Segment Reporting
 12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Segment Reporting

4. SEGMENT REPORTING

 

The Company has two reportable segments: (1) Monitoring and (2) Distributorships.

 

Monitoring fees on Company installed units

 

The Company rents units directly to customers and installs the units in the customer’s vehicles. The rental periods range from a few months to 2 years and include a combination of down payments made by the customer and monthly payments paid under the agreements with the Company. Revenue is recognized from these companies on the straight-line basis over the term of the agreement. Amounts collected in excess of those earned are classified as deferred revenue in the balance sheet, and amounts earned in excess of amounts collected are reflected in accounts receivable in the balance sheet at December 31, 2017 and December 31, 2016.

 

Distributorships

 

The Company enters into arrangements that include multiple deliverables, which typically consist of the sale of exclusive distributorship territory rights, startup supplies package, promotional material, three weeks of onsite training and ongoing monthly support services. The Company accounts for each material element within an arrangement with multiple deliverables as separate units of accounting. Revenue is allocated to each unit of accounting under the guidance of ASC Topic 605-25, Multiple-Element Revenue Arrangements, which provides criteria for separating consideration in multiple-deliverable arrangements by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third-party evidence is available. The Company is required to determine the best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. The Company generally does not separately sell distributorships or training on a standalone basis. Therefore, the Company does not have VSOE for the selling price of these units nor is third party evidence available and thus management uses its best estimate of selling prices in their allocation of revenue to each deliverable in the multiple element arrangement.

 

The following table summarizes net sales and identifiable operating income by segment:

 

    Years Ended December 31,  
    2017     2016  
          (restated)  
Segment gross profit (a):                
Monitoring   $ 773,395     $ 173,852  
Distributorships     301,240       88,745  
Gross profit     1,074,635       262,597  
                 
Identifiable segment operating expenses (b):                
Monitoring     224,884       19,296  
Distributorships     110,810       44,139  
      335,694       63,435  
                 
Identifiable segment operating income (c):                
Monitoring     548,511       154,556  
Distributorships     190,430       44,606  
      738,941       199,162  
                 
Reconciliation of identifiable segment income to corporate income (d):                
Payroll     473,620       147,231  
Professional fees     146,406       92,705  
General and administrative expenses     841,961       458,351  
Depreciation     2,349       2,014  
Interest expense     943,415       214,708  
Change in fair value of derivative liability     (68,078 )     22,231  
Loss on extinguishment of debt     305,000       116,541  
Impairment of fixed assets     801,983       -  
                 
Loss before provision for income taxes     (2,707,715 )     (854,619 )
                 
Provision for income taxes     1,600       1,600  
Net loss   $ (2,709,315 )   $ (856,219 )
                 
Total net property, plant, and equipment assets                
Monitoring   $ 506,721     $ 107,702  
Distributorships     249,682       246,365  
Corporate     34,930       2,279  
    $ 791,333     $ 356,346  

 

(a) Segment gross profit includes segment net sales less segment cost of sales
(b) Identifiable segment operating expenses consists of identifiable depreciation expense
(c) Identifiable segment operating incomes consists of segment gross profit less identifiable operating expense
(d) General corporate expense consists of all other non-identifiable expenses