and collectively holds 100% of the interests of Tan Security (the “Tan Security Acquisition”).

8

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

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

At June 30, 2019, the Company had a working capital deficit of $3,715,022, as compared to a working capital deficit of $2,233,652 at December 31, 2018. The increase of $1,481,370 in the Company’s working capital deficit from December 31, 2018 to June 30, 2019 was primarily the result of a non-cash increase in the fair market value of the Company’s convertible notes payable, net of discount – related party and an increase in the warrant liability, partially offset by a decrease in contingent consideration.

The Company’s future capital requirements for its operations will depend on many factors, including the profitability of its businesses, the number and cash requirements of other acquisition candidates that the Company pursues, and the costs of operations. The Company has been investing in expanding its operation in new states, its security service in Colorado and California, and upgrading the capabilities of BioTrackTHC. The Company’s management has taken several actions to ensure that it will have sufficient liquidity to meet its obligations for the next twelve months, including growing and diversifying its revenue streams, selectively reducing expenses, and considering additional funding. Additionally, if the Company’s actual revenues are less than forecasted, the Company anticipates that variable expenses will also decline, and the Company’s management can implement expense reduction as necessary. The Company is evaluating other measures to further improve its liquidity, including the sale of equity or debt securities. Lastly, the Company may elect to reduce certain related-party and third-party debt by converting such debt into common shares. The Company’s management believes that these actions will enable the Company to meet its liquidity requirements through August 16, 2020. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2019 and beyond.  

On May 31, 2019 the Company filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the securities being offered. The Company is working with an investment bank to identify investors in anticipation of raising up to $5 million in new equity capital.

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

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3. Summary of Significant Accounting Policies

Principles of Consolidation 

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC (“Security Consultants”), Boss Security Solutions, Inc. (“Boss Security”), Security Consultants Group Oregon, LLC (“Security Oregon”), Security Grade, BioTrackTHC (since June 1, 2018, Engeni US (since August 3, 2018), and Tan Security (since April 1, 2019).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Significant estimates made by management include, but are not limited to allowance for doubtful accounts, purchase accounting allocations, recoverability and useful lives of property, equipment and intangible assets, valuation of convertible notes payable, contingencies, warrant liabilities, equity compensation and revenue recognition. Actual results could differ from estimates.

Cash  

Cash consists of checking accounts. The Company considers all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be cash equivalents. The Company has no cash equivalents as of June 30, 2019 or December 31, 2018.

Accounts Receivable and Allowance for Doubtful Accounts

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

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

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $77,046 and $76,156 at June 30, 2019 and December 31, 2018, respectively.

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Long-Lived Assets, Including Definite Lived Intangible Assets

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

Goodwill

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

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

Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset

Accounting for Acquisitions

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

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

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Revenue Recognition

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

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

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

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

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

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

Segment Information

FASB ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company.

Asset information by operating segment is not presented since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s condensed unaudited consolidated financial statements.

Expenses

Cost of Revenues

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

Operating Expenses

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

Other Income (Expense), net

Other income (expense), net consisted of change in fair value of convertible note, change in fair value of convertible note – related party, change in fair value of contingent consideration, change in fair value of warrant liability, loss on issuance of warrants, gain on reduction of obligation pursuant to acquisition and interest (expense) income.

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Property and Equipment

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

Contingencies

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

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $178,219 and $34,963 for the three months ended June 30, 2019 and 2018, respectively, and $247,490 and $61,737 for the six months ended June 30, 2019 and 2018, respectively.

Foreign Currency

The local currency is the functional currency for one entity’s operations outside the United States. Assets and liabilities of these operations are translated to U.S. dollars at the exchange rate in effect at the end of each period. Income statement accounts are translated at the average exchange rate prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of other comprehensive income within shareholders’ equity. Gains and losses from foreign currency transactions are included in net loss for the period.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of consolidated net income (loss) and foreign currency translation adjustments. Foreign currency translation adjustments included in comprehensive income (loss) were not tax-effected as investments in international affiliates are deemed to be permanent.

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Distinguishing Liabilities from Equity

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

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

Initial Measurement

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

Subsequent Measurement – Financial instruments classified as liabilities

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

Beneficial Conversion Feature

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

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

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

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

Share-based Compensation

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

The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services are received.

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

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

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Fair Value of Financial Instruments

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

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

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

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

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

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

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

Convertible notes payable

The fair value of the Company’s convertible notes payable, approximated the carrying value as of June 30, 2019 and December 31, 2018. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2.

Warrant liabilities

The fair value of the Company’s warrant liabilities approximated the carrying value as of June 30, 2019 and December 31, 2018. Factors that the Company considered when estimating the fair value of its warrants included market conditions and the term of the warrants. The level of the warrant liabilities would be considered as Level 3.

Additional Disclosures Regarding Fair Value Measurements

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

Earnings (Loss) per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury stock method, and convertible debt and convertible securities, using the if-converted method.

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For the three months ended June 30, 2018 and the six months ended June 30, 2019 and 2018, potential common shares includable in the computation of fully-diluted per share results are not presented in the condensed consolidated financial statements as their effect would be anti-dilutive. For the three months ended June 30, 2019, dilutive earnings per share are calculated by dividing net income attributable to common shareholders less the change in fair value of warrant liability, the change in fair value of convertible notes, interest expense on convertible notes, and the debt discount amortized on convertible notes. The calculation of diluted EPS excludes 24,571,582 shares for securities which have been deemed to be anti-dilutive.

Earnings per share for the three and six months ended June 30, 2019 and 2018 were calculated as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Numerator
Net income attributable to common shareholders	$	4,811,718		$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Effect of dilutive instruments on net loss		(7,024,580	)		-			-			-
Net income (loss) attributable to common shareholders - diluted	$	(2,212,862	)	$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Denominator
Weighted average shares of common stock outstanding - basic		75,470,238			42,673,528			74,324,689			35,907,118
Dilutive effect of warrants and convertible securities		5,766,440			-			-			-
Weighted average shares of common stock outstanding - diluted		81,236,678			42,673,528			74,324,689			35,907,118
Net income (loss) per share
Basic	$	0.06		$	(0.21	)	$	(0.08	)	$	(0.68	)
Diluted	$	(0.03	)	$	(0.21	)	$	(0.08	)	$	(0.68	)

The anti-dilutive shares of common stock outstanding for the three and six months ended June 30, 2019 and 2018 were as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Potentially dilutive securities:
Convertible notes payable		-		135,634		2,704,577		135,634
Convertible Preferred A Stock		1,000,000		1,000,000		1,000,000		1,000,000
Convertible Preferred B Stock		13,784,201		13,784,201		13,784,201		13,784,201
Warrants		-		3,307,073		4,925,558		3,307,073
Stock options		9,787,381		8,704,345		9,787,381		8,704,345

Reclassifications

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

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-.02, Leases (Topic 842) (“Topic 842”) which requires the recognition of right-of-use assets and lease liabilities on the balance sheet. The most prominent of the changes in the standard is the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases.

The Company adopted the new standard on January 1, 2019 and used the modified retrospective approach with the effective date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company elected certain practical expedients, which among other things, allowed us to carry forward prior conclusions about lease identification and classification.

Adoption of the standard resulted in the balance sheet recognition of additional lease assets and lease liabilities of approximately $1,500,000. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company currently has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in separate lease and non-lease components for all our leases. For additional information regarding the Company’s leases, see Note 18 in the notes to condensed consolidated financial statements.

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In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220); Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of the ASU. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees and applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. ASC 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. This update is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect that this update will have on its financial statements and related disclosures.

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

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4. Revenue Recognition

Disaggregation of revenue 

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Types of Revenues:
Security and Guarding	$	1,347,529	$	1,197,201	$	2,552,240	$	2,290,975
Systems Installation		174,067		100,699		202,608		135,263
Software		2,377,277		576,142		4,515,132		576,142
Total revenues	$	3,898,873	$	1,874,042	$	7,269,980	$	3,002,380

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

Security and Guarding Revenue

Helix provides armed and unarmed guards, monitoring of security alarms and cameras, as well as armed transportation services. The guards are charged out at an hourly rate, as are the monitoring services, with invoices typically sent to clients shortly after each month-end for the previous month, with revenue being recognized over time. The customer simultaneously receives and consumes benefits provided by the Helix performance. Transportation services are typically invoiced on a per-run basis, with revenue being recognized at a point in time once the service has been completed.

Systems Installation Revenue

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

Software

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

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

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

Performance Obligations

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

Significant Judgments

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

Costs to Obtain or Fulfill Contract

The Company’s costs to fulfill or obtain contracts with customers primarily consist of commissions and legal costs. The Company provides sales team members with commissions at 0-6%. Although sales commissions are incremental in nature and are only incurred when a contract is obtained, there is no up-front commission paid on the satisfactory obtainment of a contract, resulting in no sales commissions being capitalized at June 30, 2019 and December 31, 2018. The Company also incurs legal costs relating to the drafting and negotiating of contracts with select customers. Because legal costs are not incremental in nature and are incurred regardless of whether a contract is ultimately obtained, there were no legal costs capitalized as of June 30, 2019 and December 31, 2018. The Company did not record amortization of costs incurred to obtain the contract or any impairment losses for the period ending June 30, 2019 and 2018.

5. Business Combinations

Security Grade Acquisition

On June 2, 2017 (the “Security Grade Closing Date”), the Company entered into a Membership Interest Purchase Agreement (the “Security Grade Acquisition Agreement”) in which the Company purchased all issued and outstanding units of Security Grade Protective Services, Ltd. (“Security Grade”), which consisted of 800,000 Class A Units and 200,000 Class B Units. On the Security Grade Closing Date, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, provided that, within the first 60 days following the Security Grade Closing Date, no material customer identified in the Security Grade Acquisition Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the Security Grade Closing Date, on the 61st day following the Security Grade Closing Date, the Company shall issue an additional $800,000 in cash and issue 207,427 additional stock options (the “Additional Stock Options”). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Security Grade Acquisition Agreement within the first 60 days following the Security Grade Closing Date, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Security Grade Acquisition Agreement in the 180 days immediately preceding such termination. The Company subsequently issued the 207,427 Additional Stock Options on August 1, 2017 as well as a second cash payment of $800,000 pursuant to the original terms of the Security Grade Acquisition Agreement.

In the first quarter of 2018, the Company notified the selling members of Security Grade of their intent to exercise their right of setoff noted in the Security Grade Acquisition Agreement after discovering misrepresentations made by one of the selling members of Security Grade. The Company has settled with all of the six selling members. As of June 30, 2019 and December 31, 2018, the Company has a liability pursuant to the Security Grade Acquisition Agreement of $0 and $101,667, respectively, payable following the closing.

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

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

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

The Initial Stock Options are included as part of the purchase price. The Company determined the fair value of the contingent consideration to be $916,643 at June 2, 2017 and recorded it as a liability in its unaudited condensed consolidated balance sheet. The Company satisfied their contingent consideration liability during the third quarter of 2017. During the year ended December 31, 2018, the Company reached settlement agreements with all six selling members. As a result of these settlements, 79,486 options previously issued as part of the acquisition were cancelled (see Note 14).

BioTrackTHC Acquisition

On March 3, 2018, the Company and its wholly owned subsidiary, Merger Sub, entered into the Merger Agreement with BioTrackTHC and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders, pursuant to which Merger Sub merged with and into BioTrackTHC. On the BioTrackTHC Closing Date, the Company closed the Merger. In connection with closing the Merger, the Company issued 38,184,985 unregistered shares of Company common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the BioTrackTHC Stock Plan, pursuant to which options exercisable for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders will own 48% of the Company on a fully diluted basis at closing.

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

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

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

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Engeni SA Acquisition

On the Engeni Closing Date, the Company and its wholly owned subsidiary, Engeni Merger Sub, entered into the Engeni Merger Agreement with Engeni US, Engeni SA, the members of Engeni US, and Scott Zienkewicz as the representative of the Engeni US members. Pursuant to the Engeni Merger Agreement, Engeni Merger Sub merged with and into Engeni US, with Engeni US surviving the merger as a wholly-owned subsidiary of the Company. On the Engeni Closing Date, in connection with closing the Engeni Merger Agreement, the Company issued 366,700 shares of Company common stock to Engeni US members. Furthermore, the Company may also issue Engeni US members 366,700 and 366,600 shares of Parent common stock upon the achievement of specific objectives. If applicable, the Company will pay Engeni US members the aggregate amount of $100,000, on a pro rata basis, if Engeni SA reaches financial breakeven on or before December 31, 2018, as determined by the Company’s Chief Financial Officer and Scott Zienkewicz.

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

During the first quarter of 2019, it was determined Engeni SA did not reach financial breakeven and therefore the contingent consideration of $100,000 was deemed by the Company not to be payable and was reduced to zero. In accordance with ASC 805-30-35-1, the Company recognized the change in the fair value of contingent consideration subsequent to the acquisition date in general and administrative expenses. The Company’s allocation of the purchase price was calculated as follows:

	As Adjusted
Base Price - Common Stock	$	388,702
Contingent Consideration - Common Stock		777,298
Contingent Consideration - Cash		-
Total Purchase Price	$	1,166,000

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	5,609
Accounts receivable and other assets		30,479
Property, plant and equipment, net		57,830
Software		449,568	3.3
Goodwill		778,552
Total assets acquired	$	1,322,038
Liabilities assumed:
Accounts payable	$	56,038
Total liabilities assumed		56,038
Estimated fair value of net assets acquired	$	1,266,000

The Company determined the fair value of the contingent consideration to be $777,298 at August 3, 2018 and recorded it as a liability in its unaudited condensed consolidated balance sheets. On April 2, 2019, the Company satisfied their contingent consideration liability and issued 733,300 shares of the Company’s common stock to Engeni US members.

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Tan’s International Security

On the Tan Security Closing Date, the Company entered into the Tan Security Acquisition Agreement. Pursuant to the Tan Security Acquisition Agreement, Helix purchased all membership interests and capital stock of Tan Security and collectively holds 100% of the interests of Tan Security. The purchase price of $100,000 in cash plus 250,000 shares of the Company’s restricted common stock will be paid to Rocky Tan as follows:

● 250,000 shares of Helix Stock at closing.

● $25,000 at closing

● $25,000 on the 4-month anniversary of the Tan Security Closing Date

● $25,000 on the 8-month anniversary of the Tan Security Closing Date

● $25,000 on the 12-month anniversary of the Tan Security Closing Date

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

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

Base Price – Cash at closing	$	25,000
Base Price – Deferred cash payment (including $25,000 to be made on the 4,8 and 12-month anniversaries of closing)		75,000
Base Price – Common Stock		710,000
Total Purchase Price	$	810,000

Description	Fair Value
Assets acquired:
Cash	$	2,940
Accounts receivable		7,635
Goodwill		821,807
Total assets acquired	$	832,382
Liabilities assumed:
Accounts payable	$	12,526
Other liabilities		9,856
Total liabilities assumed		22,382
Estimated fair value of net assets acquired	$	810,000

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

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6. Property and Equipment, Net

At June 30, 2019 and December 31, 2018, property and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Furniture and equipment	$	139,782		$	264,659
Software equipment		352,505			-
Vehicles		201,066			202,700
Total		693,353			467,359
Less: Accumulated depreciation		(147,535	)		(117,841	)
Property and equipment, net	$	545,818		$	349,518

Depreciation expense for the three months ended June 30, 2019 and 2018 was $29,509 and $32,893, respectively, and $47,222 and $35,893 for the six months ended June 30, 2019 and 2018, respectively.

7. Intangible Assets, Net and Goodwill

The following table summarizes the Company’s intangible assets as of June 30, 2019 and December 31, 2018:

				June 30, 2019
	Estimated Useful Life (Years)	Gross  Carrying Amount		Assets Acquired		Accumulated Amortization			Net Book Value
Database	5	$	93,427	$	-	$	(60,119	)	$	33,308
Trade names and trademarks	5 - 10		591,081		-		(149,063	)		442,018
Web addresses	5		130,000		-		(82,511	)		47,489
Customer list	5		11,459,027		-		(3,101,382	)		8,357,645
Software	4.5		9,771,195		-		(2,356,189	)		7,415,006
Domain Name	5		-		17,383		(143	)		17,240
		$	22,044,730	$	17,383	$	(5,749,407	)	$	16,312,706

				December 31, 2018
	Estimated Useful Life (Years)	Gross Carrying Amount at December 31, 2017		Assets Acquired Pursuant to Business Combination (1) (2)		Accumulated Amortization			Net Book Value
Database	5	$	93,427	$	-	$	(50,858	)	$	42,569
Trade names and trademarks	5 - 10		125,000		466,081		(91,554	)		499,527
Web addresses	5		130,000		-		(69,625	)		60,375
Customer list	5		3,154,578		8,304,449		(1,965,520	)		9,493,507
Software	4.5		-		9,771,195		(1,263,095	)		8,508,100
		$	3,503,005	$	18,541,725	$	(3,440,652	)	$	18,604,078

(1)	On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 5)
(2)	On August 3, 2018, the Company acquired various assets of Engeni (See Note 5)

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $1,160,827 and $476,003 for the three months ended June 30, 2019 and 2018, respectively, and $2,308,755 and $645,579 for the six months ended June 30, 2019 and 2018, respectively.

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The following table summarizes the Company’s Goodwill as of June 30, 2019 and December 31, 2018:

	Total Goodwill
Balance at December 31, 2017	$	664,329
Impairment of goodwill		(664,329	)
Goodwill attributable to BiotrackTHC acquisition		39,135,007
Goodwill attributable to Engeni acquisition		778,552
Balance at December 31, 2018	$	39,913,559
Goodwill attributable to Tan Security acquisition		821,807
Balance at June 30, 2019	$	40,735,366

During the period ended March 31, 2018, the Company came to a settlement agreement with multiple Security Grade employees resulting from a misrepresentation of revenue and customer list information provided as part of the acquisition. Therefore, the Company considers the settlement to be an indicator for goodwill impairment testing. Accordingly, at March 31, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off of $664,329 for the three months ended March 31, 2018.

8. Costs, Estimated Earnings and Billings

Costs, estimated earnings and billings on uncompleted contracts are summarized as follows as of June 30, 2019 and December 31, 2018:

	June 30, 2019			December 31, 2018
Costs incurred on uncompleted contracts	$	140,289		$	89,700
Estimated earnings		49,366			50,512
Cost and estimated earnings earned on uncompleted contracts		189,655			140,212
Billings to date		304,500			252,535
Billings in excess of costs on uncompleted contracts		(114,845	)		(112,323	)
Costs in excess of billings	$	12,017		$	42,869
Billings in excess of cost		(126,862	)		(155,192	)
	$	(114,845	)	$	(112,323	)

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9. Accounts Payable and Accrued Liabilities

As of June 30, 2019 and December 31, 2018, accounts payable and accrued liabilities consisted of the following:

	June 30, 2019		December 31, 2018
Accounts payable	$	857,610	$	842,389
Accrued compensation and related expenses		56,332		33,869
Accrued expenses		1,138,368		826,455
Lease obligation - current		410,826		-
Total	$	2,463,136	$	1,702,713

10. Convertible Note Payable

	June 30, 2019			December 31, 2018
Note Five, 5% interest, convertible promissory note, fixed secured, maturing November 16, 2019	$	-		$	187,177
Note Ten, 25% interest, convertible promissory note, fixed secured, maturing March 1, 2020, net of debt discount for warrants		423,700			-
		423,700			187,177
Less: Current portion		(423,700	)		(187,177	)
Long-term portion	$	-		$	-

On February 13, 2017, the Company entered into a $183,333 10% Fixed Secured Convertible Promissory Note (“Note Five”) with an investor (the “First Investor”). The First Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the First Investor for due diligence and legal bills for the transaction.

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

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

On November 16, 2017, the Company amended Note Five (the “First Amendment”) with the First Investor. The First Amendment has a maturity date that is six months from November 16, 2017, converts at a 40% discount to the lowest one-day Volume Average Weighted Price (“VWAP”) during the 30 trading days preceding such conversion, incurs interest at an annual rate of 5%, and is prepayable at any time at 110% of the unpaid principal and accrued interest balance. At November 16, 2017, the principal amount of Note Five was $281,900.

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

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In November 2018, the Company amended Note Five (“Third Amendment”) with a second investor. The Third Amendment states that Note Five shall have a maturity of November 16, 2019. The principal amount as of the date of the Third Amendment was $115,136. During March 2019, the remaining principal of $112,305 was converted into 155,421 shares of common stock. The interest expense associated with Note Five was $0 and $5,839 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $7,878 for the six months ended June 30, 2019 and 2018, respectively.

On March 1, 2019, the Company entered into a $450,000 Secured Convertible Promissory Note (“Note Ten”) with a third investor. The third investor provided the Company with $450,000 in cash proceeds, which was received by the Company during the period ended June 30, 2019. Note Ten will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Ten is convertible at the election of the third investor, in whole or in part, at any time or from time to time, into the Company’s common stock at the lower of $0.90 per share or a 30% discount to the Company’s 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Ten, the Company issued a warrant to the third investor to purchase 160,715 shares of the Company’s common stock at $1.40 per share.

The Company evaluated Note Ten in accordance with ASC 480, Distinguishing Liabilities from Equity and determined Note Ten will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2019, the fair value of Note Ten was $661,581. Accordingly, the Company recorded a change in fair value of ($845,622) and $211,581 related to Note Ten for the three and six months ended June 30, 2019, respectively.

In addition, the company recorded a debt discount relating to the warrants issued in the amount of $355,847 based on the residual fair value of the warrants themselves at inception of Note Ten. Debt discounts amortized to interest expense were $88,718 and $117,966 for the three and six months ended June 30, 2019, respectively. The unamortized discount balance at June 30, 2019 was $237,881. On May 31, 2019, the Company issued 15,625 restricted shares of common stock as paid-in-kind (“PIK”) interest payments in the amount of $14,062. Accrued interest expense associated with Note Ten was $9,247 as of June 30, 2019, which includes PIK interest payable.

11. Related Party Transactions

Advances from Related Parties

The Company had a loan outstanding from a former Company executive. The loan balance was $0 and $45,250 as of June 30, 2019 and December 31, 2018, respectively.

Convertible Note Payable

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

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

As of February 20, 2018, the fair value of the liability was $239,343, however due to termination of the conversion of the note into equity securities, Note Eight will be valued in its principal amount of $125,000 and accordingly the Company recorded a credit regarding the change in fair value of $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $118,506 for the six months ended June 30, 2019 and 2018, respectively. The interest expense associated with Note Eight was $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $2,402 for the six months ended June 30, 2019 and 2018, respectively. Note Eight was paid in full on the Maturity Date.

On March 1, 2019, the Company entered into a $1,500,000 Secured Convertible Promissory Note (“Note Nine”) with a related party entity (the Second Related Party Holder”). A Managing Member of the Second Related Party Holder is also a Director of the Company. The Second Related Party Holder provided the Company with $1,475,000 in cash proceeds, which was received by the Company during the period ended June 30, 2019. The additional $25,000 was retained by the fourth investor for legal bills for the transaction. Note Nine will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Nine is convertible at the election of the fourth investor, in whole or in part, at any time or from time to time, into the Company’s common stock at the lower of $0.90 per share or a 30% discount to the Company’s 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Nine, the Company issued a warrant to the fourth investor to purchase 535,715 shares of the Company’s common stock at $1.40 per share.

The Company evaluated Note Nine in accordance with ASC 480, Distinguishing Liabilities from Equity and determined Note Nine will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2019, the fair value of Note Nine was $2,205,270. Accordingly, the Company recorded a change in fair value of ($2,818,739) and $705,270 related to Note Nine for the three and six months ended June 30, 2019, respectively.

In addition, the company recorded a debt discount relating to the warrants issued in the amount of $1,186,153 based on the residual fair value of the warrants at inception of Note Nine. The additional $25,000 retained by the fourth investor for legal bills for the transaction will be recorded as a debt discount. Debt discounts amortized to interest expense were $301,959 and $401,506 for the three and six months ended June 30, 2019, respectively. The unamortized discount balance at June 30, 2019 was $809,647. On May 31, 2019, the Company issued 52,083 restricted shares of common stock as PIK interest payments in the amount of $46,875. Accrued interest expense associated with Note Nine was $30,822 as of June 30, 2019, which includes PIK interest payable. As of June 30, 2019, the balance of Note Nine, net of debt discount for warrants and legal bills was $1,395,623.

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Warrants

In March 2016, the Company issued 960,000 shares of restricted common stock to the Related Party Holder per a subscription agreement for total proceeds of $150,000. In conjunction with the subscription agreement, the Company issued a warrant to the Related Party Holder to purchase 1,920,000 restricted shares of the Company’s common stock at $0.16 per share. The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company’s notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company’s notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of June 30, 2019, the warrants granted are not exercisable. 

On March 1, 2019, in connection with the issuance of Note Nine, the Company issued warrants, of which the value was derived and based off the fair value of Note Nine, to the investor to purchase 535,715 shares of the Company’s common stock at $1.40 per share. Exercise of the purchase rights represented by the warrant may be made, in whole or in part, at any time or times on or after March 1, 2019 and on or before March 1, 2024, by delivery to the Company of the Notice of Exercise.

The Company determined that the warrants associated with Note Nine are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. At inception, March 1, 2019, the fair value of the warrant liability was $1,186,153 while as of June 30, 2019, the fair value of the warrant liability was $471,346. Accordingly, the Company recorded a change in fair value of $(857,730) and $(714,807) during the three and six months ended June 30, 2019, respectively, which is reflected in the unaudited condensed consolidated statements of operations. 

Promissory Note

On January 3, 2019, the Company entered into an unsecured promissory note in the amount of $280,000. The unsecured promissory note has a fixed interest rate of 10% and is due and payable on March 31, 2019. On March 2, 2019, the unsecured promissory note was paid off in full.

12. Notes Payable

Notes payable consisted of the following: 

	June 30, 2019			December 31, 2018
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$	58,910		$	71,284
Loans Payable - Credit Union		6,127			5,075
Less: Current portion of loans payable		(24,805	)		(24,805	)
Long-term portion of loans payable	$	40,232		$	51,554

The interest expense associated with the notes payable was $890 and $720 for the three months ended June 30, 2019 and 2018, respectively, and $2,681 and $1,420 for the six months ended June 30, 2019 and 2018, respectively.

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13. Shareholders’ Equity

Common Stock

Subscription Agreements

The table below reflects shares of restricted common stock issued in relation to subscription agreements during the period ended June 30, 2018:

Date of Sale	Number of Shares Sold		Total Proceeds
February 2018		222,222	$	200,000
March 2018		500,000		450,000
April 2018		500,000		450,000
May 2018		244,444		219,999
		1,466,666	$	1,319,999

Other Common Stock Issuances

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

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

In January 2019, the Company issued 20,000 shares of restricted common stock to a consultant per a consulting agreement and recorded shared based compensation expense of $27,400.

In March and June 2019, the Company issued 1,255,222 and 166,667 shares of common stock as part of investment unit purchase agreements (see Note 15).

In March and June 2019, certain option holders exercised their rights under the BioTrackTHC Stock Plan and were issued 62,847 and 47,084 shares of common stock, respectively, for no cash proceeds.

In March and April 2019, certain option holders exercised their rights under the BioTrackTHC Stock Plan and were issued 6,082 and 57,461 shares of common stock for total proceeds of $4,805 and $21,808, respectively.

In April 2019, the Company issued 250,000 shares of common stock as part of the Tan Security acquisition.

In April 2019, a selling shareholder of Security Grade exercised their right to purchase 15,101 shares of the Company’s common stock.

In April 2019, the Company issued 733,300 shares of common stock in satisfaction of the Engeni contingent consideration (see Note 5).

In May 2019, the Company issued 15,625 and 52,083 restricted shares of common stock as PIK interest payments in the amount of $14,062 and $46,875, respectively (see Notes 10 and 11).

Conversion of Convertible Note to Common Stock

On February 15, 2018, March 12, 2018 and March 21, 2018, the holder of a 10% fixed secured convertible promissory note issued by the Company elected its option to partially convert $50,000, $50,000 and $75,000 in principal of the convertible note into 46,066, 63,963, and 95,945 shares of the Company’s common stock.

On March 7, 2019 and March 28, 2019, the holder of a 10% fixed secured convertible promissory note issued by the Company elected its option to fully convert $75,882 and $42,055 in principal of the convertible note into 100,000 and 55,421 shares of the Company’s common stock.

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2017 Omnibus Incentive Plan

The table below reflects shares issued under the 2017 Omnibus Incentive Plan during the period ended June 30, 2019:

Date of Issuance	Number of Shares Issued		Total Share Based Compensation
March 2019		250,000	$	320,000
		250,000	$	320,000

The table below reflects shares issued under the 2017 Omnibus Incentive Plan during the period ended June 30, 2018:

Date of Issuance	Number of Shares Issued		Total Share Based Compensation
January 2018		42,850	$	173,014
March 2018		100,000		250,000
May 2018		133,900		223,774
		276,750	$	646,788

Series A convertible preferred stock

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

Series B convertible preferred stock

Series B Preferred Stock Purchase Agreement

On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares are convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees listed below and the satisfaction of the promissory notes discussed in Note 11.

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

The table below reflects the shares issued under the Series B Preferred Purchase Agreement of the initial tranche, Second Series B Purchase Agreement and the various issuances under the Third Series B Purchase Agreement during the year-ended December 31, 2017:

Date of Sale	Number of Shares Sold		Total Proceeds
Initial
May 2017		7,318,084	$	1,875,000
Second
July 2017		1,680,000		840,000
Third
August 2017		369,756		120,000
September 2017		462,195		150,000
October 2017		462,195		150,000
October 2017		1,042,337		557,500
December 2017		2,449,634		795,000
Ending Balance		13,784,201	$	4,487,500

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

Conversion:

Each Series B Preferred Share is convertible at the option of the holder into such number of shares of the Company’s common stock equal to the number of Series B Preferred Shares to be converted, multiplied by the Preferred Conversation Rate. The Preferred Conversion Rate shall be the quotient obtained by dividing the Preferred Stock Original Issue Price ($0.3253815) by the Preferred Stock Conversation Price in effect at the time of the conversion (the initial conversion price will be equal to the Preferred Stock Original Issue Price, subject to adjustment in the event of stock splits, stock dividends, and fundamental transactions). Based on the current conversion price, the Series B Preferred Shares are convertible into 13,784,201 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (i) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (ii) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company’s Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000).

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

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

Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature exists, as the effective conversion price for the Series B preferred shares at issuance was less than the fair value of the common stock into which the preferred shares are convertible. A beneficial conversion feature based on the intrinsic value at the date of issuances for the Series B preferred shares is scheduled below. For the three and six months ended June 30, 2018, the beneficial conversion amount of $14,998,505 and $22,202,194, respectively was accreted back to the preferred stock as a deemed dividend and charged to additional paid in capital in the absence of earning as the beneficial conversion feature is amortized over time through the earliest conversion date, May 12, 2018. Provided below is a schedule of the issuances of Series B preferred shares and the amount accredited to deemed dividend at June 30, 2018. As of June 30, 2019 and 2018, the beneficial conversion feature was fully amortized.

For the Six Months Ended June 30, 2018
Issuance Date	Beneficial Conversion Feature Term (months)	Number of shares		Fair Value of Beneficial Conversion Feature		Amount accreted as a deemed dividend at December 31, 2017			Amount accreted as a deemed dividend for the Six Months Ended June 30, 2018			Unamortized Beneficial Conversion Feature
May 17, 2017	12		7,318,084	$	25,247,098	$	(15,779,436	)	$	(9,467,661	)	$	-
July 29, 2017	9.5		1,680,000		6,804,000		(3,674,634	)		(3,129,366	)		-
August 29, 2017	8.5		369,756		1,148,263		(556,190	)		(592,073	)		-
September 15, 2017	8		462,195		1,435,329		(648,601	)		(786,728	)		-
October 11, 2017	7		462,195		1,121,036		(426,309	)		(694,727	)		-
October 31, 2017	6.5		1,042,337		1,735,641		(548,570	)		(1,187,071	)		-
December 19, 2017	5		2,449,634		6,921,348		(576,780	)		(6,344,568	)		-
Total			13,784,201	$	44,412,715	$	(22,210,520	)	$	(22,202,194	)	$	-

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Dividends, Voting Rights and Liquidity Value:

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

Classification:

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

14. Stock Options

On March 15, 2018 the Company awarded Zachary Venegas two options to purchase a total of 490,000 shares of the Company’s common stock at prices ranging from $1.90 to $2.09 per share. These options vested on June 28, 2018 and have expiration dates ranging from March 2023 to March 2028.

As part of the Membership Interest Purchase Agreement entered into between the Company and Security Grade, on June 2, 2017 (see Note 5), the Company granted to the selling Members the option to purchase up to 414,854 shares of the Company’s common stock at a price of $0.001 per share. Of the 414,854 options granted, 207,427 were vested at closing and equity classified. The vesting of the remaining 207,427 shares were subject to certain milestones being achieved and was initially recognized as contingent consideration, both a component of purchase price. As a result of the milestones being met during the third quarter of 2017, the remaining 207,427 shares have also vested. The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant.

On March 6, 2018, the Company filed a lawsuit in the United States Court for the District of Colorado alleging violations in previously disclosed representations and warranties by the plaintiff as part of the Acquisition. Following the appointment of a registered Public Company Accounting Oversight Board (“PCAOB”) auditor, certain misrepresentations, primarily surrounding the misclassification of certain revenues as being recurring, were discovered, artificially inflating the price of the membership interest in Security Grade. As a result of certain settlements with the selling shareholder, as of June 30, 2018, 70,151 options previously issued as part of the acquisition were cancelled. Subsequently, as of December 31, 2018, the remaining settlements with the selling shareholders were settled and a total of 79,486 options previously issued as part of the acquisition were cancelled.

On February 6, 2019 the Company awarded an executive an option to purchase a total of 100,000 shares of the Company’s common stock at an exercise price $1.51 per share. These options vested on May 6, 2019 and have an expiration date of February 6, 2024.

On March 19, 2019 the Company awarded the Chief Financial Officer, two options to purchase a total of 300,000 shares of the Company’s common stock at prices ranging from $2.35 to $2.59 per share. These options shall vest over a three-year period from March 2020 to March 2022 and have expiration dates ranging from March 2024 to March 2029.

On March 19, 2019 the Company awarded the Chief Executive Officer, two options to purchase a total of 500,000 shares of the Company’s common stock at prices ranging from $2.35 to $2.59 per share. These options shall vest over a three-year period from March 2020 to March 2022 and have expiration dates ranging from March 2024 to March 2029.

On May 2, 2019, the Company awarded an investor an option to purchase a total of 125,000 shares of the Company’s common stock at an exercise price of $2.03 per share. 62,500 of the options shall vest immediately and 62,500 of the options shall vest on August 2, 2019 provided the marketing agreement between the Company and grantee has not been terminated. These options shall expire on May 1, 2024.

In May and June 2019, the Company awarded five employees, an option to purchase a total of 50,000, 40,000, 50,000, 50,000, and 30,000 shares of the Company’s common stock at prices ranging from $1.05 to $2.03 per share. These options shall vest over a period ranging from September 2019 to June 2020 and have expiration dates ranging from May 2024 to June 2024.

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Stock option activity for the period ended June 30, 2019 is as follows:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2019		8,730,956		$	0.671		2.44
Granted		1,245,000		$	2.106		7.06
Exercised		(188,575	)	$	0.261		1.08
Forfeited and expired
Outstanding at June 30, 2019		9,787,381		$	0.862		2.98
Vested options at June 30, 2019		8,900,021		$	0.749		2.13

15. Warrant Liability

On March 1, 2019, in connection with the issuance of Note Ten, the Company issued warrants, of which the value was derived and based off the fair value of Note Ten, to the investor to purchase 160,715 shares of the Company’s common stock at $1.40 per share. Exercise of the purchase rights represented by the warrant may be made, in whole or in part, at any time or times on or after March 1, 2019 and on or before March 1, 2024, by delivery to the Company of the Notice of Exercise.

The Company determined that the warrants associated with Note Ten are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with ASC 480, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. At inception, March 1, 2019, the fair value of the warrant liability was $355,847 while as of June 30, 2019, the fair value of the warrant liability was $141,404. Accordingly, the Company recorded a change in fair value of the warrant liability of $(257,320) and $(214,443) related to Note Ten for the three and six months ended June 30, 2019, respectively.

On January 10, 2019, the Company entered into an Investment Unit Purchase Agreement (the “First Investment Agreement”) to issue and sell investment units to an investor, in which the investment units consist of one share of the common stock of the Company, and a warrant exercisable for one half share of common stock of the Company at an Exercise Price of $1.25 per share for cash at a price per investment unit of $0.90.

On March 5, 2019, the Company sold an aggregate of 1,255,222 units of the Company’s securities to an investor at a purchase price of $0.90 per unit for total proceeds of $1,129,700. In connection with the First Investment Agreement, the investor is entitled to purchase from the Company, at the Exercise Price, at any time on or after 90 days from the issuance date, 627,611 shares of the Company’s common stock (the “March Warrant Shares”).

The Company determined that the warrants are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations.

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The fair value of the March Warrant Shares at issuance on January 10, 2019 is in excess of the proceeds received, the warrant liability is required to be recorded at fair value with the excess of the fair value over the proceeds received recognized as a loss in earnings. The gross proceeds from the 1,255,222 investment units at $0.90 was $1,129,700.  The fair value of the March Warrant Shares at issuance was $1,717,506. The amount to be recognized as a loss in earnings is calculated as follows:

Proceeds from January investment units	$	1,129,700
Par value of common stock issues	$	(1,255	)
Fair value of warrants	$	(1,717,506	)
Loss on issuance of warrants (January 10, 2019 issuance)	$	(589,061	)
Loss on issuance of warrants (March 11, 2019 issuance)	$	(198,148	)
Total loss on issuance of warrants	$	(787,209	)

As of June 30, 2019, the fair value of the warrant liability was $538,847 and the Company recorded a change in fair value of the warrant liability of $(1,046,606) and $(1,178,659) for the three and six months ended June 30, 2019, respectively.

On March 11, 2019, the Company issued warrants to an investment bank to purchase a total of 100,000 restricted shares of the Company’s common stock at a per share purchase price of $0.90. The warrants are exercisable at any time six months after the issuance date within three years of issuance.

The Company determined that the warrants are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the condensed consolidated balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the condensed consolidated statement of operations. At inception, March 11, 2019, the fair value of the warrant liability was $198,148 while as of June 30, 2019, the fair value of the warrant liability was $82,162. Accordingly, the Company recorded a change in fair value of the warrant liability of $(168,380) and $(115,986) related to the warrants for the three and six months ended June 30, 2019, respectively.

On June 14, 2019, the Company entered into another Investment Unit Purchase Agreement (the “Second Investment Agreement”) to issue and sell investment units to an investor (the “investor”), in which the investment units consist of one share of the common stock of the Company, and a warrant exercisable for one half share of common stock of the Company at an exercise price of $1.25 per share for cash at a price per investment unit of $0.90.

On June 24, 2019, the Company sold an aggregate of 166,667 units of the Company’s securities to an investor at a purchase price of $0.90 per unit for total proceeds of $150,000. In connection with the Second Investment Agreement, the investor is entitled to purchase from the Company, at the exercise price, at any time on or after 90 days from the issuance date, 83,333 shares of the Company’s common stock (the “June Warrant Shares”).

The gross proceeds from the 166,667 investment units at $0.90 was $150,000.  The fair value of the June Warrant Shares at issuance was $83,586 while as of June 30, 2019, the fair value of the warrant liability was $73,073. Accordingly, the Company recorded a change in fair value of the warrant liability of ($10,513) related to the warrants for the three and six months ended June 30, 2019.

A summary of warrant activity is as follows:

For the Six Months Ended June 30, 2019
	Warrant  Shares		Weighted Average Exercise Price
Balance at January 1, 2019		3,418,184	$	0.23
Warrants granted		1,507,374	$	1.23
Balance at June 30, 2019		4,925,558	$	0.55

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The fair value of the Company’s warrant liability was calculated using the Black-Scholes model and the following assumptions:

	As of June 30, 2019			As of December 31, 2018
Fair value of company’s common stock	$	1.06		$	0.90
Dividend yield		0	%		0	%
Expected volatility		135% - 140%			175.0	%
Risk Free interest rate		1.72% - 2.56%			2.49	%
Expected life (years)		3.19			1.65
Fair value of financial instruments - warrants	$	2,199,266		$	896,171

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

	Amount
Balance as of January 1, 2019	$	896,171
Fair value of warrants issued		3,541,240
Change in fair value of liability to issue warrants		(2,238,145	)
Balance as of June 30, 2019	$	2,199,266

	Amount
Balance as of April 1, 2019	$	5,986,781
Fair value of warrants issued		83,586
Change in fair value of liability to issue warrants		(3,871,101	)
Balance as of June 30, 2019	$	2,199,266

16. Stock-Based Compensation

2017 Omnibus Incentive Plan

The Company’s 2017 Omnibus Incentive Plan (the “2017 Plan”) was adopted by our Board of Directors and a majority of our voting securities on October 17, 2017. The 2017 Plan permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and dividend equivalent rights to eligible employees, directors and consultants. We grant options to purchase shares of common stock under the 2017 Plan at no less than the fair value of the underlying common stock as of the date of grant. Options granted under the Plan have a maximum term of ten years. Under the Plan, a total of 5,000,000 shares of common stock are reserved for issuance, of which options to purchase 1,735,000 and 490,000 shares of common stock and 764,945 and 514,945 shares of common stock were granted as of June 30, 2019 and December 31, 2018, respectively.

Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan

On October 22, 2014, BioTrackTHC approved and adopted the BioTrackTHC Stock Plan. The BioTrackTHC Stock Plan set aside and reserved 600,000 shares of BioTrackTHC’s common stock for grant and issuance in accordance with its terms and conditions. Persons eligible to receive awards from the BioTrackTHC Stock Plan include employees (including officers and directors) of BioTrackTHC or its affiliates and consultants who provide significant services to BioTrackTHC or its affiliates (the “Grantees”). The BioTrackTHC Stock Plan permits BioTrackTHC to issue to Grantees qualified and/or non-qualified options to purchase BioTrackTHC’s common stock, restricted common stock, performance units, and performance shares. The term of each award under the BioTrackTHC Stock Plan shall be no more than ten years from the date of grant thereof. BioTrackTHC’s Board of Directors or a committee designated by the Board of Directors is responsible for administration of the BioTrackTHC Stock Plan and has the sole discretion to determine which Grantees will be granted awards and the terms and conditions of the awards granted.

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BioTrackTHC Management Awards

On September 1, 2015 and November 1, 2015, BioTrackTHC’s Board approved individual employee option grants (the “Executive Grants”) for three executives (the “Executives”). Pursuant to the Executive Grants, the Executives were each granted stock options to purchase 146,507 shares (totaling 439,521 shares) of BioTrackTHC’s common stock (the “Option”) at an exercise price equal to approximately $7.67. The options vest as to 25% of the shares subject to the Options, one year after the date of grant and then in equal quarterly installments for the three years thereafter, subject to the Executive’s continued employment with BioTrackTHC (see Notes 1 and 5).

17. Income Taxes

No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company’s net deferred income tax assets for the six months ended June 30, 2019 and 2018 consist of income tax loss carryforwards. These amounts are available for carryforward for use in offsetting taxable income of future years through 2035. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry-forward period. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Due to the Company’s history of operating losses, these deferred tax assets arising from the future tax benefits are currently not likely to be realized and are thus reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes. 

For the six months ended June 30, 2019 and 2018, the Company has a net operating loss carry forward of approximately $15,098,000 and $8,365,000, respectively. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382. The Company applied a 100% valuation reserve against the deferred tax benefit as the realization of the benefit is not certain.

18. Commitments and Contingencies

Under Topic 842, operating lease expense is generally recognized evenly on a straight-line basis. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to five years. The lease term represents the period up to the early termination date unless it is reasonably certain that the Company will not exercise the early termination option. Certain leases include rental payments that are adjusted periodically based on changes in consumer price and other indices.

Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines the lease and non-lease components in determining the lease liabilities and ROU assets.

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Activity related to the Company’s leases was as follows:

	Six Months Ended June 30, 2019
Operating lease expense	$	297,566
Cash paid for amounts included in the measurement of operating lease liabilities	$	150,696
ROU assets obtained in exchange for operating lease obligations	$	1,499,752

 The Company’s lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The Company used the incremental borrowing rate on December 31, 2018 for all leases that commenced prior to that date.

ROU lease assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows:

	As of June 30, 2019
Other assets	$	1,293,245
Accounts payable and accrued liabilities	$	410,826
Other long-term liabilities		962,716
Total lease liabilities	$	1,373,542
Weighted average remaining lease term (in years)		3.05
Weighted average discount rate		6.00	%

Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of June 30, 2019, for the following five fiscal years and thereafter were as follows:

	As of June 30, 2019
2019 - Remaining		238,684
2020		393,413
2021		248,223
2022		195,144
2023		200,944
Thereafter		205,434
Total future minimum lease payments	$	1,481,842
Less imputed interest		(108,300	)
Total	$	1,373,542

As of June 30, 2019, the Company had additional operating lease obligations for a lease with a future effective date of approximately $600,000. This operating lease will commence during the first quarter of fiscal 2022 with a lease term of three years.

As of December 31, 2018, future minimum lease payments, as defined under the previous lease accounting guidance of ASC Topic 840, under noncancelable operating leases for the following five fiscal years and thereafter were as follows:

	Operating leases
2019	$	473,495
2020		420,291
2021		275,223
2022		198,144
2023		199,144
Thereafter		205,135
Total lease payments	$	1,771,432

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19. Segment Results

FASB ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on the way a company’s management organized segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision–making group is composed of the Chief Executive Officer. The Company operates in three segments, Security and guarding, Systems installation and Software.

Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s unaudited condensed consolidated financial statements.

The following represents selected information for the Company’s reportable segments:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Security and guarding
Revenue	$	1,347,529		$	1,197,201		$	2,552,240		$	2,290,975
Cost of revenue		797,944			1,273,693			1,738,530			2,064,398
Gross margin		549,585			(76,492	)		813,710			226,577
Total operating expenses		1,903,371			2,455,685			3,637,078			5,152,876
Loss from operations		(1,353,786	)		(2,532,177	)		(2,823,368	)		(4,926,299	)
Total other income (expense)		7,265,540			735,239			(979,410	)		2,656,120
Total net income (loss)	$	5,911,754		$	(1,796,938	)	$	(3,802,778	)	$	(2,270,179	)
Systems installation
Revenue	$	174,067		$	100,699		$	202,608		$	135,263
Cost of revenue		337,852			-			499,610			-
Gross margin		(163,785	)		100,699			(297,002	)		135,263
Total operating expenses		154,822			-			187,453			-
Loss from operations		(318,607	)		100,699			(484,455	)		135,263
Total other income		513			-			433			-
Total net (loss) income	$	(318,094	)	$	100,699		$	(484,022	)	$	135,263
Software
Revenue	$	2,377,277		$	576,142		$	4,515,132		$	576,142
Cost of revenue		860,903			286,694			1,683,778			286,694
Gross margin		1,516,374			289,448			2,831,354			289,448
Total operating expenses		2,309,704			421,566			4,585,917			421,566
Loss from operations		(793,330	)		(132,118	)		(1,754,563	)		(132,118	)
Total other income		11,978			9			11,970			9
Total net loss	$	(781,352	)	$	(132,109	)	$	(1,742,593	)	$	(132,109	)

20. Subsequent Events

On July 29, 2019, the Company entered into an unsecured promissory note in the amount of $300,000. The unsecured promissory note has a fixed interest rate of 12% per annum and is due and payable upon the maturity date of January 29, 2020. 

In August 2019, the Company paid $25,000 in cash as part of the original purchase price of Tan Security pursuant to the original terms of the Tan Security Acquisition Agreement.

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

Forward-Looking Statements

The following discussion of our financial condition and results of operations for the three and six months ended June 30, 2019 and 2018 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed on April 1, 2019 with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

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

Overview

Helix TCS, Inc. provides critical infrastructure solutions to the legal cannabis industry. Our mission is to provide clients with the best-in-class critical infrastructure services through a single integrated platform which enables them to run their businesses more safely, efficiently, and profitably. As we increase our platform’s scale and scope, clients will be able to realize greater cost savings and operating advantages.

Our team is composed of former military, law enforcement, and technology professionals with deep experience in security and law enforcement, intelligence, technology design and development, partner relations, data aggregation, venture capital, private equity, risk-management, banking, and finance.

Technology is a cornerstone of Helix’s service offering. Our technology platform allows clients to manage their business in a compliant manner with BioTrackTHC’s seed-to-sale software, as well as managing inventory and supply costs through Cannabase. We also provide bespoke monitoring and transport solutions. We focus on utilizing technology as an operations multiplier, bringing in and managing unique partnerships across the tech spectrum to tailor and guarantee desired outcomes for our clients.

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

We have greatly enhanced our core operations with the acquisitions of Security Grade, BioTrackTHC, Engeni and Tan Security. Security Grade is a market leader in the security profession and provides a broad range of services, from security consulting to installation of surveillance technology. Consistent with our team of professionals, Security Grade employs specialists with extensive experience and exposure to all areas of security related services. BioTrackTHC specializes in providing cannabis software services, ranging from monitoring of plant inventory to point-of-sale solutions. BioTrackTHC’s software is used by 9 government entities and more than 2,000 commercial client locations across 34 U.S. states and 6 countries. Engeni provides a turnkey and comprehensive digital presence solution for small businesses. The Engeni Growth solution includes an optimized web page, a fully-paid Google pay-per-click campaign, lead capture & lead delivery and ubiquitous directory/map listings. Engeni has also become the Company’s offshore software development platform, and is currently working on the second generation of the BioTrackTHC software. These strategic acquisitions will help field the growing demand in the Legal Cannabis Industry. Tan Security, a licensed security company, provided the Company a platform with which to expand security operations in the state of California.

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Results of Operations for the three months ended June 30, 2019 and 2018

The following table shows our results of operations for the three months ended June 30, 2019 and 2018. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	For the Three Months Ended June 30,						Change
	2019			2018			Dollars			Percentage
Revenue	$	3,898,873		$	1,874,042		$	2,024,831			108	%
Cost of revenue		1,996,699			1,560,387			436,312			28	%
Gross margin		1,902,174			313,655			1,588,519			506	%
Operating expenses		4,367,897			2,877,251			1,490,646			52	%
Loss from operations		(2,465,723	)		(2,563,596	)		97,873			-4	%
Other income (expense), net		7,278,031			735,248			6,542,783			890	%
Net income (loss)	$	4,812,308		$	(1,828,348	)	$	6,640,646			-363	%
Changes in foreign currency translation adjustment	$	(590	)	$	-		$	(590	)		100	%
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		-			(7,203,689	)		7,203,689			-100	%
Net income (loss) attributable to common shareholders	$	4,811,718		$	(9,032,037	)	$	13,843,755			-153	%

Revenue

Total revenue for the three-month period ended June 30, 2019 was $3,898,873, which represented an increase of $2,024,831 compared to total revenue of $1,874,042 for the three months ended June 30, 2018. The increase primarily resulted from additional revenue resulting from the BioTrackTHC acquisition and an increase in the number of clients serviced by our security operations.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2019 and 2018 primarily consisted of hourly compensation for security personnel and employees involved in the creation and development of licensing software. Cost of revenues increased by $436,312 for the three months ended June 30, 2019, to $1,996,699 as compared to $1,560,387 for the three months ended June 30, 2018. The increase primarily resulted from the acquisition of BioTrackTHC and a substantial increase in the number of clients serviced by Helix security, which required the hiring of additional employees.

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Operating Expenses

Our operating expenses encompass selling, general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Our operating expenses during the three months ended June 30, 2019 and 2018 were $4,367,897 and $2,877,251, respectively. The overall $1,490,646 increase in operating expenses was attributable to the following increases/(decreases) in operating expenses of:

● Selling, general and administrative – $642,492

● Salaries and wages – $(1,113)

● Professional and legal fees – $523,306

● Depreciation and amortization – $325,961

The $642,492 increase in selling, general and administrative expenses is a result of increases in rent expense, advertising and travel expenses resulting from an expansion in our operations. The $1,113 decrease in salaries and wages resulted from a decrease in stock compensation expense. The $523,306 increase in professional and legal fees primarily resulted from an increase in legal fees and costs associated with fundraising. The $325,961 increase in depreciation and amortization was due to amortization of intangible assets acquired in the BioTrackTHC and Engeni acquisitions.

Other Income (Expense), net

Other income (expense), net consisted of a change in the fair value of convertible notes, change in the fair value of convertible notes – related party, change in fair value of warrant liability, change in fair value of contingent consideration, gain on reduction of obligation pursuant to acquisition and interest (expense) income. Other income (expense), net during the three months ended June 30, 2019 and 2018 was $7,278,031 and $735,248, respectively. The $6,542,783 increase in other income (expense), net was primarily attributable to a gain on the change in fair value of convertible notes of $845,622, gain on the change in fair value of convertible notes – related party of $2,818,739, gain on the change in fair value of warrant liability of $3,871,101, partially offset by interest expense of $514,081 during the three months ended June 30, 2019.

Net income (loss)

For the foregoing reasons, we had net income of $4,812,308 for the three months ended June 30, 2019, or $0.06 per basic share, compared to a net loss of $1,828,348 for the three months ended June 30, 2018, or $0.04 net loss per common share – basic and diluted.

Convertible preferred stock beneficial conversion feature accreted as a deemed dividend

The convertible preferred stock beneficial conversion feature accreted as a deemed dividend resulted from the effective conversion price of the Series B preferred shares at issuance being less than the fair value of the common stock into which the preferred shares are convertible. The result was a non-cash charge in the amount of $0 for the three months ended June 30, 2019 compared to $7,203,689 for the three months ended June 30, 2018.

Net income (loss) Attributable to common shareholders

For the foregoing reasons, we had a net gain attributable to common shareholders of $4,811,718 for the three months ended June 30, 2019, or $.06 per basic share attributable to common shareholders, compared to net loss attributable to common shareholders of $9,032,037 for the three months ended June 30, 2018, or $0.21 net loss per share attributable to common shareholders – basic and diluted.

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Results of Operations for the six months ended June 30, 2019 and 2018

The following table shows our results of operations for the six months ended June 30, 2019 and 2018. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	For the Six Months Ended June 30,						Change
	2019			2018			Dollars			Percentage
Revenue	$	7,269,980		$	3,002,380		$	4,267,600			142	%
Cost of revenue		3,921,918			2,351,092			1,570,826			67	%
Gross margin		3,348,062			651,288			2,696,774			414	%
Operating expenses		8,410,448			5,574,442			2,836,006			51	%
Loss from operations		(5,062,386	)		(4,923,154	)		(139,232	)		3	%
Other income (expense), net		(967,007	)		2,656,129			(3,623,136	)		-136	%
Net loss	$	(6,029,393	)	$	(2,267,025	)	$	(3,762,368	)		166	%
Changes in foreign currency translation adjustment	$	3,657		$	-		$	3,657			100	%
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		-			(22,202,194	)		22,202,194			-100	%
Net loss attributable to common shareholders	$	(6,025,736	)	$	(24,469,219	)	$	18,443,483			-75	%

Revenue

Total revenue for the six-month period ended June 30, 2019 was $7,269,980, which represented an increase of $4,267,600 compared to total revenue of $3,002,380 for the six months ended June 30, 2018. The increase primarily resulted from additional revenue resulting from the BioTrackTHC acquisition and an increase in the number of clients serviced by our security operations.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2019 and 2018 primarily consisted of hourly compensation for security personnel and employees involved in the creation and development of licensing software. Cost of revenues increased by $1,570,826 for the six months ended June 30, 2019, to $3,921,918 as compared to $2,351,092 for the six months ended June 30, 2018. The increase primarily resulted from the acquisition of BioTrackTHC and a substantial increase in the number of clients serviced by Helix security, which required the hiring of additional employees.

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Operating Expenses

Our operating expenses encompass selling, general and administrative expenses, salaries and wages, professional and legal fees and depreciation. Selling, general and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Our operating expenses during the six months ended June 30, 2019 and 2018 were $8,410,448 and $5,574,442, respectively. The overall $2,836,006 increase in operating expenses was attributable to the following increases in operating expenses of:

● Selling, general and administrative – $1,231,490

● Salaries and wages – $384,144

● Professional and legal fees – $592,002

● Depreciation and amortization – $1,292,699

The $1,231,490 increase in selling, general and administrative expenses is a result of increases in rent expense, advertising and travel expenses resulting from an expansion in our operations. The $384,144 increase in salaries and wages resulted from a significant increase in headcount, including BioTrackTHC and Engeni personnel. The $592,002 increase in professional and legal fees primarily resulted from an increase in legal fees and costs associated with fundraising. The $1,292,699 increase in depreciation and amortization was due to amortization of intangible assets acquired in the BioTrackTHC and Engeni acquisitions.

Other Income (Expense), net

Other income (expense), net consisted of a change in the fair value of convertible notes, change in the fair value of convertible notes – related party, change in fair value of warrant liability, change in fair value of contingent consideration, loss on issuance of warrants, gain on reduction of obligation pursuant to acquisition and interest (expense) income. Other income (expense), net during the six months ended June 30, 2019 and 2018 was ($967,007) and $2,656,129, respectively. The $3,623,136 decrease in other income (expense), net was primarily attributable to a loss on the change in fair value of convertible notes of $142,341, loss on the change in fair value of convertible notes – related party of $705,270, loss on the change in fair value of contingent consideration of $880,050, loss on issuance of warrants of $787,209, and interest expense of $690,282, partially offset by a gain on the change in fair value of warrant liability of $2,238,145, during the six months ended June 30, 2019.

Net income (loss)

For the foregoing reasons, we had a net loss of $6,029,393 for the six months ended June 30, 2019, or $0.08 net loss per common share – basic and diluted, compared to a net loss of $2,267,025 for the six months ended June 30, 2018, or $0.06 net loss per common share – basic and diluted.

Convertible preferred stock beneficial conversion feature accreted as a deemed dividend

The convertible preferred stock beneficial conversion feature accreted as a deemed dividend resulted from the effective conversion price of the Series B preferred shares at issuance being less than the fair value of the common stock into which the preferred shares are convertible. The result was a non-cash charge in the amount of $0 for the six months ended June 30, 2019 compared to $22,202,194 for the six months ended June 30, 2018.

Net income (loss) Attributable to common shareholders

For the foregoing reasons, we had a net loss attributable to common shareholders of $6,025,736 for the six months ended June 30, 2019, or $.08 net loss per share attributable to common shareholders - basic and diluted, compared to net loss attributable to common shareholders of $24,469,219 for the six months ended June 30, 2018, or $0.68 net loss per share attributable to common shareholders – basic and diluted.

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Liquidity, Capital Resources and Cash Flows

Going Concern

Management believes that we will continue to incur losses for the immediate future. Therefore, we may either need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern. For the six months ended June 30, 2019, we have generated revenue and are trying to achieve positive cash flows from operations.

As of June 30, 2019, we had a cash balance of $800,015, accounts receivable, net of $1,640,996 and $6,708,392 in current liabilities. At the current cash consumption rate, we may need to consider additional funding sources toward the end of fiscal 2019. We are taking proactive measures to reduce operating expenses, drive growth in revenue and expeditiously resolve any remaining legal matters.

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

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

Capital Resources 

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

	June 30, 2019			December 31, 2018			Change
Current assets	$	2,993,370		$	1,923,353		$	1,070,017
Current liabilities		6,708,392			4,157,005			2,551,387
Working capital	$	(3,715,022	)	$	(2,233,652	)	$	(1,481,370	)

As of June 30, 2019, and December 31, 2018, we had a cash balance of $800,015 and $285,761, respectively.

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Summary of Cash Flows

	For the Six Months Ended June 30,
	2019			2018
Net cash used in operating activities	$	(1,889,854	)	$	(1,623,613	)
Net cash used in investing activities		(647,014	)		(94,871	)
Net cash provided by financing activities		3,099,741			1,294,457

Net cash used in operating activities. Net cash used in operating activities for the six months ended June 30, 2019 was $(1,889,854). This included a net loss of $6,029,393, non-cash charge related to depreciation and amortization of $2,355,977, non-cash charge related to amortization of debt discounts of $519,472,  non-cash charge from loss on issuance of warrants of $787,209, non-cash charge related to provision for doubtful account $104,288, non-cash charge related to share-based compensation of $889,400, non-cash losses (gains) due to changes in fair value of convertible notes, fair value of convertible notes – related party, fair value of warrant liability, fair value of contingent consideration of $142,341, $705,270, $(2,238,145) and $880,050, non-cash gains on reduction of contingent consideration of $100,000, and changes in accounts receivable, deposits, costs in excess of billings, billings in excess of costs, deferred rent, accounts payable and accrued expenses, prepaid expenses, due from related party, and right of use assets and liabilities of $93,677. Net cash used in operating activities for the six months ended June 30, 2018 was $(1,623,613). This included a net loss of $(2,267,025), non-cash charge related to depreciation and amortization of $1,063,278, non-cash charge related to share-based compensation of $1,619,753, non-cash gains due to changes in fair value of convertible notes, fair value of warrant obligations, and fair value of a related party note of $(522,646), $(1,297,840), and $(118,506), respectively, non-cash charge from loss on impairment of goodwill of $664,329, non-cash gain on reduction of obligation pursuant to acquisition of $(557,054), and changes in accounts receivable, deposits, costs in excess of billings, billings in excess of costs, deferred rent, and accounts payable and accrued expenses of $(207,902).

Net cash used in investing activities. Net cash used in investing activities for the six months ended June 30, 2019 was $(647,014), which consisted of capital expenditures of $(505,904), purchase of domain names of $(17,383) and payments pursuant to the Tan Security business acquisition and Security Grade business acquisition of $(123,727). Net cash used in investing activities for the six months ended June 30, 2018 was $(94,871), which consisted of capital expenditures of $(484,838), cash payment pursuant to the Revolutionary asset acquisition of $(58,730), and payments as part of the BioTrackTHC business combination, net of cash acquired in the amount of $448,697.

Net cash provided by financing activities. Net cash provided by financing activities for the six months ended June 30, 2019 was $3,099,741, which resulted from issuance of a promissory note receivable of $(75,000), repayment of notes payable of $(11,322), proceeds and repayment of a promissory note of $(280,000), proceeds from the issuance of common stock of $1,306,313, proceeds from the issuance of convertible note payable of $1,925,000 and repayment of advances from related parties of $(45,250). Net cash provided by financing activities for the six months ended June 30, 2018 was $1,294,457, which resulted from proceeds from the issuance of common stock of $1,320,212, proceeds from notes payable of $33,745, and repayment of advances from related parties of $(59,500).

Off-Balance Sheet Arrangements

None. 

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on April 1, 2019.

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Related Party Transactions

The Company had a loan outstanding from a former Company executive. The loan balance was $0 and $45,250 as of June 30, 2019 and December 31, 2018, respectively.

In March 2016, the Company issued 960,000 shares of restricted common stock to the Related Party Holder per a subscription agreement for total proceeds of $150,000. In conjunction with the subscription agreement, the Company issued a warrant to the Related Party Holder to purchase 1,920,000 restricted shares of the Company’s common stock at $0.16 per share. The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company’s notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company’s notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of June 30, 2019, the warrants granted are not exercisable. 

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

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

As of February 20, 2018, the fair value of the liability was $239,343, however due to termination of the conversion of the note into equity securities, Note Eight will be valued in its principal amount of $125,000 and accordingly the Company recorded a credit regarding the change in fair value of $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $118,506 for the six months ended June 30, 2019 and 2018, respectively. The interest expense associated with Note Eight was $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $2,402 for the six months ended June 30, 2019 and 2018, respectively. Note Eight was paid in full on the Maturity Date.

On March 1, 2019, the Company entered into a $1,500,000 Secured Convertible Promissory Note (“Note Nine”) with a related party entity (the Second Related Party Holder”). A Managing Member of the Second Related Party Holder is also a Director of the Company. The Second Related Party Holder provided the Company with $1,475,000 in cash proceeds, which was received by the Company during the period ended June 30, 2019. The additional $25,000 was retained by the fourth investor for legal bills for the transaction. Note Nine will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Nine is convertible at the election of the fourth investor, in whole or in part, at any time or from time to time, into the Company’s common stock at the lower of $0.90 per share or a 30% discount to the Company’s 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Nine, the Company issued a warrant to the fourth investor to purchase 535,715 shares of the Company’s common stock at $1.40 per share.

The Company evaluated Note Nine in accordance with ASC 480, Distinguishing Liabilities from Equity and determined Note Nine will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2019, the fair value of Note Nine was $2,205,270. Accordingly, the Company recorded a change in fair value of ($2,818,739) and $705,270 related to Note Nine for the three and six months ended June 30, 2019, respectively.

In addition, the company recorded a debt discount relating to the warrants issued in the amount of $1,186,153 based on the residual fair value of the warrants at inception of Note Nine. The additional $25,000 retained by the fourth investor for legal bills for the transaction will be recorded as a debt discount. Debt discounts amortized to interest expense were $301,959 and $401,506 for the three and six months ended June 30, 2019, respectively. The unamortized discount balance at June 30, 2019 was $809,647. On May 31, 2019, the Company issued 52,083 restricted shares of common stock as PIK interest payments in the amount of $46,875. Accrued interest expense associated with Note Nine was $30,822 as of June 30, 2019, which includes PIK interest payable. As of June 30, 2019, the balance of Note Nine, net of debt discount for warrants and legal bills was $1,395,623.

48

On March 1, 2019, in connection with the issuance of Note Nine, the Company issued warrants, of which the value was derived and based off the fair value of Note Nine, to the investor to purchase 535,715 shares of the Company’s common stock at $1.40 per share. Exercise of the purchase rights represented by the warrant may be made, in whole or in part, at any time or times on or after March 1, 2019 and on or before March 1, 2024, by delivery to the Company of the Notice of Exercise.

The Company determined that the warrants associated with Note Nine are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. At inception, March 1, 2019, the fair value of the warrant liability was $1,186,153 while as of June 30, 2019, the fair value of the warrant liability was $471,346. Accordingly, the Company recorded a change in fair value of $(857,730) and $(714,807) during the three and six months ended June 30, 2019, respectively, which is reflected in the unaudited condensed consolidated statements of operations. 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

ITEM 4. Controls and Procedures 

Disclosure Controls and Procedures

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

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that as of June 30, 2019, our disclosure controls and procedures were effective.

49

Management’s Report on Internal Controls Over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our internal controls over financial reporting as of June 30, 2019, the end of the interim period covered by this report established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. The evaluation of our internal controls over financial reporting included a review of the internal control objectives, design, implementation and the effect of the controls and procedures on the information generated for use in this report.

In the course of our evaluation, we sought to identify errors, control problems or acts of fraud and to confirm the appropriate corrective actions, including process improvements, were being undertaken. Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, concluded that the Company did not maintain effective internal control over financial reporting as of the six months ended June 30, 2019 due to the existence of material weaknesses in the internal control over financial reporting described below.

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

Management has determined that we did not maintain effective internal controls over financial reporting as of June 30, 2019 due to the existence of the following material weaknesses identified by management:

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

● Inadequate segregation of duties.

This quarterly report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting because we are a “smaller reporting company.” Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this quarterly report. 

Changes in internal control over financial reporting

During the six months ended June 30, 2019, there was no change in our internal control over financial reporting or in other factors that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

50

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

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

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

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

On March 8, 2017, two former employees filed a lawsuit in the United States District Court for the District of Colorado alleging violations of the Fair Labor Standards Act and the Colorado Wage Act on behalf of themselves and other employees. The plaintiffs seek damages for our alleged failure to compensate them appropriately for the overtime hours they worked as purported “non-exempt” employees. As of June 30, 2019, the claim is currently pending the outcome of certain matters in the Kenney, et al v. Helix TCS, Inc. case.

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

On July 20, 2017 one former employee filed a lawsuit in the United States District Court for the District of Colorado alleging violations of the Fair Labor Standards Act on behalf of themselves and other employees. The plaintiffs seek damages for our alleged failure to compensate them appropriately for the overtime hours they worked as purported “non-exempt” employees. As of June 30, 2019, the claim is currently in the process of discovery.

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

ITEM 1A. Risk Factors

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

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

During the six months ended June 30, 2019, we issued 3,086,893 shares of common stock with proceeds received totaling $1,306,313.

ITEM 3. Defaults upon Senior Securities

None.

ITEM 4. Mine Safety Disclosure

Not applicable.

ITEM 5. Other Information

None. 

51

ITEM 6. Exhibits

Exhibit No.	Description
10.43	Form of Management Consulting Services Agreement by and between the Company and Rose Management Group LLC (incorporated by reference to Exhibit 10.43 of the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on April 18, 2019).
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32.1	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase *
101.DEF	XBRL Taxonomy Extension Definition Linkbase *
101.LAB	XBRL Taxonomy Extension Label Linkbase *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase *

* Filed herewith

# Management contract or compensatory plan.

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:	By:	/s/ Zachary L. Venegas
		Zachary L. Venegas
		Chief Executive Officer (Principal Executive Officer

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

Signature	Title	Date
/s/ Zachary L. Venegas	Chief Executive Officer	August 14, 2019
Zachary L. Venegas*	(Principal Executive Officer)
/s/ Scott Ogur	Chief Financial Officer	August 14, 2019
Scott Ogur	(Principal Financial Officer)
/s/ Paul Hodges	Director	August 14, 2019
Paul Hodges*
/s/ Patrick Vo	Director	August 14, 2019
Patrick Vo*
/s/ Terence Ferraro	Director	August 14, 2019
Terence Ferraro*
/s/ Andrew Schweibold	Director	August 14, 2019
Andrew Schweibold*
/s/ Satyavrat Joshi	Director	August 14, 2019
Satyavrat Joshi*

* By: Scott Ogur, as Attorney in Fact, pursuant to the
Power of Attorney dated August 14, 2019 and filed herewith.

53

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Zachary L. Venegas, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 14, 2019	By:	/s/ Zachary L. Venegas
		Zachary L. Venegas
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott Ogur, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 14, 2019	By:	/s/ Scott Ogur
		Scott Ogur
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Quarterly Report on Form 10-Q of Helix TCS, Inc. (the “Company”) for the period ended June 30, 2019 (the “Report”), as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Zachary L. Venegas, Chief Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: August 14, 2019	By:	/s/ Zachary L. Venegas
		Zachary L. Venegas
		Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Quarterly Report on Form 10-Q of Helix TCS, Inc. (the “Company”) for the period ended June 30, 2019 (the “Report”), as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Scott Ogur, Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: August 14, 2019	By:	/s/ Scott Ogur
		Scott Ogur
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 14, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	Helix TCS, Inc.
Entity Central Index Key	0001611277
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		75,747,718
Entity File Number	000-55722
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	DE

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash	$ 800,015	$ 285,761
Accounts receivable, net	1,640,996	1,184,923
Prepaid expenses and other current assets	540,342	409,800
Costs & earnings in excess of billings	12,017	42,869
Total current assets	2,993,370	1,923,353
Property and equipment, net	545,818	349,518
Intangible assets, net	16,312,706	18,604,078
Goodwill	40,735,366	39,913,559
Deposits and other assets	1,413,493	146,990
Promissory note receivable	75,000
Total assets	62,075,753	60,937,498
Current liabilities:
Accounts payable and accrued liabilities	2,463,136	1,702,713
Advances from related parties		45,250
Billings in excess of costs	126,862	155,192
Deferred rent		2,937
Notes payable, current portion	24,805	24,805
Obligation pursuant to acquisition	75,000	201,667
Convertible notes payable, net of discount	423,700	187,177
Convertible notes payable, net of discount - related party	1,395,623
Due to related party		32,489
Contingent consideration		908,604
Warrant liability	2,199,266	896,171
Total current liabilities	6,708,392	4,157,005
Long-term liabilities:
Notes payable, net of current portion	40,232	51,554
Other long-term liabilities	962,716
Total long-term liabilities	1,002,948	51,554
Total liabilities	7,711,340	4,208,559
Shareholders' equity:
Common stock; par value $0.001; 200,000,000 shares authorized; 75,747,718 shares issued and outstanding as of June 30, 2019; 72,660,825 shares issued and outstanding as of December 31, 2018	75,748	72,660
Additional paid-in capital	86,489,136	82,831,014
Accumulated other comprehensive income	21,648	17,991
Accumulated deficit	(32,236,903)	(26,207,510)
Total shareholders' equity	54,364,413	56,728,939
Total liabilities and shareholders' equity	62,075,753	60,937,498
Preferred Stock (Class A)
Shareholders' equity:
Preferred stock value	1,000	1,000
Total shareholders' equity	1,000	1,000
Preferred Stock (Class B)
Shareholders' equity:
Preferred stock value	13,784	13,784
Total shareholders' equity	$ 13,784	$ 13,784

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	75,747,718	72,660,825
Common stock, shares outstanding	75,747,718	72,660,825
Preferred Stock (Class A)
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,000,000	17,000,000
Preferred stock, shares issued	1,000,000	13,784,201
Preferred stock, shares outstanding	1,000,000	13,784,201
Preferred Stock (Class B)
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,000,000	17,000,000
Preferred stock, shares issued	1,000,000	13,784,201
Preferred stock, shares outstanding	1,000,000	13,784,201

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Security and guarding	$ 1,347,529	$ 1,197,201	$ 2,552,240	$ 2,290,975
Systems installation	174,067	100,699	202,608	135,263
Software	2,377,277	576,142	4,515,132	576,142
Total revenues	3,898,873	1,874,042	7,269,980	3,002,380
Cost of revenue	1,996,699	1,560,387	3,921,918	2,351,092
Gross margin	1,902,174	313,655	3,348,062	651,288
Operating expenses:
Selling, general and administrative	1,170,491	527,999	2,107,369	875,879
Salaries and wages	1,214,969	1,216,082	2,466,546	2,082,402
Professional and legal fees	792,101	268,795	1,480,556	888,554
Depreciation and amortization	1,190,336	864,375	2,355,977	1,063,278
Loss on impairment of Goodwill				664,329
Total operating expenses	4,367,897	2,877,251	8,410,448	5,574,442
Loss from operations	(2,465,723)	(2,563,596)	(5,062,386)	(4,923,154)
Other income (expenses):
Change in fair value of convertible note	845,622	120,630	(142,341)	697,646
Change in fair value of convertible note - related party	2,818,739		(705,270)	118,506
Change in fair value of warrant liability	3,871,101	321,161	2,238,145	1,297,840
Change in fair value of contingent consideration	256,650		(880,050)
Loss on issuance of warrants			(787,209)
Gain on reduction of obligation pursuant to acquisition		290,441		557,054
Interest (expense) income	(514,081)	3,016	(690,282)	(14,917)
Other income (expenses)	7,278,031	735,248	(967,007)	2,656,129
Net income (loss)	4,812,308	(1,828,348)	(6,029,393)	(2,267,025)
Other comprehensive (loss) income:
Changes in foreign currency translation adjustment	(590)		3,657
Total other comprehensive (loss) income	(590)		3,657
Total comprehensive income (loss)	4,811,718	(1,828,348)	(6,025,736)	(2,267,025)
Convertible preferred stock beneficial conversion feature accreted as a deemed dividend		(7,203,689)		(22,202,194)
Net income (loss) attributable to common shareholders	$ 4,811,718	$ (9,032,037)	$ (6,025,736)	$ (24,469,219)
Net income (loss) per share attributable to common shareholders:
Basic	$ 0.06	$ (0.21)	$ (0.08)	$ (0.68)
Diluted	$ (0.03)	$ (0.21)	$ (0.08)	$ (0.68)
Weighted average common shares outstanding:
Basic	75,470,238	42,673,528	74,324,689	35,907,118
Diluted	81,236,678	42,673,528	74,324,689	35,907,118

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Preferred Stock (Class A)	Preferred Stock (Class B)	Total
Balance at Dec. 31, 2017	$ 28,771	$ 18,741,114		$ (18,241,708)	$ 1,000	$ 13,784
Balance, Shares at Dec. 31, 2017	28,771,402				1,000,000	13,784,201
Beneficial conversion feature of Series B convertible preferred stock		22,202,194					$ 22,202,194
Deemed dividend on conversion of Series B convertible preferred stock to common stock		(22,202,194)					(22,202,194)
Issuance of common stock per investment unit agreements	$ 1,467	1,318,532					1,319,999
Issuance of common stock per investment unit agreements, Shares	1,466,666
Issuance of common stock resulting from convertible note PIK interest (paid)	$ 206	174,794					175,000
Issuance of common stock resulting from convertible note PIK interest (paid), Shares	205,974
Reduction in Additional Paid-In Capital due to Security Grade acquisition settlement agreement		(300,840)					(300,840)
Restricted common stock issued as part of BioTrackTHC acquisition	$ 38,185	57,513,848					57,552,033
Restricted common stock issued as part of BioTrackTHC acquisition, Shares	38,184,985
Share-based compensation expense	$ 292	676,461					676,753
Share-based compensation expense, shares	291,750
Issuance of warrants pursuant to consulting agreement		943,000					943,000
Issuance of common stock resulting from exercise of stock options	$ 213						213
Issuance of common stock resulting from exercise of stock options, Shares	212,633
Foreign currency translation
Net income				(2,267,025)			(2,267,025)
Balance at Jun. 30, 2018	$ 69,134	79,066,909		(20,508,733)	$ 1,000	$ 13,784	58,642,094
Balance, Shares at Jun. 30, 2018	69,133,410				1,000,000	13,784,201
Balance at Dec. 31, 2017	$ 28,771	18,741,114		(18,241,708)	$ 1,000	$ 13,784
Balance, Shares at Dec. 31, 2017	28,771,402				1,000,000	13,784,201
Balance at Dec. 31, 2018	$ 72,660	82,831,014	$ 17,991	(26,207,510)	$ 1,000	$ 13,784	56,728,939
Balance, Shares at Dec. 31, 2018	72,660,825				1,000,000	13,784,201
Balance at Mar. 31, 2018	$ 29,857	19,927,689		(18,680,385)	$ 1,000	$ 13,784
Balance, Shares at Mar. 31, 2018	29,857,448				1,000,000	13,784,201
Beneficial conversion feature of Series B convertible preferred stock		7,203,689					7,203,689
Deemed dividend on conversion of Series B convertible preferred stock to common stock		(7,203,689)					(7,203,689)
Issuance of common stock per investment unit agreements	$ 745	669,254					669,999
Issuance of common stock per investment unit agreements, Shares	744,444
Reduction in Additional Paid-In Capital due to Security Grade acquisition settlement agreement		(210,522)					(210,522)
Restricted common stock issued as part of BioTrackTHC acquisition	$ 38,185	57,513,848					57,552,033
Restricted common stock issued as part of BioTrackTHC acquisition, Shares	38,184,985
Share-based compensation expense	$ 134	223,640					223,774
Share-based compensation expense, shares	133,900
Issuance of warrants pursuant to consulting agreement		943,000					943,000
Issuance of common stock resulting from exercise of stock options	$ 213						213
Issuance of common stock resulting from exercise of stock options, Shares	212,633
Foreign currency translation
Net income				(1,828,348)			(1,828,348)
Balance at Jun. 30, 2018	$ 69,134	79,066,909		(20,508,733)	$ 1,000	$ 13,784	58,642,094
Balance, Shares at Jun. 30, 2018	69,133,410				1,000,000	13,784,201
Balance at Dec. 31, 2018	$ 72,660	82,831,014	17,991	(26,207,510)	$ 1,000	$ 13,784	56,728,939
Balance, Shares at Dec. 31, 2018	72,660,825				1,000,000	13,784,201
Issuance of common stock per investment unit agreements	$ 1,422	66,247					67,669
Issuance of common stock per investment unit agreements, Shares	1,421,889
Issuance of common stock resulting from convertible note PIK interest (paid)	$ 156	117,781					117,937
Issuance of common stock resulting from convertible note PIK interest (paid), Shares	155,421
Share-based compensation expense	$ 270	889,130					889,400
Share-based compensation expense, shares	270,000
Issuance of common stock resulting from exercise of stock options	$ 79	26,534					26,613
Issuance of common stock resulting from exercise of stock options, Shares	78,644
Issuance of common stock resulting from cashless exercise of stock options	$ 110	(110)
Issuance of common stock resulting from cashless exercise of stock options, Shares	109,931
Restricted common stock issued as part of Tan Security acquisition	$ 250	709,750					710,000
Restricted common stock issued as part of Tan Security acquisition, Shares	250,000
Issuance of common stock in satisfaction of contingent consideration	$ 733	1,787,921					1,788,654
Issuance of common stock in satisfaction of contingent consideration, Shares	733,300
Issuance of common stock resulting from convertible note interest	$ 68	60,869					60,937
Issuance of common stock resulting from convertible note interest, Shares	67,708
Foreign currency translation			3,657				3,657
Net income				(6,029,393)			(6,029,393)
Balance at Jun. 30, 2019	$ 75,748	86,489,136	21,648	(32,236,903)	$ 1,000	$ 13,784	54,364,413
Balance, Shares at Jun. 30, 2019	75,747,718				1,000,000	13,784,201
Balance at Mar. 31, 2019	$ 74,410	83,357,328	22,238	(37,049,211)	$ 1,000	$ 13,784	46,419,549
Balance, Shares at Mar. 31, 2019	74,410,397				1,000,000	13,784,201
Issuance of common stock per investment unit agreements	$ 167	66,247					66,414
Issuance of common stock per investment unit agreements, Shares	166,667
Share-based compensation expense		485,333					485,333
Issuance of common stock resulting from exercise of stock options	$ 73	21,735					21,808
Issuance of common stock resulting from exercise of stock options, Shares	72,562
Issuance of common stock resulting from cashless exercise of stock options	$ 47	(47)
Issuance of common stock resulting from cashless exercise of stock options, Shares	47,084
Restricted common stock issued as part of Tan Security acquisition	$ 250	709,750					710,000
Restricted common stock issued as part of Tan Security acquisition, Shares	250,000
Issuance of common stock in satisfaction of contingent consideration	$ 733	1,787,921					1,788,654
Issuance of common stock in satisfaction of contingent consideration, Shares	733,300
Issuance of common stock resulting from convertible note interest	$ 68	60,869					60,937
Issuance of common stock resulting from convertible note interest, Shares	67,708
Foreign currency translation			(590)				(590)
Net income				4,812,308			4,812,308
Balance at Jun. 30, 2019	$ 75,748	$ 86,489,136	$ 21,648	$ (32,236,903)	$ 1,000	$ 13,784	$ 54,364,413
Balance, Shares at Jun. 30, 2019	75,747,718				1,000,000	13,784,201

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (6,029,393)	$ (2,267,025)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,355,977	1,063,278
Accretion of debt discounts	519,472
Loss on issuance of warrants	787,209
Provision for doubtful accounts	104,288
Share-based compensation expense	889,400	676,753
Change in fair value of convertible notes, net of discount	142,341	(522,646)
Change in fair value of obligation to issue warrants	(2,238,145)	(1,297,840)
Change in fair value of convertible notes, net of discount - related party	705,270	(1,185,056)
Change in fair value of contingent consideration	880,050
Loss on impairment of goodwill		664,329
Gain on reduction of obligation pursuant to acquisition		(557,054)
Gain on reduction of contingent consideration	(100,000)
Change in operating assets and liabilities:
Accounts receivable	(563,744)	(353,355)
Prepaid expenses	(134,876)
Deposits	26,743	(50,069)
Due from related party	(32,489)
Costs in excess of billings	30,852	31,570
Accounts payable and accrued expenses	718,162	128,645
Other long-term liabilities
Deferred rent	(2,937)	(6,077)
Billings in excess of costs	(28,330)	41,384
Right of use assets and liabilities	80,296
Net cash used in operating activities	(1,889,854)	(1,623,613)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	505,904	(484,838)
Purchase of domain names	(17,383)
Payments for business combination, net of cash acquired	(123,727)	448,697
Payments for asset acquisition		(58,730)
Net cash used in investing activities	(647,014)	(94,871)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances for related parties		(59,500)
Advance for note receivable	(75,000)
Payments pursuant to advances from related parties	(45,250)
Payments pursuant to notes payable	(11,322)
Payments pursuant to a promissory note	(280,000)
Proceeds from notes payable		33,745
Proceeds from the issuance of a promissory note	280,000
Proceeds from the issuance of convertible notes payable	1,925,000
Proceeds from the issuance of common stock	1,306,313	1,320,212
Net cash provided by financing activities	3,099,741	1,294,457
Effect of foreign exchange rate changes on cash	(48,619)
Net change in cash	514,254	(424,027)
Cash, beginning of period	285,761	868,554
Cash, end of period	800,015	444,527
Supplemental disclosure of cash and non-cash transactions:
Conversion of convertible note into common stock	117,937	175,000
Debt discount for warrant liability	(1,542,000)
Equity issued pursuant to asset acquisition	710,000	57,552,033
Security Grade acquisition consideration settlement		(300,840)
PIK interest payment of common stock	60,937
Common stock issued pursuant to consideration as part of acquisition	1,788,654
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets	$ 1,485,511

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Description of Business

6 Months Ended

Jun. 30, 2019

Description of Business [Abstract]

Description of Business

1. Description of Business

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

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

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

The acquisition of Helix was treated as a recapitalization for financial accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and their historical financial statements before the Acquisition Agreement were replaced with the historical financial statements of the Company. The common stock account of the Company continues post-merger, while the retained earnings of the acquiree is eliminated. Furthermore, on April 11, 2016, the Company acquired the assets of Revolutionary Software, LLC ("Revolutionary").

On March 3, 2018, Helix, Inc. and its wholly owned subsidiary, Helix Acquisition Sub, Inc. ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement") with Bio-Tech Medical Software, Inc. ("BioTrackTHC") and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders, pursuant to which Merger Sub merged with and into BioTrackTHC (the "Merger").

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

On August 3, 2018 (the "Engeni Closing Date"), the Company and its wholly owned subsidiary, Engeni Merger Sub, LLC ("Engeni Merger Sub"), entered into an Agreement and Plan of Merger (the "Engeni Merger Agreement") with Engeni LLC ("Engeni US"), Engeni S.A ("Engeni SA"), Scott Zienkewicz, Nicolas Heller and Alberto Pardo Saleme (the Engeni US members), and Scott Zienkewicz, as the representative of the Engeni US members. Pursuant to the Engeni Merger Agreement, Engeni Merger Sub merged with and into Engeni US, with Engeni US surviving the merger as a wholly-owned subsidiary of the Company (the "Engeni Merger").

On the Engeni Closing Date, in connection with closing the Engeni Merger Agreement, the Company issued 366,700 shares of Company common stock to Engeni US members. Furthermore, the Company subsequently issued Engeni US members 733,300 shares of Company common stock on April 2, 2019.

On February 5, 2019, the Company and its wholly owned subsidiary, Merger Sub, entered into an Agreement and Plan of Merger (the "Amercanex Merger Agreement") with Green Tree International, Inc., a corporation incorporated under the laws of the state of Colorado operating under the tradename "Amercanex International Exchange" ("Amercanex"). Pursuant to the Amercanex Merger Agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with and into Amercanex, with Amercanex surviving the merger as a wholly-owned subsidiary of the Company. The Merger is expected to close during the third quarter of 2019.

On April 1, 2019 ("Tan Security Closing Date"), the Company entered into a Membership Interest and Stock Purchase Agreement (the "Tan Security Acquisition Agreement") with Tan's International Security and Tan's International LLC (collectively, "Tan Security"). Pursuant to the Tan Security Acquisition Agreement, the Company purchased all membership interests and capital stock of Tan Security and collectively holds 100% of the interests of Tan Security (the "Tan Security Acquisition").

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Going Concern Uncertainty, Financial Condition and Management's Plans

6 Months Ended

Jun. 30, 2019

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

Going Concern Uncertainty, Financial Condition and Management's Plans

2. Going Concern Uncertainty, Financial Condition and Management's Plans

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

At June 30, 2019, the Company had a working capital deficit of $3,715,022, as compared to a working capital deficit of $2,233,652 at December 31, 2018. The increase of $1,481,370 in the Company's working capital deficit from December 31, 2018 to June 30, 2019 was primarily the result of a non-cash increase in the fair market value of the Company's convertible notes payable, net of discount – related party and an increase in the warrant liability, partially offset by a decrease in contingent consideration.

The Company's future capital requirements for its operations will depend on many factors, including the profitability of its businesses, the number and cash requirements of other acquisition candidates that the Company pursues, and the costs of operations. The Company has been investing in expanding its operation in new states, its security service in Colorado and California, and upgrading the capabilities of BioTrackTHC. The Company's management has taken several actions to ensure that it will have sufficient liquidity to meet its obligations for the next twelve months, including growing and diversifying its revenue streams, selectively reducing expenses, and considering additional funding. Additionally, if the Company's actual revenues are less than forecasted, the Company anticipates that variable expenses will also decline, and the Company's management can implement expense reduction as necessary. The Company is evaluating other measures to further improve its liquidity, including the sale of equity or debt securities. Lastly, the Company may elect to reduce certain related-party and third-party debt by converting such debt into common shares. The Company's management believes that these actions will enable the Company to meet its liquidity requirements through August 16, 2020. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2019 and beyond.  

On May 31, 2019 the Company filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the securities being offered. The Company is working with an investment bank to identify investors in anticipation of raising up to $5 million in new equity capital.

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

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

Principles of Consolidation 

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC ("Helix TCS"), Security Consultants Group, LLC ("Security Consultants"), Boss Security Solutions, Inc. ("Boss Security"), Security Consultants Group Oregon, LLC ("Security Oregon"), Security Grade, BioTrackTHC (since June 1, 2018, Engeni US (since August 3, 2018), and Tan Security (since April 1, 2019).

Use of Estimates

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

Cash  

Cash consists of checking accounts. The Company considers all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be cash equivalents. The Company has no cash equivalents as of June 30, 2019 or December 31, 2018.

Accounts Receivable and Allowance for Doubtful Accounts

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

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

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. Allowance for doubtful accounts was $77,046 and $76,156 at June 30, 2019 and December 31, 2018, respectively.

Long-Lived Assets, Including Definite Lived Intangible Assets

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

Goodwill

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

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

Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset

Accounting for Acquisitions

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

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

Revenue Recognition

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

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

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

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

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

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

Segment Information

FASB ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company.

Asset information by operating segment is not presented since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company's condensed unaudited consolidated financial statements.

Expenses

Cost of Revenues

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

Operating Expenses

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

Other Income (Expense), net

Other income (expense), net consisted of change in fair value of convertible note, change in fair value of convertible note – related party, change in fair value of contingent consideration, change in fair value of warrant liability, loss on issuance of warrants, gain on reduction of obligation pursuant to acquisition and interest (expense) income.

Property and Equipment

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

Contingencies

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

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $178,219 and $34,963 for the three months ended June 30, 2019 and 2018, respectively, and $247,490 and $61,737 for the six months ended June 30, 2019 and 2018, respectively.

Foreign Currency

The local currency is the functional currency for one entity's operations outside the United States. Assets and liabilities of these operations are translated to U.S. dollars at the exchange rate in effect at the end of each period. Income statement accounts are translated at the average exchange rate prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of other comprehensive income within shareholders' equity. Gains and losses from foreign currency transactions are included in net loss for the period.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of consolidated net income (loss) and foreign currency translation adjustments. Foreign currency translation adjustments included in comprehensive income (loss) were not tax-effected as investments in international affiliates are deemed to be permanent.

Distinguishing Liabilities from Equity

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

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

Initial Measurement

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

Subsequent Measurement – Financial instruments classified as liabilities

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

Beneficial Conversion Feature

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

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

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

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

Share-based Compensation

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

The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services are received.

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

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

Fair Value of Financial Instruments

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

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

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

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

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

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

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

Convertible notes payable

The fair value of the Company's convertible notes payable, approximated the carrying value as of June 30, 2019 and December 31, 2018. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2.

Additional Disclosures Regarding Fair Value Measurements

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

Earnings (Loss) per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share ("EPS") on the face of the income statement for all entities with complex capital structures. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury stock method, and convertible debt and convertible securities, using the if-converted method.

For the three months ended June 30, 2018 and the six months ended June 30, 2019 and 2018, potential common shares includable in the computation of fully-diluted per share results are not presented in the condensed consolidated financial statements as their effect would be anti-dilutive. For the three months ended June 30, 2019, dilutive earnings per share are calculated by dividing net income attributable to common shareholders less the change in fair value of warrant liability, the change in fair value of convertible notes, interest expense on convertible notes, and the debt discount amortized on convertible notes. The calculation of diluted EPS excludes 24,571,582 shares for securities which have been deemed to be anti-dilutive.

Earnings per share for the three and six months ended June 30, 2019 and 2018 were calculated as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Numerator
Net income attributable to common shareholders	$	4,811,718		$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Effect of dilutive instruments on net loss		(7,024,580	)		-			-			-
Net income (loss) attributable to common shareholders - diluted	$	(2,212,862	)	$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Denominator
Weighted average shares of common stock outstanding - basic		75,470,238			42,673,528			74,324,689			35,907,118
Dilutive effect of warrants and convertible securities		5,766,440			-			-			-
Weighted average shares of common stock outstanding - diluted		81,236,678			42,673,528			74,324,689			35,907,118
Net income (loss) per share
Basic	$	0.06		$	(0.21	)	$	(0.08	)	$	(0.68	)
Diluted	$	(0.03	)	$	(0.21	)	$	(0.08	)	$	(0.68	)

Reclassifications

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

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-.02, Leases (Topic 842) ("Topic 842") which requires the recognition of right-of-use assets and lease liabilities on the balance sheet. The most prominent of the changes in the standard is the recognition of right-of-use ("ROU") assets and lease liabilities by lessees for those leases classified as operating leases.

The Company adopted the new standard on January 1, 2019 and used the modified retrospective approach with the effective date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company elected certain practical expedients, which among other things, allowed us to carry forward prior conclusions about lease identification and classification.

Adoption of the standard resulted in the balance sheet recognition of additional lease assets and lease liabilities of approximately $1,500,000. The new standard also provides practical expedients for an entity's ongoing accounting. The Company currently has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in separate lease and non-lease components for all our leases. For additional information regarding the Company's leases, see Note 18 in the notes to condensed consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220); Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of the ASU. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company's consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees and applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. ASC 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. This update is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect that this update will have on its financial statements and related disclosures.

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

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Revenue Recognition

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Revenue Recognition

4. Revenue Recognition

Disaggregation of revenue 

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Types of Revenues:
Security and Guarding	$	1,347,529	$	1,197,201	$	2,552,240	$	2,290,975
Systems Installation		174,067		100,699		202,608		135,263
Software		2,377,277		576,142		4,515,132		576,142
Total revenues	$	3,898,873	$	1,874,042	$	7,269,980	$	3,002,380

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

Security and Guarding Revenue

Helix provides armed and unarmed guards, monitoring of security alarms and cameras, as well as armed transportation services. The guards are charged out at an hourly rate, as are the monitoring services, with invoices typically sent to clients shortly after each month-end for the previous month, with revenue being recognized over time. The customer simultaneously receives and consumes benefits provided by the Helix performance. Transportation services are typically invoiced on a per-run basis, with revenue being recognized at a point in time once the service has been completed.

Systems Installation Revenue

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

Software

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

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

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

Performance Obligations

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

Significant Judgments

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

Costs to Obtain or Fulfill Contract

The Company’s costs to fulfill or obtain contracts with customers primarily consist of commissions and legal costs. The Company provides sales team members with commissions at 0-6%. Although sales commissions are incremental in nature and are only incurred when a contract is obtained, there is no up-front commission paid on the satisfactory obtainment of a contract, resulting in no sales commissions being capitalized at June 30, 2019 and December 31, 2018. The Company also incurs legal costs relating to the drafting and negotiating of contracts with select customers. Because legal costs are not incremental in nature and are incurred regardless of whether a contract is ultimately obtained, there were no legal costs capitalized as of June 30, 2019 and December 31, 2018. The Company did not record amortization of costs incurred to obtain the contract or any impairment losses for the period ending June 30, 2019 and 2018.

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Business Combinations

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Business Combinations

5. Business Combinations

Security Grade Acquisition

On June 2, 2017 (the “Security Grade Closing Date”), the Company entered into a Membership Interest Purchase Agreement (the “Security Grade Acquisition Agreement”) in which the Company purchased all issued and outstanding units of Security Grade Protective Services, Ltd. (“Security Grade”), which consisted of 800,000 Class A Units and 200,000 Class B Units. On the Security Grade Closing Date, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the “Initial Stock Options”). Furthermore, provided that, within the first 60 days following the Security Grade Closing Date, no material customer identified in the Security Grade Acquisition Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the Security Grade Closing Date, on the 61st day following the Security Grade Closing Date, the Company shall issue an additional $800,000 in cash and issue 207,427 additional stock options (the “Additional Stock Options”). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Security Grade Acquisition Agreement within the first 60 days following the Security Grade Closing Date, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Security Grade Acquisition Agreement in the 180 days immediately preceding such termination. The Company subsequently issued the 207,427 Additional Stock Options on August 1, 2017 as well as a second cash payment of $800,000 pursuant to the original terms of the Security Grade Acquisition Agreement.

In the first quarter of 2018, the Company notified the selling members of Security Grade of their intent to exercise their right of setoff noted in the Security Grade Acquisition Agreement after discovering misrepresentations made by one of the selling members of Security Grade. The Company has settled with all of the six selling members. As of June 30, 2019 and December 31, 2018, the Company has a liability pursuant to the Security Grade Acquisition Agreement of $0 and $101,667, respectively, payable following the closing.

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

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

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

The Initial Stock Options are included as part of the purchase price. The Company determined the fair value of the contingent consideration to be $916,643 at June 2, 2017 and recorded it as a liability in its unaudited condensed consolidated balance sheet. The Company satisfied their contingent consideration liability during the third quarter of 2017. During the year ended December 31, 2018, the Company reached settlement agreements with all six selling members. As a result of these settlements, 79,486 options previously issued as part of the acquisition were cancelled (see Note 14).

BioTrackTHC Acquisition

On March 3, 2018, the Company and its wholly owned subsidiary, Merger Sub, entered into the Merger Agreement with BioTrackTHC and Terence J. Ferraro, as the representative of the BioTrackTHC shareholders, pursuant to which Merger Sub merged with and into BioTrackTHC. On the BioTrackTHC Closing Date, the Company closed the Merger. In connection with closing the Merger, the Company issued 38,184,985 unregistered shares of Company common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the BioTrackTHC Stock Plan, pursuant to which options exercisable for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders will own 48% of the Company on a fully diluted basis at closing.

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

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

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

Engeni SA Acquisition

On the Engeni Closing Date, the Company and its wholly owned subsidiary, Engeni Merger Sub, entered into the Engeni Merger Agreement with Engeni US, Engeni SA, the members of Engeni US, and Scott Zienkewicz as the representative of the Engeni US members. Pursuant to the Engeni Merger Agreement, Engeni Merger Sub merged with and into Engeni US, with Engeni US surviving the merger as a wholly-owned subsidiary of the Company. On the Engeni Closing Date, in connection with closing the Engeni Merger Agreement, the Company issued 366,700 shares of Company common stock to Engeni US members. Furthermore, the Company may also issue Engeni US members 366,700 and 366,600 shares of Parent common stock upon the achievement of specific objectives. If applicable, the Company will pay Engeni US members the aggregate amount of $100,000, on a pro rata basis, if Engeni SA reaches financial breakeven on or before December 31, 2018, as determined by the Company’s Chief Financial Officer and Scott Zienkewicz.

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

During the first quarter of 2019, it was determined Engeni SA did not reach financial breakeven and therefore the contingent consideration of $100,000 was deemed by the Company not to be payable and was reduced to zero. In accordance with ASC 805-30-35-1, the Company recognized the change in the fair value of contingent consideration subsequent to the acquisition date in general and administrative expenses. The Company’s allocation of the purchase price was calculated as follows:

	As Adjusted
Base Price - Common Stock	$	388,702
Contingent Consideration - Common Stock		777,298
Contingent Consideration - Cash		-
Total Purchase Price	$	1,166,000

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	5,609
Accounts receivable and other assets		30,479
Property, plant and equipment, net		57,830
Software		449,568	3.3
Goodwill		778,552
Total assets acquired	$	1,322,038
Liabilities assumed:
Accounts payable	$	56,038
Total liabilities assumed		56,038
Estimated fair value of net assets acquired	$	1,266,000

The Company determined the fair value of the contingent consideration to be $777,298 at August 3, 2018 and recorded it as a liability in its unaudited condensed consolidated balance sheets. On April 2, 2019, the Company satisfied their contingent consideration liability and issued 733,300 shares of the Company’s common stock to Engeni US members.

Tan’s International Security

On the Tan Security Closing Date, the Company entered into the Tan Security Acquisition Agreement. Pursuant to the Tan Security Acquisition Agreement, Helix purchased all membership interests and capital stock of Tan Security and collectively holds 100% of the interests of Tan Security. The purchase price of $100,000 in cash plus 250,000 shares of the Company’s restricted common stock will be paid to Rocky Tan as follows:

● 250,000 shares of Helix Stock at closing.

● $25,000 at closing

● $25,000 on the 4-month anniversary of the Tan Security Closing Date

● $25,000 on the 8-month anniversary of the Tan Security Closing Date

● $25,000 on the 12-month anniversary of the Tan Security Closing Date

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

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

Base Price – Cash at closing	$	25,000
Base Price – Deferred cash payment (including $25,000 to be made on the 4,8 and 12-month anniversaries of closing)		75,000
Base Price – Common Stock		710,000
Total Purchase Price	$	810,000

Description	Fair Value
Assets acquired:
Cash	$	2,940
Accounts receivable		7,635
Goodwill		821,807
Total assets acquired	$	832,382
Liabilities assumed:
Accounts payable	$	12,526
Other liabilities		9,856
Total liabilities assumed		22,382
Estimated fair value of net assets acquired	$	810,000

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

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

6. Property and Equipment, Net

At June 30, 2019 and December 31, 2018, property and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Furniture and equipment	$	139,782		$	264,659
Software equipment		352,505			-
Vehicles		201,066			202,700
Total		693,353			467,359
Less: Accumulated depreciation		(147,535	)		(117,841	)
Property and equipment, net	$	545,818		$	349,518

Depreciation expense for the three months ended June 30, 2019 and 2018 was $29,509 and $32,893, respectively, and $47,222 and $35,893 for the six months ended June 30, 2019 and 2018, respectively.

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Intangible Assets, Net and Goodwill

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets, Net and Goodwill

7. Intangible Assets, Net and Goodwill

The following table summarizes the Company's intangible assets as of June 30, 2019 and December 31, 2018:

				June 30, 2019
	Estimated Useful Life (Years)	Gross  Carrying Amount		Assets Acquired		Accumulated Amortization			Net Book Value
Database	5	$	93,427	$	-	$	(60,119	)	$	33,308
Trade names and trademarks	5 - 10		591,081		-		(149,063	)		442,018
Web addresses	5		130,000		-		(82,511	)		47,489
Customer list	5		11,459,027		-		(3,101,382	)		8,357,645
Software	4.5		9,771,195		-		(2,356,189	)		7,415,006
Domain Name	5		-		17,383		(143	)		17,240
		$	22,044,730	$	17,383	$	(5,749,407	)	$	16,312,706

				December 31, 2018
	Estimated Useful Life (Years)	Gross Carrying Amount at December 31, 2017		Assets Acquired Pursuant to Business Combination (1) (2)		Accumulated Amortization			Net Book Value
Database	5	$	93,427	$	-	$	(50,858	)	$	42,569
Trade names and trademarks	5 - 10		125,000		466,081		(91,554	)		499,527
Web addresses	5		130,000		-		(69,625	)		60,375
Customer list	5		3,154,578		8,304,449		(1,965,520	)		9,493,507
Software	4.5		-		9,771,195		(1,263,095	)		8,508,100
		$	3,503,005	$	18,541,725	$	(3,440,652	)	$	18,604,078

(1)	On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 5)
(2)	On August 3, 2018, the Company acquired various assets of Engeni (See Note 5)

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $1,160,827 and $476,003 for the three months ended June 30, 2019 and 2018, respectively, and $2,308,755 and $645,579 for the six months ended June 30, 2019 and 2018, respectively.

The following table summarizes the Company's Goodwill as of June 30, 2019 and December 31, 2018:

	Total Goodwill
Balance at December 31, 2017	$	664,329
Impairment of goodwill		(664,329	)
Goodwill attributable to BiotrackTHC acquisition		39,135,007
Goodwill attributable to Engeni acquisition		778,552
Balance at December 31, 2018	$	39,913,559
Goodwill attributable to Tan Security acquisition		821,807
Balance at June 30, 2019	$	40,735,366

During the period ended March 31, 2018, the Company came to a settlement agreement with multiple Security Grade employees resulting from a misrepresentation of revenue and customer list information provided as part of the acquisition. Therefore, the Company considers the settlement to be an indicator for goodwill impairment testing. Accordingly, at March 31, 2018, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off of $664,329 for the three months ended March 31, 2018.

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Costs, Estimated Earnings and Billings

6 Months Ended

Jun. 30, 2019

Costs in Excess of Billings on Uncompleted Contracts or Programs [Abstract]

Costs, Estimated Earnings and Billings

8. Costs, Estimated Earnings and Billings

Costs, estimated earnings and billings on uncompleted contracts are summarized as follows as of June 30, 2019 and December 31, 2018:

	June 30, 2019			December 31, 2018
Costs incurred on uncompleted contracts	$	140,289		$	89,700
Estimated earnings		49,366			50,512
Cost and estimated earnings earned on uncompleted contracts		189,655			140,212
Billings to date		304,500			252,535
Billings in excess of cost		(114,845	)		(112,323	)
Costs in excess of billings	$	12,017		$	42,869
Billings in excess of cost		(126,862	)		(155,192	)
	$	(114,845	)	$	(112,323	)

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Accounts Payable and Accrued Liabilities

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities

9. Accounts Payable and Accrued Liabilities

As of June 30, 2019 and December 31, 2018, accounts payable and accrued liabilities consisted of the following:

	June 30, 2019		December 31, 2018
Accounts payable	$	857,610	$	842,389
Accrued compensation and related expenses		56,332		33,869
Accrued expenses		1,138,368		826,455
Lease obligation - current		410,826		-
Total	$	2,463,136	$	1,702,713

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Convertible Note Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Convertible Note Payable

10. Convertible Note Payable

	June 30, 2019			December 31, 2018
Note Five, 5% interest, convertible promissory note, fixed secured, maturing November 16, 2019	$	-		$	187,177
Note Ten, 25% interest, convertible promissory note, fixed secured, maturing March 1, 2020, net of debt discount for warrants		423,700			-
		423,700			187,177
Less: Current portion		(423,700	)		(187,177	)
Long-term portion	$	-		$	-

On February 13, 2017, the Company entered into a $183,333 10% Fixed Secured Convertible Promissory Note ("Note Five") with an investor (the "First Investor"). The First Investor provided the Company with $166,666 in cash, which was received by the Company during the period ended March 31, 2017. The additional $16,666 was retained by the First Investor for due diligence and legal bills for the transaction.

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

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

On November 16, 2017, the Company amended Note Five (the "First Amendment") with the First Investor. The First Amendment has a maturity date that is six months from November 16, 2017, converts at a 40% discount to the lowest one-day Volume Average Weighted Price ("VWAP") during the 30 trading days preceding such conversion, incurs interest at an annual rate of 5%, and is prepayable at any time at 110% of the unpaid principal and accrued interest balance. At November 16, 2017, the principal amount of Note Five was $281,900.

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

In November 2018, the Company amended Note Five ("Third Amendment") with a second investor. The Third Amendment states that Note Five shall have a maturity of November 16, 2019. The principal amount as of the date of the Third Amendment was $115,136. During March 2019, the remaining principal of $112,305 was converted into 155,421 shares of common stock. The interest expense associated with Note Five was $0 and $5,839 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $7,878 for the six months ended June 30, 2019 and 2018, respectively.

On March 1, 2019, the Company entered into a $450,000 Secured Convertible Promissory Note ("Note Ten") with a third investor. The third investor provided the Company with $450,000 in cash proceeds, which was received by the Company during the period ended June 30, 2019. Note Ten will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Ten is convertible at the election of the third investor, in whole or in part, at any time or from time to time, into the Company's common stock at the lower of $0.90 per share or a 30% discount to the Company's 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Ten, the Company issued a warrant to the third investor to purchase 160,715 shares of the Company's common stock at $1.40 per share.

The Company evaluated Note Ten in accordance with ASC 480, Distinguishing Liabilities from Equity and determined Note Ten will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2019, the fair value of Note Ten was $661,581. Accordingly, the Company recorded a change in fair value of ($845,622) and $211,581 related to Note Ten for the three and six months ended June 30, 2019, respectively.

In addition, the company recorded a debt discount relating to the warrants issued in the amount of $355,847 based on the residual fair value of the warrants themselves at inception of Note Ten. Debt discounts amortized to interest expense were $88,718 and $117,966 for the three and six months ended June 30, 2019, respectively. The unamortized discount balance at June 30, 2019 was $237,881. On May 31, 2019, the Company issued 15,625 restricted shares of common stock as PIK interest repayments in the amount of $14,062. Accrued interest expense associated with Note Ten was $9,247 as of June 30, 2019, which includes PIK interest payable.

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Related Party Transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

11. Related Party Transactions

Advances from Related Parties

The Company had a loan outstanding from a former Company executive. The loan balance was $0 and $45,250 as of June 30, 2019 and December 31, 2018, respectively.

Convertible Note Payable

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

On February 20, 2018, the Company entered into an agreement to amend Note Eight (the "Amendment") with the Related Party Holder. The Company and Holder desired to extend the maturity date of Note Eight to August 20, 2018 (the "Maturity Date"). Note Eight was amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of the Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for the Amendment within 10 business days of the date of the Amendment. The principal amount of Note Eight will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on Note Eight shall be due and payable on the Maturity Date. All provisions related to conversion of Note Eight into equity securities of the Company were terminated as part of the Amendment.

As of February 20, 2018, the fair value of the liability was $239,343, however due to termination of the conversion of the note into equity securities, Note Eight will be valued in its principal amount of $125,000 and accordingly the Company recorded a credit regarding the change in fair value of $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $118,506 for the six months ended June 30, 2019 and 2018, respectively. The interest expense associated with Note Eight was $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $2,402 for the six months ended June 30, 2019 and 2018, respectively. Note Eight was paid in full on the Maturity Date.

On March 1, 2019, the Company entered into a $1,500,000 Secured Convertible Promissory Note ("Note Nine") with a related party entity (the Second Related Party Holder"). A Managing Member of the Second Related Party Holder is also a Director of the Company. The Second Related Party Holder provided the Company with $1,475,000 in cash proceeds, which was received by the Company during the period ended June 30, 2019. The additional $25,000 was retained by the fourth investor for legal bills for the transaction. Note Nine will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Nine is convertible at the election of the fourth investor, in whole or in part, at any time or from time to time, into the Company's common stock at the lower of $0.90 per share or a 30% discount to the Company's 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Nine, the Company issued a warrant to the fourth investor to purchase 535,715 shares of the Company's common stock at $1.40 per share.

The Company evaluated Note Nine in accordance with ASC 480, Distinguishing Liabilities from Equity and determined Note Nine will be accounted for as a liability initially measured at fair value and subsequently at fair value with changes in fair value recognized in earnings. As of June 30, 2019, the fair value of Note Nine was $2,205,270. Accordingly, the Company recorded a change in fair value of ($2,818,739) and $705,270 related to Note Nine for the three and six months ended June 30, 2019, respectively.

In addition, the company recorded a debt discount relating to the warrants issued in the amount of $1,186,153 based on the residual fair value of the warrants at inception of Note Nine. The additional $25,000 retained by the fourth investor for legal bills for the transaction will be recorded as a debt discount. Debt discounts amortized to interest expense were $301,959 and $401,506 for the three and six months ended June 30, 2019, respectively. The unamortized discount balance at June 30, 2019 was $809,647. On May 31, 2019, the Company issued 52,083 restricted shares of common stock as PIK interest repayments in the amount of $46,875. Accrued interest expense associated with Note Nine was $30,822 as of June 30, 2019, which includes PIK interest payable. As of June 30, 2019, the balance of Note Nine, net of debt discount for warrants and legal bills was $1,395,623.

Warrants

In March 2016, the Company issued 960,000 shares of restricted common stock to the Related Party Holder per a subscription agreement for total proceeds of $150,000. In conjunction with the subscription agreement, the Company issued a warrant to the Related Party Holder to purchase 1,920,000 restricted shares of the Company's common stock at $0.16 per share. The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company's notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company's notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of June 30, 2019, the warrants granted are not exercisable. 

On March 1, 2019, in connection with the issuance of Note Nine, the Company issued warrants, of which the value was derived and based off the fair value of Note Nine, to the investor to purchase 535,715 shares of the Company's common stock at $1.40 per share. Exercise of the purchase rights represented by the warrant may be made, in whole or in part, at any time or times on or after March 1, 2019 and on or before March 1, 2024, by delivery to the Company of the Notice of Exercise.

The Company determined that the warrants associated with Note Nine are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. At inception, March 1, 2019, the fair value of the warrant liability was $1,186,153 while as of June 30, 2019, the fair value of the warrant liability was $471,346. Accordingly, the Company recorded a change in fair value of $(857,730) and $(714,807) during the three and six months ended June 30, 2019, respectively, which is reflected in the unaudited condensed consolidated statements of operations. 

Promissory Note

On January 3, 2019, the Company entered into an unsecured promissory note in the amount of $280,000. The unsecured promissory note has a fixed interest rate of 10% and is due and payable on March 31, 2019. On March 2, 2019, the unsecured promissory note was paid off in full.

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Notes Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Notes Payable

12. Notes Payable

Notes payable consisted of the following: 

	June 30, 2019			December 31, 2018
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$	58,910		$	71,284
Loans Payable - Credit Union		6,127			5,075
Less: Current portion of loans payable		(24,805	)		(24,805	)
Long-term portion of loans payable	$	40,232		$	51,554

The interest expense associated with the notes payable was $890 and $720 for the three months ended June 30, 2019 and 2018, respectively, and $2,681 and $1,420 for the six months ended June 30, 2019 and 2018, respectively.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Shareholders' Equity

13. Shareholders' Equity

Common Stock

Subscription Agreements

The table below reflects shares of restricted common stock issued in relation to subscription agreements during the period ended June 30, 2018:

Date of Sale	Number of Shares Sold		Total Proceeds
February 2018		222,222	$	200,000
March 2018		500,000		450,000
April 2018		500,000		450,000
May 2018		244,444		219,999
		1,466,666	$	1,319,999

Other Common Stock Issuances

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

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

In January 2019, the Company issued 20,000 shares of restricted common stock to a consultant per a consulting agreement and recorded shared based compensation expense of $27,400.

In March and June 2019, the Company issued 1,255,222 and 166,667 shares of common stock as part of investment unit purchase agreements (see Note 15).

In March and June 2019, certain option holders exercised their rights under the BioTrackTHC Stock Plan and were issued 62,847 and 47,084 shares of common stock, respectively, for no cash proceeds.

In March and April 2019, certain option holders exercised their rights under the BioTrackTHC Stock Plan and were issued 6,082 and 57,461 shares of common stock for total proceeds of $4,805 and $21,808, respectively.

In April 2019, the Company issued 250,000 shares of common stock as part of the Tan Security acquisition.

In April 2019, a selling shareholder of Security Grade exercised their right to purchase 15,101 shares of the Company's common stock.

In April 2019, the Company issued 733,300 shares of common stock in satisfaction of the Engeni contingent consideration (see Note 5).

In May 2019, the Company issued 15,625 and 52,083 restricted shares of common stock as PIK interest repayments in the amount of $14,062 and $46,875, respectively (see Notes 10 and 11).

Conversion of Convertible Note to Common Stock

On February 15, 2018, March 12, 2018 and March 21, 2018, the holder of a 10% fixed secured convertible promissory note issued by the Company elected its option to partially convert $50,000, $50,000 and $75,000 in principal of the convertible note into 46,066, 63,963, and 95,945 shares of the Company's common stock.

On March 7, 2019 and March 28, 2019, the holder of a 10% fixed secured convertible promissory note issued by the Company elected its option to fully convert $75,882 and $42,055 in principal of the convertible note into 100,000 and 55,421 shares of the Company's common stock.

2017 Omnibus Incentive Plan

The table below reflects shares issued under the 2017 Omnibus Incentive Plan during the period ended June 30, 2019:

Date of Issuance	Number of Shares Issued		Total Share Based Compensation
March 2019		250,000	$	320,000
		250,000	$	320,000

The table below reflects shares issued under the 2017 Omnibus Incentive Plan during the period ended June 30, 2018:

Date of Issuance	Number of Shares Issued		Total Share Based Compensation
January 2018		42,850	$	173,014
March 2018		100,000		250,000
May 2018		133,900		223,774
		276,750	$	646,788

Series B convertible preferred stock

Series B Preferred Stock Purchase Agreement

On May 17, 2017, the Company sold to accredited investors an aggregate of 5,781,426 Series B Preferred Shares for gross proceeds of $1,875,000 and converted a $500,000 Unsecured Convertible Promissory Note into 1,536,658 Series B Preferred Shares. This tranche of Series B Preferred Shares are convertible into 7,318,084 shares of common stock based on the current conversion price, at a purchase price of $0.325 per share. Net proceeds were approximately $1,772,500 after legal and placement agent fees listed below and the satisfaction of the promissory notes discussed in Note 11.

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

The table below reflects the shares issued under the Series B Preferred Purchase Agreement of the initial tranche, Second Series B Purchase Agreement and the various issuances under the Third Series B Purchase Agreement during the year-ended December 31, 2017:

Date of Sale	Number of Shares Sold		Total Proceeds
Initial
May 2017		7,318,084	$	1,875,000
Second
July 2017		1,680,000		840,000
Third
August 2017		369,756		120,000
September 2017		462,195		150,000
October 2017		462,195		150,000
October 2017		1,042,337		557,500
December 2017		2,449,634		795,000
Ending Balance		13,784,201	$	4,487,500

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

Conversion:

Each Series B Preferred Share is convertible at the option of the holder into such number of shares of the Company's common stock equal to the number of Series B Preferred Shares to be converted, multiplied by the Preferred Conversation Rate. The Preferred Conversion Rate shall be the quotient obtained by dividing the Preferred Stock Original Issue Price ($0.3253815) by the Preferred Stock Conversation Price in effect at the time of the conversion (the initial conversion price will be equal to the Preferred Stock Original Issue Price, subject to adjustment in the event of stock splits, stock dividends, and fundamental transactions). Based on the current conversion price, the Series B Preferred Shares are convertible into 13,784,201 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (i) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (ii) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company's Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000).

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

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

Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature exists, as the effective conversion price for the Series B preferred shares at issuance was less than the fair value of the common stock into which the preferred shares are convertible. A beneficial conversion feature based on the intrinsic value at the date of issuances for the Series B preferred shares is scheduled below. For the three and six months ended June 30, 2018, the beneficial conversion amount of $14,998,505 and $22,202,194, respectively was accreted back to the preferred stock as a deemed dividend and charged to additional paid in capital in the absence of earning as the beneficial conversion feature is amortized over time through the earliest conversion date, May 12, 2018. Provided below is a schedule of the issuances of Series B preferred shares and the amount accredited to deemed dividend at June 30, 2018. As of June 30, 2019 and 2018, the beneficial conversion feature was fully amortized.

For the Six Months Ended June 30, 2018
Issuance Date	Beneficial Conversion Feature Term (months)	Number of shares		Fair Value of Beneficial Conversion Feature		Amount accreted as a deemed dividend at December 31, 2017			Amount accreted as a deemed dividend for the Six Months Ended June 30, 2018			Unamortized Beneficial Conversion Feature
May 17, 2017	12		7,318,084	$	25,247,098	$	(15,779,436	)	$	(9,467,661	)	$	-
July 29, 2017	9.5		1,680,000		6,804,000		(3,674,634	)		(3,129,366	)		-
August 29, 2017	8.5		369,756		1,148,263		(556,190	)		(592,073	)		-
September 15, 2017	8		462,195		1,435,329		(648,601	)		(786,728	)		-
October 11, 2017	7		462,195		1,121,036		(426,309	)		(694,727	)		-
October 31, 2017	6.5		1,042,337		1,735,641		(548,570	)		(1,187,071	)		-
December 19, 2017	5		2,449,634		6,921,348		(576,780	)		(6,344,568	)		-
Total			13,784,201	$	44,412,715	$	(22,210,520	)	$	(22,202,194	)	$	-

Dividends, Voting Rights and Liquidity Value:

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

Classification:

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

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Stock Options

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock Options

14. Stock Options

On March 15, 2018 the Company awarded Zachary Venegas two options to purchase a total of 490,000 shares of the Company's common stock at prices ranging from $1.90 to $2.09 per share. These options vested on June 28, 2018 and have expiration dates ranging from March 2023 to March 2028.

As part of the Membership Interest Purchase Agreement entered into between the Company and Security Grade, on June 2, 2017 (see Note 5), the Company granted to the selling Members the option to purchase up to 414,854 shares of the Company's common stock at a price of $0.001 per share. Of the 414,854 options granted, 207,427 were vested at closing and equity classified. The vesting of the remaining 207,427 shares were subject to certain milestones being achieved and was initially recognized as contingent consideration, both a component of purchase price. As a result of the milestones being met during the third quarter of 2017, the remaining 207,427 shares have also vested. The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant.

On March 6, 2018, the Company filed a lawsuit in the United States Court for the District of Colorado alleging violations in previously disclosed representations and warranties by the plaintiff as part of the Acquisition. Following the appointment of a registered Public Company Accounting Oversight Board ("PCAOB") auditor, certain misrepresentations, primarily surrounding the misclassification of certain revenues as being recurring, were discovered, artificially inflating the price of the membership interest in Security Grade. As a result of certain settlements with the selling shareholder, as of June 30, 2018, 70,151 options previously issued as part of the acquisition were cancelled. Subsequently, as of December 31, 2018, the remaining settlements with the selling shareholders were settled and a total of 79,486 options previously issued as part of the acquisition were cancelled.

On February 6, 2019 the Company awarded an executive an option to purchase a total of 100,000 shares of the Company's common stock at an exercise price $1.51 per share. These options vested on May 6, 2019 and have an expiration date of February 6, 2024.

On March 19, 2019 the Company awarded the Chief Financial Officer, two options to purchase a total of 300,000 shares of the Company's common stock at prices ranging from $2.35 to $2.59 per share. These options shall vest over a three-year period from March 2020 to March 2022 and have expiration dates ranging from March 2024 to March 2029.

On March 19, 2019 the Company awarded the Chief Executive Officer, two options to purchase a total of 500,000 shares of the Company's common stock at prices ranging from $2.35 to $2.59 per share. These options shall vest over a three-year period from March 2020 to March 2022 and have expiration dates ranging from March 2024 to March 2029.

On May 2, 2019, the Company awarded an investor an option to purchase a total of 125,000 shares of the Company's common stock at an exercise price of $2.03 per share. 62,500 of the options shall vest immediately and 62,500 of the options shall vest on August 2, 2019 provided the marketing agreement between the Company and grantee has not been terminated. These options shall expire on May 1, 2024.

In May and June 2019, the Company awarded five employees, an option to purchase a total of 50,000, 40,000, 50,000, 50,000, and 30,000 shares of the Company's common stock at prices ranging from $1.05 to $2.03 per share. These options shall vest over a period ranging from September 2019 to June 2020 and have expiration dates ranging from May 2024 to June 2024.

Stock option activity for the period ended June 30, 2019 is as follows:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2019		8,730,956		$	0.671		2.44
Granted		1,245,000		$	2.106		7.06
Exercised		(188,575	)	$	0.261		1.08
Forfeited and expired
Outstanding at June 30, 2019		9,787,381		$	0.862		2.98
Vested options at June 30, 2019		9,315,418		$	0.587		2.01

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Warrant Liability

6 Months Ended

Jun. 30, 2019

Warrants and Rights Note Disclosure [Abstract]

Warrant Liability

15. Warrant Liability

On March 1, 2019, in connection with the issuance of Note Ten, the Company issued warrants, of which the value was derived and based off the fair value of Note Ten, to the investor to purchase 160,715 shares of the Company's common stock at $1.40 per share. Exercise of the purchase rights represented by the warrant may be made, in whole or in part, at any time or times on or after March 1, 2019 and on or before March 1, 2024, by delivery to the Company of the Notice of Exercise.

The Company determined that the warrants associated with Note Ten are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with ASC 480, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. At inception, March 1, 2019, the fair value of the warrant liability was $355,847 while as of June 30, 2019, the fair value of the warrant liability was $141,404. Accordingly, the Company recorded a change in fair value of the warrant liability of $(257,320) and $(214,443) related to Note Ten for the three and six months ended June 30, 2019, respectively.

On January 10, 2019, the Company entered into an Investment Unit Purchase Agreement (the "First Investment Agreement") to issue and sell investment units to an investor, in which the investment units consist of one share of the common stock of the Company, and a warrant exercisable for one half share of common stock of the Company at an Exercise Price of $1.25 per share for cash at a price per investment unit of $0.90.

On March 5, 2019, the Company sold an aggregate of 1,255,222 units of the Company's securities to an investor at a purchase price of $0.90 per unit for total proceeds of $1,129,700. In connection with the First Investment Agreement, the investor is entitled to purchase from the Company, at the Exercise Price, at any time on or after 90 days from the issuance date, 627,611 shares of the Company's common stock (the "March Warrant Shares").

The Company determined that the warrants are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations.

The fair value of the March Warrant Shares at issuance on January 10, 2019 is in excess of the proceeds received, the warrant liability is required to be recorded at fair value with the excess of the fair value over the proceeds received recognized as a loss in earnings. The gross proceeds from the 1,255,222 investment units at $0.90 was $1,129,700.  The fair value of the March Warrant Shares at issuance was $1,717,506. The amount to be recognized as a loss in earnings is calculated as follows:

Proceeds from January investment units	$	1,129,700
Par value of common stock issues	$	(1,255	)
Fair value of warrants	$	(1,717,506	)
Loss on issuance of warrants (January 10, 2019 issuance)	$	(589,061	)
Loss on issuance of warrants (March 11, 2019 issuance)	$	(198,148	)
Total loss on issuance of warrants	$	(787,209	)

As of June 30, 2019, the fair value of the warrant liability was $538,847 and the Company recorded a change in fair value of the warrant liability of $(1,046,606) and $(1,178,659) for the three and six months ended June 30, 2019, respectively.

On March 11, 2019, the Company issued warrants to an investment bank to purchase a total of 100,000 restricted shares of the Company's common stock at a per share purchase price of $0.90. The warrants are exercisable at any time six months after the issuance date within three years of issuance.

The Company determined that the warrants are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. The Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the condensed consolidated balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the condensed consolidated statement of operations. At inception, March 11, 2019, the fair value of the warrant liability was $198,148 while as of June 30, 2019, the fair value of the warrant liability was $82,162. Accordingly, the Company recorded a change in fair value of the warrant liability of $(168,380) and $(115,986) related to the warrants for the three and six months ended June 30, 2019, respectively.

On June 14, 2019, the Company entered into another Investment Unit Purchase Agreement (the "Second Investment Agreement") to issue and sell investment units to an investor (the "investor"), in which the investment units consist of one share of the common stock of the Company, and a warrant exercisable for one half share of common stock of the Company at an exercise price of $1.25 per share for cash at a price per investment unit of $0.90.

On June 24, 2019, the Company sold an aggregate of 166,667 units of the Company's securities to an investor at a purchase price of $0.90 per unit for total proceeds of $150,000. In connection with the Second Investment Agreement, the investor is entitled to purchase from the Company, at the exercise price, at any time on or after 90 days from the issuance date, 83,333 shares of the Company's common stock (the "June Warrant Shares").

The gross proceeds from the 166,667 investment units at $0.90 was $150,000.  The fair value of the June Warrant Shares at issuance was $83,586 while as of June 30, 2019, the fair value of the warrant liability was $73,073. Accordingly, the Company recorded a change in fair value of the warrant liability of $10,513 related to the warrants for the three and six months ended June 30, 2019.

A summary of warrant activity is as follows:

For the Six Months Ended June 30, 2019
	Warrant  Shares		Weighted Average Exercise Price
Balance at January 1, 2019		3,418,184	$	0.23
Warrants granted		1,507,374	$	1.23
Balance at June 30, 2019		4,925,558	$	0.55

The fair value of the Company's warrant liability was calculated using the Black-Scholes model and the following assumptions:

	As of June 30, 2019			As of December 31, 2018
Fair value of company's common stock	$	1.06		$	0.90
Dividend yield		0	%		0	%
Expected volatility		135% - 140%			175.0	%
Risk Free interest rate		1.72% - 2.56%			2.49	%
Expected life (years)		3.19			1.65
Fair value of financial instruments - warrants	$	2,199,266		$	896,171

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

	Amount
Balance as of January 1, 2019	$	896,171
Fair value of warrants issued		3,541,240
Change in fair value of liability to issue warrants		(2,238,145	)
Balance as of June 30, 2019	$	2,199,266

	Amount
Balance as of April 1, 2019	$	5,986,781
Fair value of warrants issued		83,586
Change in fair value of liability to issue warrants		(3,871,101	)
Balance as of June 30, 2019	$	2,199,266

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

16. Stock-Based Compensation

2017 Omnibus Incentive Plan

The Company's 2017 Omnibus Incentive Plan (the "2017 Plan") was adopted by our Board of Directors and a majority of our voting securities on October 17, 2017. The 2017 Plan permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and dividend equivalent rights to eligible employees, directors and consultants. We grant options to purchase shares of common stock under the 2017 Plan at no less than the fair value of the underlying common stock as of the date of grant. Options granted under the Plan have a maximum term of ten years. Under the Plan, a total of 5,000,000 shares of common stock are reserved for issuance, of which options to purchase 1,735,000 and 490,000 shares of common stock and 764,945 and 514,945 shares of common stock were granted as of June 30, 2019 and December 31, 2018, respectively.

Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan

On October 22, 2014, BioTrackTHC approved and adopted the BioTrackTHC Stock Plan. The BioTrackTHC Stock Plan set aside and reserved 600,000 shares of BioTrackTHC's common stock for grant and issuance in accordance with its terms and conditions. Persons eligible to receive awards from the BioTrackTHC Stock Plan include employees (including officers and directors) of BioTrackTHC or its affiliates and consultants who provide significant services to BioTrackTHC or its affiliates (the "Grantees"). The BioTrackTHC Stock Plan permits BioTrackTHC to issue to Grantees qualified and/or non-qualified options to purchase BioTrackTHC's common stock, restricted common stock, performance units, and performance shares. The term of each award under the BioTrackTHC Stock Plan shall be no more than ten years from the date of grant thereof. BioTrackTHC's Board of Directors or a committee designated by the Board of Directors is responsible for administration of the BioTrackTHC Stock Plan and has the sole discretion to determine which Grantees will be granted awards and the terms and conditions of the awards granted.

BioTrackTHC Management Awards

On September 1, 2015 and November 1, 2015, BioTrackTHC's Board approved individual employee option grants (the "Executive Grants") for three executives (the "Executives"). Pursuant to the Executive Grants, the Executives were each granted stock options to purchase 146,507 shares (totaling 439,521 shares) of BioTrackTHC's common stock (the "Option") at an exercise price equal to approximately $7.67. The options vest as to 25% of the shares subject to the Options, one year after the date of grant and then in equal quarterly installments for the three years thereafter, subject to the Executive's continued employment with BioTrackTHC (see Notes 1 and 5).

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company's net deferred income tax assets for the six months ended June 30, 2019 and 2018 consist of income tax loss carryforwards. These amounts are available for carryforward for use in offsetting taxable income of future years through 2035. Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carry-forward period. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Due to the Company's history of operating losses, these deferred tax assets arising from the future tax benefits are currently not likely to be realized and are thus reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes. 

For the six months ended June 30, 2019 and 2018, the Company has a net operating loss carry forward of approximately $15,098,000 and $8,365,000, respectively. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382. The Company applied a 100% valuation reserve against the deferred tax benefit as the realization of the benefit is not certain.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

18. Commitments and Contingencies

Under Topic 842, operating lease expense is generally recognized evenly on a straight-line basis. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to five years. The lease term represents the period up to the early termination date unless it is reasonably certain that the Company will not exercise the early termination option. Certain leases include rental payments that are adjusted periodically based on changes in consumer price and other indices.

Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines the lease and non-lease components in determining the lease liabilities and ROU assets.

Activity related to the Company's leases was as follows:

	Six Months Ended June 30, 2019
Operating lease expense	$	297,566
Cash paid for amounts included in the measurement of operating lease liabilities	$	150,696
ROU assets obtained in exchange for operating lease obligations	$	1,499,752

 The Company's lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The Company used the incremental borrowing rate on December 31, 2018 for all leases that commenced prior to that date.

ROU lease assets and lease liabilities for the Company's operating leases were recorded in the condensed consolidated balance sheet as follows:

	As of June 30, 2019
Other assets	$	1,293,245
Accounts payable and accrued liabilities	$	410,826
Other long-term liabilities		962,716
Total lease liabilities	$	1,373,542
Weighted average remaining lease term (in years)		3.05
Weighted average discount rate		6.00	%

Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of June 30, 2019, for the following five fiscal years and thereafter were as follows:

	As of June 30, 2019
2019 - Remaining		238,684
2020		393,413
2021		248,223
2022		195,144
2023		200,944
Thereafter		205,434
Total future minimum lease payments	$	1,481,842
Less imputed interest		(108,300	)
Total	$	1,373,542

As of June 30, 2019, the Company had additional operating lease obligations for a lease with a future effective date of approximately $600,000. This operating lease will commence during the first quarter of fiscal 2022 with a lease term of three years.

As of December 31, 2018, future minimum lease payments, as defined under the previous lease accounting guidance of ASC Topic 840, under noncancelable operating leases for the following five fiscal years and thereafter were as follows:

	Operating leases
2019	$	473,495
2020		420,291
2021		275,223
2022		198,144
2023		199,144
Thereafter		205,135
Total lease payments	$	1,771,432

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Segment Results

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Results

19. Segment Results

FASB ASC 280-10-50 requires use of the "management approach" model for segment reporting. The management approach is based on the way a company's management organized segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision–making group is composed of the Chief Executive Officer. The Company operates in three segments, Security and guarding, Systems installation and Software.

Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company's unaudited condensed consolidated financial statements.

The following represents selected information for the Company's reportable segments:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Security and guarding
Revenue	$	1,347,529		$	1,197,201		$	2,552,240		$	2,290,975
Cost of revenue		797,944			1,273,693			1,738,530			2,064,398
Gross margin		549,585			(76,492	)		813,710			226,577
Total operating expenses		1,903,371			2,455,685			3,637,078			5,152,876
Loss from operations		(1,353,786	)		(2,532,177	)		(2,823,368	)		(4,926,299	)
Total other income (expense)		7,265,540			735,239			(979,410	)		2,656,120
Total net income (loss)	$	5,911,754		$	(1,796,938	)	$	(3,802,778	)	$	(2,270,179	)
Systems installation
Revenue	$	174,067		$	100,699		$	202,608		$	135,263
Cost of revenue		337,852			-			499,610			-
Gross margin		(163,785	)		100,699			(297,002	)		135,263
Total operating expenses		154,822			-			187,453			-
Loss from operations		(318,607	)		100,699			(484,455	)		135,263
Total other income		513			-			433			-
Total net (loss) income	$	(318,094	)	$	100,699		$	(484,022	)	$	135,263
Software
Revenue	$	2,377,277		$	576,142		$	4,515,132		$	576,142
Cost of revenue		860,903			286,694			1,683,778			286,694
Gross margin		1,516,374			289,448			2,831,354			289,448
Total operating expenses		2,309,704			421,566			4,585,917			421,566
Loss from operations		(793,330	)		(132,118	)		(1,754,563	)		(132,118	)
Total other income		11,978			9			11,970			9
Total net loss	$	(781,352	)	$	(132,109	)	$	(1,742,593	)	$	(132,109	)

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

20. Subsequent Events

On July 29, 2019, the Company entered into an unsecured promissory note in the amount of $300,000. The unsecured promissory note has a fixed interest rate of 12% per annum and is due and payable upon the maturity date of January 29, 2020. 

In August 2019, the Company paid $25,000 in cash as part of the original purchase price of Tan Security pursuant to the original terms of the Tan Security Acquisition Agreement.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation 

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Helix TCS, LLC (“Helix TCS”), Security Consultants Group, LLC (“Security Consultants”), Boss Security Solutions, Inc. (“Boss Security”), Security Consultants Group Oregon, LLC (“Security Oregon”), Security Grade, BioTrackTHC (since June 1, 2018, Engeni US (since August 3, 2018), and Tan Security (since April 1, 2019).

Use of Estimates

Use of Estimates

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

Cash

Cash  

Cash consists of checking accounts. The Company considers all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be cash equivalents. The Company has no cash equivalents as of June 30, 2019 or December 31, 2018.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

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

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

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. Allowance for doubtful accounts was $77,046 and $76,156 at June 30, 2019 and December 31, 2018, respectively.

Long-Lived Assets, Including Definite Lived Intangible Assets

Long-Lived Assets, Including Definite Lived Intangible Assets

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

Goodwill

Goodwill

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

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

Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset

Accounting for Acquisitions

Accounting for Acquisitions

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

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

Revenue Recognition

Revenue Recognition

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

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

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

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

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

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

Segment Information

Segment Information

FASB ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company.

Asset information by operating segment is not presented since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company's condensed unaudited consolidated financial statements.

Expenses

Expenses

Cost of Revenues

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

Operating Expenses

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

Other Income (Expense), net

Other income (expense), net consisted of change in fair value of convertible note, change in fair value of convertible note – related party, change in fair value of contingent consideration, change in fair value of warrant liability, loss on issuance of warrants, gain on reduction of obligation pursuant to acquisition and interest (expense) income.

Property and Equipment

Property and Equipment

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

Contingencies

Contingencies

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

Advertising

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $178,219 and $34,963 for the three months ended June 30, 2019 and 2018, respectively, and $247,490 and $61,737 for the six months ended June 30, 2019 and 2018, respectively.

Foreign Currency

Foreign Currency

The local currency is the functional currency for one entity's operations outside the United States. Assets and liabilities of these operations are translated to U.S. dollars at the exchange rate in effect at the end of each period. Income statement accounts are translated at the average exchange rate prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of other comprehensive income within shareholders' equity. Gains and losses from foreign currency transactions are included in net loss for the period.

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) consists of consolidated net income (loss) and foreign currency translation adjustments. Foreign currency translation adjustments included in comprehensive income (loss) were not tax-effected as investments in international affiliates are deemed to be permanent.

Distinguishing Liabilities from Equity

Distinguishing Liabilities from Equity

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

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

Initial Measurement

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

Subsequent Measurement – Financial instruments classified as liabilities

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

Beneficial Conversion Feature

Beneficial Conversion Feature

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

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

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

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

Share-based Compensation

Share-based Compensation

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

The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services are received.

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

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

Fair Value of Financial Instruments

Fair Value of Financial Instruments

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

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

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

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

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

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

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

Convertible notes payable

The fair value of the Company's convertible notes payable, approximated the carrying value as of June 30, 2019 and December 31, 2018. Factors that the Company considered when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be considered as Level 2.

Additional Disclosures Regarding Fair Value Measurements

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

Earnings (Loss) per Share

Earnings (Loss) per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share ("EPS") on the face of the income statement for all entities with complex capital structures. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury stock method, and convertible debt and convertible securities, using the if-converted method.

For the three months ended June 30, 2018 and the six months ended June 30, 2019 and 2018, potential common shares includable in the computation of fully-diluted per share results are not presented in the condensed consolidated financial statements as their effect would be anti-dilutive. For the three months ended June 30, 2019, dilutive earnings per share are calculated by dividing net income attributable to common shareholders less the change in fair value of warrant liability, the change in fair value of convertible notes, interest expense on convertible notes, and the debt discount amortized on convertible notes. The calculation of diluted EPS excludes 24,571,582 shares for securities which have been deemed to be anti-dilutive.

Earnings per share for the three and six months ended June 30, 2019 and 2018 were calculated as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Numerator
Net income attributable to common shareholders	$	4,811,718		$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Effect of dilutive instruments on net loss		(7,024,580	)		-			-			-
Net income (loss) attributable to common shareholders - diluted	$	(2,212,862	)	$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Denominator
Weighted average shares of common stock outstanding - basic		75,470,238			42,673,528			74,324,689			35,907,118
Dilutive effect of warrants and convertible securities		5,766,440			-			-			-
Weighted average shares of common stock outstanding - diluted		81,236,678			42,673,528			74,324,689			35,907,118
Net income (loss) per share
Basic	$	0.06		$	(0.21	)	$	(0.08	)	$	(0.68	)
Diluted	$	(0.03	)	$	(0.21	)	$	(0.08	)	$	(0.68	)

Reclassifications

Reclassifications

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

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-.02, Leases (Topic 842) (“Topic 842”) which requires the recognition of right-of-use assets and lease liabilities on the balance sheet. The most prominent of the changes in the standard is the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases.

The Company adopted the new standard on January 1, 2019 and used the modified retrospective approach with the effective date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company elected certain practical expedients, which among other things, allowed us to carry forward prior conclusions about lease identification and classification.

Adoption of the standard resulted in the balance sheet recognition of additional lease assets and lease liabilities of approximately $1,500,000. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company currently has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in separate lease and non-lease components for all our leases. For additional information regarding the Company’s leases, see Note 18 in the notes to condensed consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220); Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of the ASU. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees and applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. ASC 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. This update is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect that this update will have on its financial statements and related disclosures.

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

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of anti-dilutive shares of common stock outstanding

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Numerator
Net income attributable to common shareholders	$	4,811,718		$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Effect of dilutive instruments on net loss		(7,024,580	)		-			-			-
Net income (loss) attributable to common shareholders - diluted	$	(2,212,862	)	$	(9,032,037	)	$	(6,025,736	)	$	(24,469,219	)
Denominator
Weighted average shares of common stock outstanding - basic		75,470,238			42,673,528			74,324,689			35,907,118
Dilutive effect of warrants and convertible securities		5,766,440			-			-			-
Weighted average shares of common stock outstanding - diluted		81,236,678			42,673,528			74,324,689			35,907,118
Net income (loss) per share
Basic	$	0.06		$	(0.21	)	$	(0.08	)	$	(0.68	)
Diluted	$	(0.03	)	$	(0.21	)	$	(0.08	)	$	(0.68	)

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Schedule of disaggregation of revenue

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Types of Revenues:
Security and Guarding	$	1,347,529	$	1,197,201	$	2,552,240	$	2,290,975
Systems Installation		174,067		100,699		202,608		135,263
Software		2,377,277		576,142		4,515,132		576,142
Total revenues	$	3,898,873	$	1,874,042	$	7,269,980	$	3,002,380

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Business Combinations (Tables)

6 Months Ended

Jun. 30, 2019

Security Grade Acquisition [Member]

Business Acquisition [Line Items]

Schedule of allocation of the purchase price

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

Schedule of assets acquired and liabilities assumed

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

BioTrackTHC Acquisition [Member]

Business Acquisition [Line Items]

Schedule of allocation of the purchase price

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

Schedule of assets acquired and liabilities assumed

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

Engeni SA Acquisition [Member]

Business Acquisition [Line Items]

Schedule of allocation of the purchase price

	As Adjusted
Base Price - Common Stock	$	388,702
Contingent Consideration - Common Stock		777,298
Contingent Consideration - Cash		-
Total Purchase Price	$	1,166,000

Schedule of assets acquired and liabilities assumed

			Weighted Average Useful Life
Description	Fair Value		(in years)
Assets acquired:
Cash	$	5,609
Accounts receivable and other assets		30,479
Property, plant and equipment, net		57,830
Software		449,568	3.3
Goodwill		778,552
Total assets acquired	$	1,322,038
Liabilities assumed:
Accounts payable	$	56,038
Total liabilities assumed		56,038
Estimated fair value of net assets acquired	$	1,266,000

Tan's International Security [Member]

Business Acquisition [Line Items]

Schedule of allocation of the purchase price

Base Price – Cash at closing	$	25,000
Base Price – Deferred cash payment (including $25,000 to be made on the 4,8 and 12-month anniversaries of closing)		75,000
Base Price – Common Stock		710,000
Total Purchase Price	$	810,000

Schedule of assets acquired and liabilities assumed

Description	Fair Value
Assets acquired:
Cash	$	2,940
Accounts receivable		7,635
Goodwill		821,807
Total assets acquired	$	832,382
Liabilities assumed:
Accounts payable	$	12,526
Other liabilities		9,856
Total liabilities assumed		22,382
Estimated fair value of net assets acquired	$	810,000

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Property and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

	June 30, 2019			December 31, 2018
Furniture and equipment	$	139,782		$	264,659
Software equipment		352,505			-
Vehicles		201,066			202,700
Total		693,353			467,359
Less: Accumulated depreciation		(147,535	)		(117,841	)
Property and equipment, net	$	545,818		$	349,518

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Intangible Assets, Net and Goodwill (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

				June 30, 2019
	Estimated Useful Life (Years)	Gross  Carrying Amount		Assets Acquired		Accumulated Amortization			Net Book Value
Database	5	$	93,427	$	-	$	(60,119	)	$	33,308
Trade names and trademarks	5 - 10		591,081		-		(149,063	)		442,018
Web addresses	5		130,000		-		(82,511	)		47,489
Customer list	5		11,459,027		-		(3,101,382	)		8,357,645
Software	4.5		9,771,195		-		(2,356,189	)		7,415,006
Domain Name	5		-		17,383		(143	)		17,240
		$	22,044,730	$	17,383	$	(5,749,407	)	$	16,312,706

				December 31, 2018
	Estimated Useful Life (Years)	Gross Carrying Amount at December 31, 2017		Assets Acquired Pursuant to Business Combination (1) (2)		Accumulated Amortization			Net Book Value
Database	5	$	93,427	$	-	$	(50,858	)	$	42,569
Trade names and trademarks	5 - 10		125,000		466,081		(91,554	)		499,527
Web addresses	5		130,000		-		(69,625	)		60,375
Customer list	5		3,154,578		8,304,449		(1,965,520	)		9,493,507
Software	4.5		-		9,771,195		(1,263,095	)		8,508,100
		$	3,503,005	$	18,541,725	$	(3,440,652	)	$	18,604,078

(1)	On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 5)
(2)	On August 3, 2018, the Company acquired various assets of Engeni (See Note 5)

Schedule of goodwill

	Total Goodwill
Balance at December 31, 2017	$	664,329
Impairment of goodwill		(664,329	)
Goodwill attributable to BiotrackTHC acquisition		39,135,007
Goodwill attributable to Engeni acquisition		778,552
Balance at December 31, 2018	$	39,913,559
Goodwill attributable to Tan Security acquisition		821,807
Balance at June 30, 2019	$	40,735,366

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Costs, Estimated Earnings and Billings (Tables)

6 Months Ended

Jun. 30, 2019

Costs in Excess of Billings on Uncompleted Contracts or Programs [Abstract]

Schedule of costs, estimated earnings and billings on uncompleted contracts

	June 30, 2019			December 31, 2018
Costs incurred on uncompleted contracts	$	140,289		$	89,700
Estimated earnings		49,366			50,512
Cost and estimated earnings earned on uncompleted contracts		189,655			140,212
Billings to date		304,500			252,535
Billings in excess of cost		(114,845	)		(112,323	)
Costs in excess of billings	$	12,017		$	42,869
Billings in excess of cost		(126,862	)		(155,192	)
	$	(114,845	)	$	(112,323	)

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Accounts Payable and Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued liabilities

	June 30, 2019		December 31, 2018
Accounts payable	$	857,610	$	842,389
Accrued compensation and related expenses		56,332		33,869
Accrued expenses		1,138,368		826,455
Lease obligation - current		410,826		-
Total	$	2,463,136	$	1,702,713

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Convertible Note Payable (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of convertible note payable

	June 30, 2019			December 31, 2018
Note Five, 5% interest, convertible promissory note, fixed secured, maturing November 16, 2019	$	-		$	187,177
Note Ten, 25% interest, convertible promissory note, fixed secured, maturing March 1, 2020, net of debt discount for warrants		423,700			-
		423,700			187,177
Less: Current portion		(423,700	)		(187,177	)
Long-term portion	$	-		$	-

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of notes payable

	June 30, 2019			December 31, 2018
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$	58,910		$	71,284
Loans Payable - Credit Union		6,127			5,075
Less: Current portion of loans payable		(24,805	)		(24,805	)
Long-term portion of loans payable	$	40,232		$	51,554

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of restricted common stock issued in relation to subscription agreement

Date of Sale	Number of Shares Sold		Total Proceeds
February 2018		222,222	$	200,000
March 2018		500,000		450,000
April 2018		500,000		450,000
May 2018		244,444		219,999
		1,466,666	$	1,319,999

Schedule of number of shares issued under 2017 omnibus incentive plan

Date of Issuance	Number of Shares Issued		Total Share Based Compensation
March 2019		250,000	$	320,000
		250,000	$	320,000

Date of Issuance	Number of Shares Issued		Total Share Based Compensation
January 2018		42,850	$	173,014
March 2018		100,000		250,000
May 2018		133,900		223,774
		276,750	$	646,788

Schedule of shares issued under series B preferred purchase agreement

Date of Sale	Number of Shares Sold		Total Proceeds
Initial
May 2017		7,318,084	$	1,875,000
Second
July 2017		1,680,000		840,000
Third
August 2017		369,756		120,000
September 2017		462,195		150,000
October 2017		462,195		150,000
October 2017		1,042,337		557,500
December 2017		2,449,634		795,000
Ending Balance		13,784,201	$	4,487,500

Schedule of the issuances of Series B preferred shares beneficial conversion feature

For the Six Months Ended June 30, 2018
Issuance Date	Beneficial Conversion Feature Term (months)	Number of shares		Fair Value of Beneficial Conversion Feature		Amount accreted as a deemed dividend at December 31, 2017			Amount accreted as a deemed dividend for the Six Months Ended June 30, 2018			Unamortized Beneficial Conversion Feature
May 17, 2017	12		7,318,084	$	25,247,098	$	(15,779,436	)	$	(9,467,661	)	$	-
July 29, 2017	9.5		1,680,000		6,804,000		(3,674,634	)		(3,129,366	)		-
August 29, 2017	8.5		369,756		1,148,263		(556,190	)		(592,073	)		-
September 15, 2017	8		462,195		1,435,329		(648,601	)		(786,728	)		-
October 11, 2017	7		462,195		1,121,036		(426,309	)		(694,727	)		-
October 31, 2017	6.5		1,042,337		1,735,641		(548,570	)		(1,187,071	)		-
December 19, 2017	5		2,449,634		6,921,348		(576,780	)		(6,344,568	)		-
Total			13,784,201	$	44,412,715	$	(22,210,520	)	$	(22,202,194	)	$	-

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Stock Options (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of stock option activity

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2019		8,730,956		$	0.671		2.44
Granted		1,245,000		$	2.106		7.06
Exercised		(188,575	)	$	0.261		1.08
Forfeited and expired
Outstanding at June 30, 2019		9,787,381		$	0.862		2.98
Vested options at June 30, 2019		9,315,418		$	0.587		2.01

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Warrant Liability (Tables)

6 Months Ended

Jun. 30, 2019

Warrants and Rights Note Disclosure [Abstract]

Schedule of recognized as a loss in earnings

Proceeds from January investment units	$	1,129,700
Par value of common stock issues	$	(1,255	)
Fair value of warrants	$	(1,717,506	)
Loss on issuance of warrants (January 10, 2019 issuance)	$	(589,061	)
Loss on issuance of warrants (March 11, 2019 issuance)	$	(198,148	)
Total loss on issuance of warrants	$	(787,209	)

Schedule of warrant activity

For the Six Months Ended June 30, 2019
	Warrant  Shares		Weighted Average Exercise Price
Balance at January 1, 2019		3,418,184	$	0.23
Warrants granted		1,507,374	$	1.23
Balance at June 30, 2019		4,925,558	$	0.55

Schedule of fair value of the Company's warrant liability using the Black-Scholes model

	As of June 30, 2019			As of December 31, 2018
Fair value of company’s common stock	$	1.06		$	0.90
Dividend yield		0	%		0	%
Expected volatility		135% - 140%			175.0	%
Risk Free interest rate		1.72% - 2.56%			2.49	%
Expected life (years)		3.19			1.65
Fair value of financial instruments - warrants	$	2,199,266		$	896,171

Schedule of fair value of the financial instruments - warrants

	Amount
Balance as of January 1, 2019	$	896,171
Fair value of warrants issued		3,541,240
Change in fair value of liability to issue warrants		(2,238,145	)
Balance as of June 30, 2019	$	2,199,266

	Amount
Balance as of April 1, 2019	$	5,986,781
Fair value of warrants issued		83,586
Change in fair value of liability to issue warrants		(3,871,101	)
Balance as of June 30, 2019	$	2,199,266

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of activity related to the Company's leases

	Six Months Ended June 30, 2019
Operating lease expense	$	297,566
Cash paid for amounts included in the measurement of operating lease liabilities	$	150,696
ROU assets obtained in exchange for operating lease obligations	$	1,499,752

Schedule of ROU lease assets and lease liabilities

	As of June 30, 2019
Other assets	$	1,293,245
Accounts payable and accrued liabilities	$	410,826
Other long-term liabilities		962,716
Total lease liabilities	$	1,373,542
Weighted average remaining lease term (in years)		3.05
Weighted average discount rate		6.00	%

Schedule of future lease payments included in the measurement of lease liabilities

	As of June 30, 2019
2019 - Remaining		238,684
2020		393,413
2021		248,223
2022		195,144
2023		200,944
Thereafter		205,434
Total future minimum lease payments	$	1,481,842
Less imputed interest		(108,300	)
Total	$	1,373,542

	Operating leases
2019	$	473,495
2020		420,291
2021		275,223
2022		198,144
2023		199,144
Thereafter		205,135
Total lease payments	$	1,771,432

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Segment Results (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of represents selected information reportable segments

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Security and guarding
Revenue	$	1,347,529		$	1,197,201		$	2,552,240		$	2,290,975
Cost of revenue		797,944			1,273,693			1,738,530			2,064,398
Gross margin		549,585			(76,492	)		813,710			226,577
Total operating expenses		1,903,371			2,455,685			3,637,078			5,152,876
Loss from operations		(1,353,786	)		(2,532,177	)		(2,823,368	)		(4,926,299	)
Total other income (expense)		7,265,540			735,239			(979,410	)		2,656,120
Total net income (loss)	$	5,911,754		$	(1,796,938	)	$	(3,802,778	)	$	(2,270,179	)
Systems installation
Revenue	$	174,067		$	100,699		$	202,608		$	135,263
Cost of revenue		337,852			-			499,610			-
Gross margin		(163,785	)		100,699			(297,002	)		135,263
Total operating expenses		154,822			-			187,453			-
Loss from operations		(318,607	)		100,699			(484,455	)		135,263
Total other income		513			-			433			-
Total net (loss) income	$	(318,094	)	$	100,699		$	(484,022	)	$	135,263
Software
Revenue	$	2,377,277		$	576,142		$	4,515,132		$	576,142
Cost of revenue		860,903			286,694			1,683,778			286,694
Gross margin		1,516,374			289,448			2,831,354			289,448
Total operating expenses		2,309,704			421,566			4,585,917			421,566
Loss from operations		(793,330	)		(132,118	)		(1,754,563	)		(132,118	)
Total other income		11,978			9			11,970			9
Total net loss	$	(781,352	)	$	(132,109	)	$	(1,742,593	)	$	(132,109	)

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Description of Business (Details)			1 Months Ended
	Aug. 03, 2018	Oct. 01, 2015	Jun. 30, 2018	Apr. 02, 2019
Description of Business (Textual)
Exchanged percentage of Helix TCS		100.00%
Business acquisition, description		Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 20 million common shares and 1 million convertible preferred shares of the Company.	The Company issued 38,184,985 unregistered shares of its common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (“BioTrackTHC Stock Plan”), pursuant to which options exercisable in the amount of 8,132,410 shares of common stock are outstanding. As a result, BioTrackTHC stockholders will own 48% of the Company on a fully diluted basis on the BioTrackTHC Closing Date.
Merger Agreement	In connection with closing the Engeni Merger Agreement, the Company issued 366,700 shares of Company common stock to Engeni US members. Furthermore, the Company subsequently issued Engeni US members 733,300 shares of Company common stock on April 2, 2019.
Tan Acquisition Agreement [Member]
Description of Business (Textual)
Exchanged percentage of Helix TCS				100.00%

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Going Concern Uncertainty, Financial Condition and Management's Plans (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Going Concern Uncertainty, Financial Condition and Management's Plans (Textual)
Working capital deficit	$ 3,715,022	$ 2,233,652
Increase of working capital	1,481,270
Anticipated new equity captital	$ 5,000,000

XML

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator
Net income attributable to common shareholders	$ 4,811,718	$ (9,032,037)	$ (6,025,736)	$ (24,469,219)
Effect of dilutive instruments on net loss	(7,024,580)
Net income (loss) attributable to common shareholders - diluted	$ (2,212,862)	$ (9,032,037)	$ (6,025,736)	$ (24,469,219)
Denominator
Weighted average shares of common stock outstanding - basic	75,470,238	42,673,528	74,324,689	35,907,118
Dilutive effect of warrants and convertible securities	5,766,440
Weighted average shares of common stock outstanding - diluted	81,236,678	42,673,528	74,324,689	35,907,118
Net income (loss) per share
Basic	$ 0.06	$ (0.21)	$ (0.08)	$ (0.68)
Diluted	$ (0.03)	$ (0.21)	$ (0.08)	$ (0.68)

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Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Summary of Significant Accounting Policies (Textual)
Allowance for doubtful accounts	$ 77,046		$ 77,046		$ 76,156
Lease agreements, description			Adoption of the standard resulted in the balance sheet recognition of additional lease assets and lease liabilities of approximately $1,500,000. The new standard also provides practical expedients for an entity's ongoing accounting. The Company currently has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in separate lease and non-lease components for all our leases.
Advertising expense	$ 178,219	$ 34,963	$ 247,490	$ 61,737
Deemed to be anti-dilutive			24,571,582
Furniture and equipment [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment estimated useful lives			5 years
Vehicles [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment estimated useful lives			3 years

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Revenue Recognition (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Types of Revenues:
Security and Guarding	$ 1,347,529	$ 1,197,201	$ 2,552,240	$ 2,290,975
Systems Installation	174,067	100,699	202,608	135,263
Software	2,377,277	576,142	4,515,132	576,142
Total revenues	$ 3,898,873	$ 1,874,042	$ 7,269,980	$ 3,002,380

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Revenue Recognition (Details Textual)	6 Months Ended
	Jun. 30, 2019
Revenue Recognition (Textual)
System installation invoice, percentage	60.00%
Sales team members commissions, description	The Company provides sales team members with commissions at 0-6%.

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Business Combinations (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Tan’s International Security [Member]
Business Acquisition [Line Items]
Base Price - Cash	$ 25,000
Base Price - Deferred cash payment (to be made on 4,8,12-month anniversaries of closing)	75,000
Base Price - Common Stock	710,000
Total Purchase Price	810,000
Security Grade Acquisition [Member]
Business Acquisition [Line Items]
Base Price - Cash	2,100,373
Base Price - Stock Options	916,643
Contingent Consideration - Stock Options	916,643
Total Purchase Price	3,933,659
BioTrackTHC Acquisition [Member]
Business Acquisition [Line Items]
Base Price - Common Stock	44,905,542
Base Price - Stock Options	12,646,491
Total Purchase Price	57,552,033
Engeni SA Acquisition [Member]
Business Acquisition [Line Items]
Base Price - Common Stock	388,702
Contingent Consideration - Common Stock	777,298
Contingent Consideration - Cash
Total Purchase Price	$ 1,166,000

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Business Combinations (Details 1)	6 Months Ended
	Jun. 30, 2019 USD ($)
Rocky Tan International Security [Member]
Assets acquired:
Cash	$ 2,940
Accounts receivable	7,635
Goodwill	821,807
Total assets acquired	832,382
Liabilities assumed:
Accounts payable	12,526
Other liabilities	9,856
Total liabilities assumed	22,382
Estimated fair value of net assets acquired	810,000
Security Grade Acquisition [Member]
Assets acquired:
Cash	14,137
Accounts receivable	53,792
Costs & earnings in excess of billings	96,898
Property, plant and equipment, net	27,775
Trademarks	25,000
Customer lists	3,154,578
Web address	5,000
Goodwill	664,329
Other assets	3,880
Total assets acquired	4,045,389
Liabilities assumed:
Billings in excess of costs	23,967
Loans payable	18,414
Credit card payable and other liabilities	69,349
Total liabilities assumed	111,730
Estimated fair value of net assets acquired	$ 3,933,659
Security Grade Acquisition [Member] | Web address [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	5 years
Security Grade Acquisition [Member] | Trademarks [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	10 years
Security Grade Acquisition [Member] | Customer lists [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	5 years
BioTrack Acquisition [Member]
Assets acquired:
Cash	$ 448,697
Accounts receivable	128,427
Prepaid expenses	351,615
Property, plant and equipment, net	72,252
Customer lists	8,304,449
Goodwill	39,135,007
Software	9,321,627
Tradename	466,081
Total assets acquired	58,228,155
Liabilities assumed:
Accounts payable	223,581
Other liabilities	452,541
Total liabilities assumed	676,122
Estimated fair value of net assets acquired	$ 57,552,033
BioTrack Acquisition [Member] | Customer lists [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	5 years
BioTrack Acquisition [Member] | Tradename [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	4 years 6 months
BioTrack Acquisition [Member] | Software [Member]
Liabilities assumed:
Weighted Average Useful Life (in years)	4 years 6 months
Engeni SA Acquisition [Member]
Assets acquired:
Cash	$ 5,609
Accounts receivable and other assets	30,479
Property, plant and equipment, net	57,830
Goodwill	778,552
Software	449,568
Total assets acquired	1,322,038
Liabilities assumed:
Accounts payable	56,038
Total liabilities assumed	56,038
Estimated fair value of net assets acquired	$ 1,266,000
Weighted Average Useful Life (in years)	3 years 3 months 19 days

XML

Business Combinations (Details Textual) - USD ($)			1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended
	Aug. 01, 2017	Oct. 01, 2015	Jun. 30, 2018	Mar. 31, 2018	Jun. 02, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Aug. 02, 2019	Dec. 31, 2018	Aug. 02, 2018
Business Combination (Textual)
Business acquisition, description		Effective October 1, 2015, for accounting purposes, as part of an acquisition amounting to a reorganization dated December 21, 2015, Helix Opportunities LLC exchanged 100% of Helix TCS, LLC and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss Security Solutions, Inc. to the Company in exchange for 20 million common shares and 1 million convertible preferred shares of the Company.	The Company issued 38,184,985 unregistered shares of its common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan (“BioTrackTHC Stock Plan”), pursuant to which options exercisable in the amount of 8,132,410 shares of common stock are outstanding. As a result, BioTrackTHC stockholders will own 48% of the Company on a fully diluted basis on the BioTrackTHC Closing Date.
Liability pursuant to agreement						$ 0		$ 0			$ 101,667
Fair value of contingent consideration					$ 916,643
Option issued of acquisition						9,315,418		9,315,418
Selling, general and administrative						$ 1,170,491	$ 527,999	$ 2,107,369	$ 875,879
Gain on reduction of obligation pursuant							$ 290,441		$ 557,054
Tan’s International Security [Member]
Business Combination (Textual)
Business acquisition, description								Pursuant to the Rocky Tan Acquisition Agreement, Helix purchased all membership interests and capital stock and will collectively hold 100% of the interests of Rocky Tan. At closing, the purchase price of $100,000 in cash plus 250,000 shares of the Company's restricted common stock will be paid to Rocky Tan as follows:   ? 250,000 shares of Helix Stock at Closing.       ? $25,000 at Closing       ? $25,000 on the 4-month anniversary of Closing       ? $25,000 on the 8-month anniversary of Closing       ? $25,000 on the 12-month anniversary of Closing
Fair value of contingent consideration												$ 777,298
Total acquisition costs
Common stock shares issued										733,300
Deferred cash payment								$ 25,000
Security Grade Protective Services, Ltd [Member]
Business Combination (Textual)
Business acquisition, description	The Company subsequently issued the 207,427 additional stock options on August 1, 2017 as well as a second cash payment of $800,000 pursuant to the original terms of the Agreement.				The Company entered into a Membership Interest Purchase Agreement (the "Security Grade Acquisition Agreement") in which the Company purchased all issued and outstanding units of Security Grade Protective Services, Ltd. ("Security Grade"), which consisted of 800,000 Class A Units and 200,000 Class B Units. On the Security Grade Closing Date, the Company delivered $800,000 in cash and 207,427 non-qualified stock options (the "Initial Stock Options").
Business combination, contractual relationship, description					Provided that, within the first 60 days following the closing, no material customer identified in the Agreement terminates its contractual relationship with the Company and that all contracts with such material customers are in full force and effect without default or cancellation as of the 60th day following the closing, on the 61st day following the closing, the Company shall deliver an additional $800,000 in cash and issue 207,427 additional stock options (the ''Additional Stock Options''). In the event of termination, cancellation or default of any contract with one or more material customer identified in the Agreement within the first 60 days following the closing, the stock options received by the acquiree shall be reduced and/or forfeited to the extent necessary (pro rata based upon their ownership interest in the Company immediately preceding the closing) by a percentage equal to the revenue received by the Company from the terminating customer(s) in the 180 days immediately preceding such termination divided by the revenue received by the Company from all material customers identified in the Agreement in the 180 days immediately preceding such termination.
Option issued of acquisition											79,486
Engeni Acquisition [Member]
Business Combination (Textual)
Business acquisition, description				The Company issued 366,700 shares of Company common stock to Engeni US members. Furthermore, the Company may also issue Engeni US members 366,700 and 366,600 shares of Parent common stock upon the achievement of specific objectives. If applicable, the Company will pay Engeni US members the aggregate amount of $100,000, on a pro rata basis, if Engeni SA reaches financial breakeven on or before December 31, 2018, as determined by the Company's Chief Financial Officer and Scott Zienkewicz.
Change in fair value of contingent consideration				$ 100,000
Bio-Tech Medical Software, Inc. [Member]
Business Combination (Textual)
Business acquisition, description			The Company closed the Merger. In connection with closing the Merger, the Company issued 38,184,985 unregistered shares of Company common stock to BioTrackTHC stockholders, of which 1,852,677 shares were held back to satisfy indemnification obligations in the Merger Agreement, if necessary. The Company also assumed the BioTrackTHC Stock Plan, pursuant to which options exercisable for 8,132,410 shares of Company common stock are outstanding so that the BioTrackTHC stockholders will own 48% of the Company on a fully diluted basis.
Security Grade Acquisition Agreement [Member]
Business Combination (Textual)
Option issued of acquisition	207,427
Second cash payment	$ 800,000

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Property and Equipment, Net (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Total	$ 693,353	$ 467,359
Less: Accumulated depreciation	(147,535)	(117,841)
Property and equipment, net	545,818	349,518
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total	139,782	264,659
Software equipment [Member]
Property, Plant and Equipment [Line Items]
Total	352,505
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Total	$ 201,066	$ 202,700

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Property and Equipment, Net (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Property and Equipment, Net (Textual)
Depreciation expense	$ 29,509	$ 32,893	$ 47,222	$ 35,893

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Intangible Assets, Net and Goodwill (Details) - USD ($)		6 Months Ended	12 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount		$ 22,044,730	$ 3,503,005
Assets Acquired Pursuant to Business Combination	[1],[2]	17,383	18,541,725
Accumulated Amortization		(5,749,407)	(3,440,652)
Net Book Value		$ 16,312,706	$ 18,604,078
Database [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		5 years	5 years
Gross Carrying Amount		$ 93,427	$ 93,427
Assets Acquired Pursuant to Business Combination	[1],[2]
Accumulated Amortization		(60,119)	(50,858)
Net Book Value		33,308	42,569
Trade names and trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount		591,081	125,000
Assets Acquired Pursuant to Business Combination			466,081	[1],[2]
Accumulated Amortization		(149,063)	(91,554)
Net Book Value		$ 442,018	$ 499,527
Trade names and trademarks [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		5 years	5 years
Trade names and trademarks [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		10 years	10 years
Web addresses [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		5 years	5 years
Gross Carrying Amount		$ 130,000	$ 130,000
Assets Acquired Pursuant to Business Combination	[1],[2]
Accumulated Amortization		(82,511)	(69,625)
Net Book Value		$ 47,489	$ 60,375
Customer list [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		5 years	5 years
Gross Carrying Amount		$ 11,459,027	$ 3,154,578
Assets Acquired Pursuant to Business Combination	[1],[2]		8,304,449
Accumulated Amortization		(3,101,382)	(1,388,176)
Net Book Value		$ 8,357,645	$ 9,493,507
Software [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		4 years 6 months	4 years 6 months
Gross Carrying Amount		$ 9,771,195
Assets Acquired Pursuant to Business Combination	[1],[2]		9,771,195
Accumulated Amortization		(2,356,189)	(1,263,095)
Net Book Value		$ 7,415,006	$ 8,508,100
Domain Name [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)		5 years
Gross Carrying Amount
Assets Acquired Pursuant to Business Combination	[1],[2]	17,383
Accumulated Amortization		(143)
Net Book Value		$ 17,240

[1] On August 3, 2018, the Company acquired various assets of Engeni (See Note 5)

[2] On June 1, 2018, the Company acquired various assets of BioTrackTHC (See Note 5)

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Intangible Assets, Net and Goodwill (Details 1) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Balance			$ 39,913,559	$ 664,329	$ 664,329
Impairment of goodwill				$ (664,329)	(664,329)
Goodwill attributable to BiotrackTHC acquisition					39,135,007
Goodwill attributable to Engeni acquisition					778,552
Goodwill attributable to Tan Security acquisition			821,807
Balance	$ 40,735,366		$ 40,735,366		$ 39,913,559

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Intangible Assets, Net and Goodwill (Details Textual) - USD ($)	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Intangible Assets, Net and Goodwill (Textual)
Amortization expense related to intangible assets	$ 1,160,827		$ 476,003	$ 2,308,755	$ 645,579
Goodwill write-off		$ 664,329
Goodwill attributable to Biotrack acquisition						$ 39,135,007
Goodwill attributable to Engeni acquisition						$ 778,552

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Costs, Estimated Earnings and Billings (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Costs in Excess of Billings on Uncompleted Contracts or Programs [Abstract]
Costs incurred on uncompleted contracts	$ 140,289	$ 89,700
Estimated earnings	49,366	50,512
Cost and estimated earnings earned on uncompleted contracts	189,655	140,212
Billings to date	304,500	252,535
Billings in excess of cost	(114,845)	(112,323)
Costs in excess of billings	12,017	42,869
Billings in excess of cost	(126,862)	(155,192)
Total	$ (114,845)	$ (112,323)

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Accounts Payable and Accrued Liabilities (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accounts payable	$ 857,610	$ 842,389
Accrued expenses	56,332	33,869
Accrued interest	1,138,368	826,455
Lease obligation - current	410,826
Total	$ 2,463,136	$ 1,702,713

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Convertible Note Payable (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Short-term Debt [Line Items]
Convertible note payable	$ 423,700	$ 187,177
Less: Current portion	(423,700)	(187,177)
Long-term portion
Note Five, 5% convertible promissory note, fixed secured, maturing November 16, 2019 [Member]
Short-term Debt [Line Items]
Convertible note payable		187,177
Note Ten, 25% convertible promissory note, fixed secured, maturing March 1, 2020, net of debt discount for warrants [Member]
Short-term Debt [Line Items]
Convertible note payable	$ 423,700

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Convertible Note Payable (Details Textual) - USD ($)		1 Months Ended							3 Months Ended		6 Months Ended		12 Months Ended
	Nov. 21, 2017	May 31, 2019	Mar. 31, 2019	Nov. 30, 2018	May 16, 2018	Nov. 16, 2017	Mar. 31, 2017	Feb. 13, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	May 17, 2017
Convertible Note Payable (Textual)
Interest expense on convertible debt											$ 9,247
Warrants issued amount									$ 355,847		355,847
Interest expense									88,718		117,966
Gain to change in fair value									845,622	$ 120,630	(142,341)	$ 697,646
Additional paid-in capital									86,489,136		86,489,136		$ 82,831,014
Notes Five, Six, and Seven [Member]
Convertible Note Payable (Textual)
Annual interest rate on debt	15.00%
Notes Five, Six, and Seven [Member] | Investor [Member]
Convertible Note Payable (Textual)
Discount on debt conversion, description						The Company amended Note Five (the "First Amendment") with the First Investor. The First Amendment has a maturity date that is six months from November 16, 2017, converts at a 40% discount to the lowest one-day Volume Average Weighted Price ("VWAP") during the 30 trading days preceding such conversion, incurs interest at an annual rate of 5%, and is prepayable at any time at 110% of the unpaid principal and accrued interest balance. At November 16, 2017, the principal amount of Note Five was $281,900.
Secured Convertible Promissory Note Five [Member]
Convertible Note Payable (Textual)
Discount on debt conversion, description				The Company amended Note Five ("Third Amendment") with a second investor. The Third Amendment states that Note Five shall have a maturity of November 16, 2019. The principal amount as of the date of the Third Amendment was $115,136. During March 2019, the remaining principal of $112,305 was converted into 155,421 shares of common stock. The interest expense associated with Note Five was $0 and $5,839 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $7,878 for the six months ended June 30, 2019 and 2018, respectively.
Retained amount								$ 16,666
Warrants issued amount								22,000
Value of debt								183,333
Beneficial conversion feature								144,666
Gain to change in fair value													$ 450,216
Secured Convertible Promissory Note Five [Member] | Third Investor [Member]
Convertible Note Payable (Textual)
Unsecured convertible promissory note								183,333
Retained amount								16,666
Value of debt							$ 25,000	166,666
Beneficial conversion feature								183,333
Secured Convertible Promissory Note Five [Member] | Fourth investor [Member]
Convertible Note Payable (Textual)
Discount on debt conversion, description			the Company entered into a $450,000 Secured Convertible Promissory Note ("Note Ten") with a third investor. The third investor provided the Company with $450,000 in cash proceeds, which was received by the Company during the period ended June 30, 2019. Note Ten will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Ten is convertible at the election of the third investor, in whole or in part, at any time or from time to time, into the Company's common stock at the lower of $0.90 per share or a 30% discount to the Company's 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Ten, the Company issued a warrant to the third investor to purchase 160,715 shares of the Company's common stock at $1.40 per share.		The Second Amendment states that Note Five shall have a maturity of November 16, 2018 and shall be pre-payable at any time at 120% of the unpaid principal and accrued interest balance. The principal amount as of the date of the Second Amendment was $112,305.
Value of debt			$ 450,000
Principal amount of notes					$ 112,305	$ 281,900
Unsecured Convertible Promissory Note Four [Member] | Fourth investor [Member]
Convertible Note Payable (Textual)
Value of debt							$ 166,666
Unsecured Convertible Promissory Note Four [Member] | Fourth investor [Member] | Minimum [Member]
Convertible Note Payable (Textual)
Conversion rate, per share														$ 0.3245385
Secured Convertible Promissory Note Six [Member] | Third Investor [Member]
Convertible Note Payable (Textual)
Secured convertible promissory note								$ 25,000
Note Ten [Member]
Convertible Note Payable (Textual)
Fair value of notes									661,581		661,581
Gain to change in fair value									$ (845,622)		$ 211,581
Restricted shares of common stock		15,625
Restricted shares of common stock value		$ 14,062

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Related Party Transactions (Details)			1 Months Ended			3 Months Ended		6 Months Ended
	Jan. 03, 2019	Mar. 11, 2016 USD ($) TradingDays	May 31, 2019 USD ($) shares	Feb. 20, 2018 USD ($) TradingDays	Mar. 31, 2016 USD ($) $ / shares shares	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares
Related Party Transactions (Textual)
Related party loan balance										$ 32,489
Promissory note, description	The Company entered into an unsecured promissory note in the amount of $280,000. The unsecured promissory note has a fixed interest rate of 10% and is due and payable on March 31, 2019. On March 2, 2019, the unsecured promissory note was paid off in full.
Common stock per share | $ / shares						$ 0.55		$ 0.55		$ 0.23	$ 0.23
Warrants to purchase shares | shares						4,925,558		4,925,558		3,418,184
Subscription Agreement [Member] | Warrant [Member]
Related Party Transactions (Textual)
Total proceeds					$ 150,000
Common stock per share | $ / shares					$ 0.16
Warrant, description					The Warrant Exercise Date is the later of the following to occur (i) March 9, 2017, (ii) ten (10) days after the Company's notice to the holder of the warrant that the Company shall have an effective S-1 registration with the SEC; or (iii) ten (10) days after Company's notice to the holder of the warrants that the Company has entered into an agreement for the sale of substantially all the assets or Common Stock of the Company. As of June 30, 2019, the warrants granted are not exercisable.
Warrants to purchase shares | shares					1,920,000
Note Nine [Member]
Related Party Transactions (Textual)
Principal amount						$ 1,500,000		$ 1,500,000
Maturity date								Mar. 01, 2020
Promissory note, description								The Company entered into a $1,500,000 Secured Convertible Promissory Note ("Note Nine") with a fourth investor. The fourth investor provided the Company with $1,475,000 in cash proceeds, which was received by the Company during the period ended March 31, 2019. The additional $25,000 was retained by the fourth investor for legal bills for the transaction. Note Nine will mature on March 1, 2020 and bear interest at a rate of 25% per annum, payable by the Company half in cash and half in kind on a quarterly basis. The principal balance of Note Nine is convertible at the election of the fourth investor, in whole or in part, at any time or from time to time, into the Company's common stock at the lower of $0.90 per share or a 30% discount to the Company's 30-day weighted average listed price per share immediately before the date of conversion. In conjunction with Note Nine, the Company issued a warrant to the fourth investor to purchase 535,715 shares of the Company's common stock at $1.40 per share.
Annual rate of interest						25.00%		25.00%
Discount on debt conversion, description								The company recorded a debt discount relating to the warrants issued in the amount of $1,186,153 based on the residual fair value of the warrants at inception of Note Nine. The additional $25,000 retained by the fourth investor for legal bills for the transaction will be recorded as a debt discount. Debt discounts amortized to interest expense was $301,959 and $401,506 for the three and six months ended June 30, 2019, respectively. The unamortized discount balance at June 30, 2019 was $809,647. Accrued interest expense associated with Note Nine was $30,822 as of June 30, 2019.
Change in fair value of convertible note - related party						$ (2,818,739)		$ 705,270
Total proceeds								$ 1,475,000
Common stock per share | $ / shares						$ 1.40		$ 1.40
Warrants to purchase shares | shares						535,715		535,715
Fair value of liability after period end						$ 2,205,270		$ 2,205,270
Net of debt discount for warrants and legal bills						1,395,623		1,395,623
Restricted shares of common stock | shares			52,083
Restricted shares of common stock value			$ 46,875
Note Nine [Member] | Warrant [Member]
Related Party Transactions (Textual)
Fair value of liability						471,346		471,346
Change in fair value of convertible note - related party						$ (857,730)		$ (714,807)
Common stock per share | $ / shares						$ 1.40		$ 1.40
Warrants to purchase shares | shares						535,715		535,715
Fair value of liability after period end						$ 1,186,153		$ 1,186,153
Note Eight [Member]
Related Party Transactions (Textual)
Principal amount				$ 125,000
Maturity date				Aug. 20, 2018
Promissory note, description				The Company entered into an agreement to amend Note Eight (this "Amendment") with the Related Party Holder. The Company and Holder desired to extend the maturity date of Note Eight to August 20, 2018 (the "Maturity Date"). The Note was amended as follows. The Company promises to pay (i) all accrued interest on the unpaid principal amount through December 31, 2017 and (ii) $25,000 in principal within 5 business days of the date of this Amendment. The Company agrees to issue 15,000 shares of restricted Company common stock as an inducement for this amendment within 10 business days of the date of the Amendment. The principal amount of the note will be reduced to $125,000. Unless extended by the Company, converted or prepaid earlier, all unpaid principal and unpaid accrued interest on Note Eight shall be due and payable on the Maturity Date. All provisions related to conversion of Note Eight into equity securities of the Company were terminated as part of this Amendment.
Fair value of liability				$ 239,343
Change in fair value of convertible note - related party						0	$ 0	0	$ 118,506
Trading days related to conversion of debt | TradingDays				10
Interest expense						$ 0	$ 0	$ 0	$ 2,402
Note Eight [Member] | Director [Member]
Related Party Transactions (Textual)
Principal amount		$ 150,000
Maturity date		Dec. 31, 2017
Annual rate of interest		7.00%
Discount on debt conversion, description		Forty percent (40%) discount to the average market closing price.
Trading days related to conversion of debt | TradingDays		5

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Notes Payable (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Vehicle financing loans payable, between 4.7% and 7.0% interest and maturing between June 2022 and July 2022	$ 58,910	$ 71,284
Loans Payable - Credit Union	6,127	5,075
Less: Current portion of loans payable	(24,805)	(24,805)
Long-term portion of loans payable	$ 40,232	$ 51,554

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Notes Payable (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Notes Payable (Textual)
Interest expense associated with notes payable	$ 890	$ 720	$ 2,681	$ 1,420

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Shareholders' Equity (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Omnibus Incentive Plan [Member]
Class of Stock [Line Items]
Number of Shares Issued	250,000
Total Proceeds	$ 320,000
Subscription Agreements [Member]
Class of Stock [Line Items]
Number of Shares Issued	722,222
Total Proceeds	$ 650,000
February 2018 [Member] | Subscription Agreements [Member]
Class of Stock [Line Items]
Number of Shares Issued	222,222
Total Proceeds	$ 200,000
March 2018 [Member] | Omnibus Incentive Plan [Member]
Class of Stock [Line Items]
Number of Shares Issued		100,000
Total Proceeds		$ 250,000
March 2018 [Member] | Subscription Agreements [Member]
Class of Stock [Line Items]
Number of Shares Issued	500,000
Total Proceeds	$ 450,000
April 2018 [Member] | Subscription Agreements [Member]
Class of Stock [Line Items]
Number of Shares Issued	500,000
Total Proceeds	$ 450,000
May 2018 [Member] | Omnibus Incentive Plan [Member]
Class of Stock [Line Items]
Number of Shares Issued		133,900
Total Proceeds		$ 223,774
May 2018 [Member] | Subscription Agreements [Member]
Class of Stock [Line Items]
Number of Shares Issued	244,444
Total Proceeds	$ 219,999
March 2019 [Member] | Omnibus Incentive Plan [Member]
Class of Stock [Line Items]
Number of Shares Issued	250,000
Total Proceeds	$ 320,000
January 2018 [Member] | Omnibus Incentive Plan [Member]
Class of Stock [Line Items]
Number of Shares Issued		42,850
Total Proceeds		$ 173,014

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Shareholders' Equity (Details 1) - Series B Preferred Purchase Agreement [Member]	12 Months Ended
	Dec. 31, 2017 USD ($) shares
Class of Stock [Line Items]
Number of Shares Sold | shares	13,784,201
Total Proceeds | $	$ 4,487,500
Initial Tranche [Member] | May 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	7,318,084
Total Proceeds | $	$ 1,875,000
Second Tranche [Member] | July 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	1,680,000
Total Proceeds | $	$ 840,000
Third Tranche [Member] | August 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	369,756
Total Proceeds | $	$ 120,000
Third Tranche [Member] | September 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	462,195
Total Proceeds | $	$ 150,000
Third Tranche [Member] | October 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	462,195
Total Proceeds | $	$ 150,000
Third Tranche [Member] | October 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	1,042,337
Total Proceeds | $	$ 557,500
Third Tranche [Member] | December 2017 [Member]
Class of Stock [Line Items]
Number of Shares Sold | shares	2,449,634
Total Proceeds | $	$ 795,000

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Shareholders' Equity (Details 2) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Fair Value of Beneficial Conversion Feature	$ 7,203,689	$ 22,202,194
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Number of shares	13,784,201	13,784,201
Fair Value of Beneficial Conversion Feature		$ 44,412,715
Amount accreted as a deemed dividend		22,202,194	$ (22,210,520)
Unamortized Beneficial Conversion Feature
May 17, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		May 17, 2017
Beneficial Conversion Feature Term (months)		12 months
Number of shares	7,318,084	7,318,084
Fair Value of Beneficial Conversion Feature		$ 25,247,098
Amount accreted as a deemed dividend		(9,467,661)	(15,779,436)
Unamortized Beneficial Conversion Feature
July 29, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		Jul. 29, 2017
Beneficial Conversion Feature Term (months)		9 years 6 months
Number of shares	1,680,000	1,680,000
Fair Value of Beneficial Conversion Feature		$ 6,804,000
Amount accreted as a deemed dividend		(3,129,366)	(3,674,634)
Unamortized Beneficial Conversion Feature
August 29, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		Aug. 29, 2017
Beneficial Conversion Feature Term (months)		8 years 6 months
Number of shares	369,756	369,756
Fair Value of Beneficial Conversion Feature		$ 1,148,263
Amount accreted as a deemed dividend		(592,073)	(592,073)
Unamortized Beneficial Conversion Feature
September 15, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		Sep. 15, 2017
Beneficial Conversion Feature Term (months)		8 months
Number of shares	462,195	462,195
Fair Value of Beneficial Conversion Feature		$ 1,435,329
Amount accreted as a deemed dividend		786,728	(648,601)
Unamortized Beneficial Conversion Feature
October 11, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		Oct. 11, 2017
Beneficial Conversion Feature Term (months)		7 months
Number of shares	462,195	462,195
Fair Value of Beneficial Conversion Feature		$ 1,121,036
Amount accreted as a deemed dividend		(694,727)	(426,309)
Unamortized Beneficial Conversion Feature
October 31, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		Oct. 31, 2017
Beneficial Conversion Feature Term (months)		6 years 6 months
Number of shares	1,042,337	1,042,337
Fair Value of Beneficial Conversion Feature		$ 1,735,641
Amount accreted as a deemed dividend		(1,187,071)	(548,570)
Unamortized Beneficial Conversion Feature
December 19, 2017 [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Issuance Date		Dec. 19, 2017
Beneficial Conversion Feature Term (months)		5 months
Number of shares	2,449,634	2,449,634
Fair Value of Beneficial Conversion Feature		$ 6,921,348
Amount accreted as a deemed dividend		(6,344,568)	$ (576,780)
Unamortized Beneficial Conversion Feature

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Shareholders' Equity (Details Textual) - USD ($)			1 Months Ended										6 Months Ended
	Jun. 07, 2018	Mar. 12, 2018	May 31, 2019	May 31, 2019	Apr. 30, 2019	Mar. 31, 2019	Mar. 28, 2019	Mar. 07, 2019	Jan. 31, 2019	Jun. 30, 2018	Mar. 21, 2018	Feb. 15, 2018	Jun. 30, 2019
Note Ten [Member]
Shareholders' Equity (Textual)
Shares of restricted common stock				15,625
Restricted shares of common stock value				$ 14,062
Note Nine [Member]
Shareholders' Equity (Textual)
Shares of restricted common stock			52,083
Restricted shares of common stock value			$ 46,875
Principal amount													$ 1,500,000
Other Common Stock Issuances [Member]
Shareholders' Equity (Textual)
Common stock, shares issued						1,255,222							166,667
Other Common Stock Issuances [Member] | Note Ten [Member]
Shareholders' Equity (Textual)
Shares of restricted common stock			15,625
Restricted shares of common stock value			$ 14,062
Other Common Stock Issuances [Member] | Note Nine [Member]
Shareholders' Equity (Textual)
Shares of restricted common stock			52,083
Restricted shares of common stock value			$ 46,875
Other Common Stock Issuances [Member] | BioTrackTHC [Member]
Shareholders' Equity (Textual)
Shares of restricted common stock										38,184,985
Other Common Stock Issuances [Member] | Investor [Member]
Shareholders' Equity (Textual)
Shares of restricted common stock									20,000
Common stock, shares issued						62,847							47,084
Shared based compensation expense									$ 27,400
Other Common Stock Issuances [Member] | Engeni Contingent Consideration [Member]
Shareholders' Equity (Textual)
Common stock, shares issued					733,300
Other Common Stock Issuances [Member] | Biotrack Acquisition [Member]
Shareholders' Equity (Textual)
Stock exercised during period, shares					57,461	6,082
Proceeds from stock options exercised					$ 21,808	$ 4,805
Other Common Stock Issuances [Member] | Security Grade [Member]
Shareholders' Equity (Textual)
Stock exercised during period, shares	212,633				15,101
Other Common Stock Issuances [Member] | Rocky Tan International Security [Member]
Shareholders' Equity (Textual)
Stock issued during period, shares, acquisitions					250,000
Convertible Note to Common Stock [Member]
Shareholders' Equity (Textual)
Principal amount		$ 50,000					$ 42,055	$ 75,882			$ 75,000	$ 50,000
Convertible note into conversion shares common stock		63,963					55,421	100,000			95,945	46,066
Convertible note, percentage		10.00%					10.00%	10.00%			10.00%	10.00%

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Shareholders' Equity (Details Textual 1) - USD ($)	1 Months Ended	6 Months Ended
	May 17, 2017	Jun. 30, 2019
Series B Preferred Shares [Member]
Shareholders' Equity (Textual)
Preferred conversion, description		Based on the current conversion price, the Series B Preferred Shares are convertible into 13,784,201 shares of common stock. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, (iii) any reclassification of our Common Stock or any compulsory share exchange by which Common Stock is effectively converted into or exchanged for other securities, cash or property; or (iv) sale of shares below the preferred stock conversion price. Each Series B Preferred Share will automatically convert into common stock upon the earlier of (i) notice by the Company to the holders that the Company has elected to convert all outstanding Series B Preferred Shares at any time on or after May 12, 2018; or (ii) immediately prior to the closing of a firmly underwritten initial public offering (involving the listing of the Company's Common Stock on an Approved Stock Exchange) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock for the account of the Company in which the net cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least fifty million dollars ($50,000,000).
Gross proceeds from sold on shares	$ 1,875,000
Unsecured convertible promissory note	$ 500,000
Convertible preferred shares	1,536,658
Preferred shares are convertible into common stock	7,318,084
Price, per share	$ 0.325
Net proceeds	$ 1,772,500
Accredited investors an aggregate shares	5,781,426
Series B Preferred Stock Purchase Agreement [Member]
Shareholders' Equity (Textual)
Price, per share	$ 0.325
Warrants issue	462,195

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Shareholders' Equity (Details Textual 2) - Series B Preferred Stock [Member] - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	May 17, 2017	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2018	Aug. 23, 2017	May 12, 2017
Shareholders' Equity (Textual)
Preferred stock, shares authorized					17,000,000	9,000,000
Preferred stock, par value						$ 0.001
Preferred stock original issue price				$ 0.3253815
Net cash proceeds				$ 50,000,000
Traded common stock, price	$ 3.98
Beneficial conversion feature		$ 14,998,505	$ 22,202,194

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Stock Options (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Share-based Payment Arrangement [Abstract]
Beginning Outstanding, Shares Underlying Options | shares	8,730,956
Granted, Shares Underlying Options | shares	1,245,000
Exercised, Shares Underlying Options | shares	(188,575)
Forfeited and expired, Shares Underlying Options | shares
Ending Outstanding, Shares Underlying Options | shares	9,787,381
Vested options, Shares Underlying Options | shares	9,315,418
Beginning Outstanding, Weighted Average Exercise Price | $ / shares	$ 0.671
Granted, Weighted Average Exercise Price | $ / shares	2.106
Exercised, Weighted Average Exercise Price | $ / shares	0.261
Forfeited and expired, Weighted Average Exercise Price | $ / shares
Ending Outstanding, Weighted Average Exercise Price | $ / shares	0.862
Vested options, Weighted Average Exercise Price | $ / shares	$ 0.587
Outstanding, Weighted Average Remaining Contractual Term (in years)	2 years 5 months 9 days
Granted, Weighted Average Remaining Contractual Term (in years)	7 years 22 days
Exercised, Weighted Average Remaining Contractual Term (in years)	1 year 29 days
Outstanding, Weighted Average Remaining Contractual Term (in years)	2 years 11 months 23 days
Vested options, Weighted Average Remaining Contractual Term (in years)	2 years 4 days

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Stock Options (Details Textual) - $ / shares					1 Months Ended						4 Months Ended
	May 02, 2019	Feb. 06, 2019	Mar. 15, 2018	Jun. 02, 2017	Jun. 30, 2019	May 31, 2019	Mar. 19, 2019	Mar. 19, 2019	Mar. 19, 2019	Dec. 31, 2018	Jun. 30, 2018
Stock Options (Textual)
Options to purchase on shares		100,000	490,000
Common stock at price per share		$ 1.51
Options term, description		These options vested on May 6, 2019 and have an expiration date of February 6, 2024.	The Company awarded Zachary Venegas two options to purchase a total of 490,000 shares of the Company’s common stock at prices ranging from $1.90 to $2.09 per share. These options vested on June 28, 2018 and have expiration dates ranging from March 2023 to March 2028 (see Note 2).		These options shall vest over a period ranging from September 2019 to June 2020 and have expiration dates ranging from May 2024 to June 2024.	These options shall vest over a period ranging from September 2019 to June 2020 and have expiration dates ranging from May 2024 to June 2024.
Previously issued options cancelled										79,486	70,151
Investor [Member]
Stock Options (Textual)
Options to purchase on shares	125,000
Common stock at price per share	$ 2.03
Vesting of remaining shares	62,500
Options term, description	The options shall vest immediately and 62,500 of the options shall vest on August 2, 2019 provided the marketing agreement between the Company and grantee has not been terminated. These options shall expire on May 1, 2024.
Membership Interest Purchase Agreement [Member]
Stock Options (Textual)
Description interest purchase agreement				The Company granted to the selling Members the option to purchase up to 414,854 shares of the Company's common stock at a price of $0.001 per share. Of the 414,854 options granted, 207,427 were vested at closing and equity classified. The vesting of the remaining 207,427 shares were subject to certain milestones being achieved and was initially recognized as contingent consideration, both a component of purchase price. As a result of the milestones being met during the third quarter of 2017, the remaining 207,427 shares have also vested. The options have an expiration date of 36 months from the closing date. The exercise price will be based on the fair market value of the share on the date of grant.
Chief Financial Officer [Member]
Stock Options (Textual)
Options to purchase on shares									300,000
Options term, description									These options shall vest over a three-year period from March 2020 to March 2022 and have expiration dates ranging from March 2024 to March 2029.
Zachary Venegas [Member]
Stock Options (Textual)
Options to purchase on shares							500,000
Options term, description							These options shall vest over a three-year period from March 2020 to March 2022 and have expiration dates ranging from March 2024 to March 2029.
Employee One [Member]
Stock Options (Textual)
Options to purchase on shares					50,000	50,000
Employee Two [Member]
Stock Options (Textual)
Options to purchase on shares					40,000	40,000
Employee Three [Member]
Stock Options (Textual)
Options to purchase on shares					50,000	50,000
Employee Four [Member]
Stock Options (Textual)
Options to purchase on shares					50,000	50,000
Employee Five [Member]
Stock Options (Textual)
Options to purchase on shares					30,000	30,000
Minimum [Member]
Stock Options (Textual)
Common stock at price per share			$ 1.90		$ 1.05	$ 1.05
Minimum [Member] | Chief Financial Officer [Member]
Stock Options (Textual)
Common stock at price per share								$ 2.35
Minimum [Member] | Zachary Venegas [Member]
Stock Options (Textual)
Common stock at price per share									$ 2.35
Maximum [Member]
Stock Options (Textual)
Common stock at price per share			$ 2.09		$ 2.03	$ 2.03
Maximum [Member] | Chief Financial Officer [Member]
Stock Options (Textual)
Common stock at price per share									2.59
Maximum [Member] | Zachary Venegas [Member]
Stock Options (Textual)
Common stock at price per share									$ 2.59

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Warrant Liability (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jan. 10, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Par value of common stock issues		$ 0.001		$ 0.001		$ 0.001
Total loss on issuance of warrants				$ (787,209)
Warrant [Member]
Proceeds from January investment units	$ 1,129,700
Par value of common stock issues	$ (1,255)
Fair value of warrants	$ (1,717,506)
Total loss on issuance of warrants	(787,209)
Warrant [Member] | January 10, 2019 Issuance [Member]
Total loss on issuance of warrants	(589,061)
Warrant [Member] | March 10, 2019 Issuance [Member]
Total loss on issuance of warrants	$ (198,148)

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Warrant Liability (Details 1)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Summary of warrant activity
Warrant Shares, Balance | shares	3,418,184
Warrant Shares, Warrants granted | shares	1,507,374
Warrant Shares, Balance | shares	4,925,558
Weighted Average Exercise Price, Balance at beginning | $ / shares	$ 0.23
Weighted Average Exercise Price, Warrants granted | $ / shares	1.23
Weighted Average Exercise Price, Balance at ending | $ / shares	$ 0.55

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Warrant Liability (Details 2) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Fair value of company's common stock	$ 1.06	$ 0.90
Dividend yield	0.00%	0.00%
Expected volatility		175.00%
Risk free interest rate		2.49%
Expected life (years)	3 years 2 months 8 days	1 year 7 months 24 days
Fair value of financial instruments - warrants	$ 2,199,266	$ 896,171
Maximum [Member]
Expected volatility	140.00%
Risk free interest rate	2.56%
Minimum [Member]
Expected volatility	135.00%
Risk free interest rate	1.72%

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Warrant Liability (Details 3) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Summary of warrants
Beginning Balance	$ 5,986,781	$ 896,171
Fair value of warrants issued	83,586	3,541,240
Change in fair value of liability to issue warrants	(3,871,101)	(2,238,145)	$ (1,297,840)
Ending Balance	$ 2,199,266	$ 2,199,266

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Warrant Liability (Details Textual) - USD ($)				1 Months Ended			3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 14, 2019	Mar. 05, 2019	Jan. 10, 2019	Jun. 24, 2019	Mar. 31, 2019	Mar. 31, 2019	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Warrants (Textual)
Fair value of the warrant liability								$ 2,199,266		$ 896,171
Change in fair value of warrant liability							$ (3,871,101)	(2,238,145)	$ (1,297,840)
Second Investment Agreement [Member]
Warrants (Textual)
Fair value of the warrant liability								73,073
Change in fair value of warrant liability							10,513	$ 10,513
Investment unit purchase agreement, description				The investor is entitled to purchase from the Company, at the exercise price, at any time on or after 90 days from the issuance date, 83,333 shares of the Company’s common stock (the “June Warrant Shares”).
Stock issued				$ 150,000
Stock issued, shares				166,667
Purchase price per share				$ 0.90
Fair value warrant shares at issuance				$ 83,586
Investment Unit Purchase Agreement [Member]
Warrants (Textual)
Investment unit purchase agreement, description	The Company entered into another Investment Unit Purchase Agreement (the “Second Investment Agreement”) to issue and sell investment units to an investor (the “investor”), in which the investment units consist of one share of the common stock of the Company, and a warrant exercisable for one half share of common stock of the Company at an exercise price of $1.25 per share for cash at a price per investment unit of $0.90
Warrant [Member]
Warrants (Textual)
Warrant exercisable, description			A warrant exercisable for one half share of common stock of the Company at an Exercise Price of $1.25 per share for cash at a price per investment unit of $0.90.
Warrants, description		The Company sold an aggregate of 1,255,222 units of the Company’s securities to an investor at a purchase price of $0.90 per unit for total proceeds of $1,129,700. In connection with the First Investment Agreement, the investor is entitled to purchase from the Company, at the Exercise Price, at any time on or after 90 days from the issuance date, 627,611 shares of the Company’s common stock (the “March Warrant Shares”).	The warrant liability is required to be recorded at fair value with the excess of the fair value over the proceeds received recognized as a loss in earnings. The gross proceeds from the 1,255,222 investment units at $0.90 was $1,129,700. The fair value of the March Warrant Shares at issuance was $1,717,506.					At inception, March 11, 2019, the fair value of the warrant liability was $198,148 while as of June 30, 2019, the fair value of the warrant liability was $82,162. Accordingly, the Company recorded a change in fair value of the warrant liability of $(168,380) and $(115,986) related to the warrants for the three and six months ended June 30, 2019, respectively.
Issued warrants to purchase restricted shares						100,000
Warrant purchase price						$ 0.90
Fair value of the warrant liability						$ 198,148		$ 538,847
Change in fair value of warrant liability							$ (1,046,606)	$ (1,178,659)
Warrant [Member] | Note Ten [Member]
Warrants (Textual)
Warrant issued to purchase shares of common stock					160,715
Warrants exercise price					$ 1.40
Warrants, description								At inception, March 1, 2019, the fair value of the warrant liability was $355,847 while as of June 30, 2019, the fair value of the warrant liability was $141,404. Accordingly, the Company recorded a change in fair value of the warrant liability of $(257,320) and $(214,443) related to Note Ten for the three and six months ended June 30, 2019, respectively.

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Stock-Based Compensation (Details) - shares			1 Months Ended		6 Months Ended	12 Months Ended
	Nov. 01, 2015	Sep. 01, 2015	Oct. 17, 2017	Oct. 22, 2014	Jun. 30, 2019	Dec. 31, 2018
Defined Benefit Plan Disclosure [Line Items]
Granted, weighted average remaining contractual term (in years)					7 years 22 days
Stock options granted					1,245,000
Biotrackthc [Member]
Defined Benefit Plan Disclosure [Line Items]
Stock option, description	BioTrackTHC’s Board approved individual employee option grants (the “Executive Grants”) for three executives (the “Executives”). Pursuant to the Executive Grants, the Executives were each granted stock options to purchase 146,507 shares (totaling 439,521 shares) of BioTrackTHC’s common stock (the “Option”) at an exercise price equal to approximately $7.67. The options vest as to 25% of the shares subject to the Options, one year after the date of grant and then in equal quarterly installments for the three years thereafter, subject to the Executive’s continued employment with BioTrackTHC	BioTrackTHC’s Board approved individual employee option grants (the “Executive Grants”) for three executives (the “Executives”). Pursuant to the Executive Grants, the Executives were each granted stock options to purchase 146,507 shares (totaling 439,521 shares) of BioTrackTHC’s common stock (the “Option”) at an exercise price equal to approximately $7.67. The options vest as to 25% of the shares subject to the Options, one year after the date of grant and then in equal quarterly installments for the three years thereafter, subject to the Executive’s continued employment with BioTrackTHC		BioTrackTHC approved and adopted the BioTrackTHC Stock Plan. The BioTrackTHC Stock Plan set aside and reserved 600,000 shares of BioTrackTHC's common stock for grant and issuance in accordance with its terms and conditions.
2017 Omnibus Incentive Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Reserved for issuance of common stock			5,000,000
Purchased shares of common stock					1,735,000	490,000
Granted, weighted average remaining contractual term (in years)			10 years
Stock options granted					764,945	514,945

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Income Taxes (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Income Taxes (Textual)
Tax carryforward, description	These amounts are available for carryforward for use in offsetting taxable income of future years through 2035.
Percentage of valuation reserve deferred tax benefit	100.00%
Net operating loss carry forward	$ 15,098,000	$ 8,365,000

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Commitments and Contingencies (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Operating lease expense	$ 297,566
Cash paid for amounts included in the measurement of operating lease liabilities	150,696
ROU assets obtained in exchange for operating lease obligations	$ 1,499,752

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Commitments and Contingencies (Details 1) - Operating Lease [Member]	6 Months Ended
	Jun. 30, 2019 USD ($)
Other assets	$ 1,293,245
Accounts payable and accrued liabilities	410,826
Other long-term liabilities	962,716
Total lease liabilities	$ 1,373,542
Weighted average remaining lease term (in years)	3 years 18 days
Weighted average discount rate	6.00%

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Commitments and Contingencies (Details 2) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
2019	$ 238,684	$ 473,495
2020	393,413	420,291
2021	248,223	275,223
2022	195,144	198,144
2023	200,944	199,144
Thereafter	205,434	205,135
Total future minimum lease payments	1,481,842	$ 1,771,432
Less imputed interest	(108,300)
Total	$ 1,373,542

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Commitments and Contingencies (Details Textual)	6 Months Ended
	Jun. 30, 2019 USD ($)
Commitments and Contingencies (Textual)
Lease agreement expires date	Mar. 31, 2022
Additional operating lease obligations	$ 600,000
Lease term	3 years

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Segment Results (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue	$ 3,898,873	$ 1,874,042	$ 7,269,980	$ 3,002,380
Cost of revenue	1,996,699	1,560,387	3,921,918	2,351,092
Gross margin	1,902,174	313,655	3,348,062	651,288
Total operating expenses	4,367,897	2,877,251	8,410,448	5,574,442
Total other income (expense)	7,278,031	735,248	(967,007)	2,656,129
Total net loss	4,812,308	(1,828,348)	(6,029,393)	(2,267,025)
Security and guarding [Member]
Revenue	1,347,529	1,197,201	2,552,240	2,290,975
Cost of revenue	797,944	1,273,693	1,738,530	2,064,398
Gross margin	549,585	(76,492)	813,710	226,577
Total operating expenses	1,903,371	2,455,685	3,637,078	5,152,876
Loss from operations	(1,353,786)	(2,532,177)	(2,823,368)	(4,926,299)
Total other income (expense)	7,265,540	735,239	(979,410)	2,656,120
Total net loss	5,911,754	(1,796,938)	(3,802,778)	(2,270,179)
Systems installation [Member]
Revenue	174,067	100,699	202,608	135,263
Cost of revenue	337,852		499,610
Gross margin	(163,785)	100,699	(297,002)	135,263
Total operating expenses	154,822		187,453
Loss from operations	(318,607)	100,699	(484,455)	135,263
Total other income (expense)	513		433
Total net loss	(318,094)	100,699	(484,022)	135,263
Software [Member]
Revenue	2,377,277	576,142	4,515,132	576,142
Cost of revenue	860,903	286,694	1,683,778	286,694
Gross margin	1,516,374	289,448	2,831,354	289,448
Total operating expenses	2,309,704	421,566	4,585,917	421,566
Loss from operations	(793,330)	(132,118)	(1,754,563)	(132,118)
Total other income (expense)	11,978	9	11,970	9
Total net loss	$ (781,352)	$ (132,109)	$ (1,742,593)	$ (132,109)

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Subsequent Events (Details) - Subsequent Event [Member] - USD ($)	1 Months Ended
	Jul. 29, 2019	Aug. 31, 2019
Subsequent Events (Textual)
Original purchase price		$ 25,000
Unsecured Promissory Note [Member]
Subsequent Events (Textual)
Unsecured promissory note	$ 300,000
Fixed interest rate	12.00%
Maturity date	Jan. 29, 2020