The accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial
statements and notes thereto contained in our Company's Form 10-K, filed with the SEC on February 14, 2017. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results
of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year ended October 31, 2017.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and Business Activity
ProBility Media Corporation (formerly Panther
Biotechnology, Inc.) (the “Company”) was incorporated in the State of Nevada on July 11, 2011. The Company was originally
incorporated as New Era Filing Services Inc., changed its name to NEF Enterprises, Inc. on October 4, 2011, changed its name to
Panther Biotechnology, Inc. on October 29, 2014 and changed its name to ProBility Media Corporation on February 1, 2017. The Company
incorporated a wholly-owned subsidiary, PubCo Reporting Services, Inc., formerly known as New Era Filing Services, Inc., in Florida
on November 20, 2012. Effective June 1, 2015, the Company sold PubCo Reporting Services, Inc. to its then management.
On October 31, 2016 (the “Closing
Date”), we consummated the transactions contemplated by a Share Exchange Agreement (the “Exchange Agreement”
or the “Business Combination”), by and between the Company and Brown Technical Media Corporation (“Brown”).
In connection with the closing of the Exchange Agreement, we issued 32,000,000 restricted shares of our common stock, to the shareholders
of Brown, which included Evan M. Levine, our Chief Executive Officer and director (6,600,000 shares of common stock beneficially
owned by Mr. Levine, when including minor children and affiliates, who received shares in the exchange), Noah I. Davis, our President
and Chief Operating Officer (7,175,522 shares of common stock beneficially owned by Mr. Davis), and Steven M. Plumb, our Chief
Financial Officer (11,469,785 shares of common stock beneficially owned by Mr. Plumb, when including shares held by his minor children
and affiliates, who received shares in the exchange) in consideration for 100% of the outstanding capital stock of Brown, and Brown
became our wholly-owned subsidiary. This transaction has been accounted for as a reverse merger with Brown as the surviving entity.
The assets of the Company that existed prior to the transaction have been recorded at their historical value as of the closing
of the transaction and has been added to the historical cost basis of the assets of Brown.
Brown was incorporated on January 21, 2014
and is a provider of codes, standards, training materials and related materials in print and electronically to small, medium and
large businesses, government, and non-profit organizations in the United States.
Brown acquired a 51% interest on January
31, 2014 in Brown Book Shop, Inc., (“Brown Books”) a Texas corporation that was formed as Brown Book Shop, a sole-proprietorship,
in 1946, and on June 8, 1976 was incorporated in Texas as Brown Book Shop, Inc. The Company operates an e-commerce website www.browntechnical.org.
On October 31, 2016, Brown acquired the remaining 49% of Brown Books.
On August 6, 2014, Brown formed Pink Professionals,
LLC (“Pink”) to develop and market social networking software aimed at female managers and professionals in certain
targeted professions, such as Oil and Gas, Finance and Information Technology. At the time of formation, Brown owned 75% of the
membership units of Pink. On October 31, 2014, Brown sold the rights to the use of the software in the Oil and Gas industry to
the 25% owner of Pink in exchange for cash consideration and the cancelation of such 25% owner’s membership units. Accordingly,
Brown now owns 100% of the equity in Pink.
On January 19, 2017, the Company acquired
100% of the membership units of Premier Purchasing and Marketing Alliance LLC, a New York limited liability company, also known
as National Electrical Wholesale Providers (“NEWP”). The acquisition of NEWP was effective January 1, 2017.
On January 26, 2017, the Company acquired
100% of the membership units of One Exam Prep, LLC, (“One Exam”) a Florida limited liability company. The acquisition
of One Exam was effective January 1, 2017.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The Financial Statements have been prepared
in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules
and regulations of the U.S. Securities and Exchange Commission (“SEC”).
Principles of Consolidation
The Consolidated Financial Statements include
the accounts of the Company and its majority owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
Use of Estimates
The preparation of the Consolidated Financial
Statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial
Statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical
experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which
form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results could differ from those estimates.
Business Combinations
The Company accounts for all business combinations
using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible
assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the
fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired
and liabilities assumed, management makes significant estimates and assumptions. The Company may utilize third-party valuation
specialists to assist the Company in the allocation. Initial purchase price allocations are subject to revision within the measurement
period, not to exceed one year from the date of acquisition. Acquisition-related expenses and transaction costs associated with
business combinations are expensed as incurred.
Cash
Cash and cash equivalents include short-term
investments with original maturities of 90 days or less. The recorded value of our cash and cash equivalents approximates their
fair value.
Accounts Receivable
Trade accounts receivable are recorded
at the invoiced amount and typically do not bear interest. The Company provides allowances for doubtful accounts related to accounts
receivable for estimated losses resulting from the inability of its customers to make required payments. The Company takes into
consideration the overall quality of the receivable portfolio along with specifically-identified customer risks. The Company has
an allowance for doubtful accounts of $39,031 and $19,635 as of April 30, 2017 and October 31, 2016, respectively.
Inventory
Inventory is valued at the lower of cost
or market value. Cost is determined using a weighted-average cost method. Price protection is recorded when earned as a reduction
to the cost of inventory. The Company decreases the value of inventory for estimated obsolescence equal to the difference between
the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known
inventory-related risks, and assumptions about future demand and market conditions. The Company has no allowance as of April 30,
2017 and October 31, 2016.
Property and Equipment
Property and equipment are stated at cost,
less accumulated depreciation. The Company calculates depreciation expense using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of their useful lives or the initial lease term. Expenditures
for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
Classification
|
|
Estimated Useful Lives
|
Equipment
|
|
5 to 7 years
|
Leasehold improvements
|
|
4 to 5 years
|
Furniture and fixtures
|
|
4 to 7 years
|
Websites
|
|
3 years
|
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
Fair Value Measurements
Fair value is defined under GAAP 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. A fair value hierarchy has been established for valuation inputs to prioritize the inputs into three levels
based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported
in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its
entirety. These levels are:
Level 1 – observable inputs such
as quoted prices for identical instruments traded in active markets.
Level 2 – inputs are based on quoted
prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active
and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
Level 3 – inputs are generally unobservable
and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.
The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow
models and similar techniques.
Revenue Recognition
The Company records revenue from sales
transactions when title and risk of loss are passed to the customer, there is persuasive evidence of an arrangement for sale, shipment
has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
The Company’s shipping terms typically specify F.O.B. origination, at which time title and risk of loss have passed to the
customer.
The Company leverages drop-shipment arrangements
with many of its vendors and suppliers to deliver products to its customers without having to physically hold the inventory at
its warehouses, thereby increasing efficiency and reducing costs. The Company recognizes revenue for drop-shipment arrangements
upon shipment to the customer with contract terms that typically specify F.O.B. shipping point.
The Company records freight billed to its
customers as revenue and the related freight costs as a cost of sales.
Sales Taxes
The State of Texas imposes a sales tax
on the Company’s sales to nonexempt customers. The Company collects that sales tax from customers and remits the entire amount
to the State. The Company’s accounting policy is to exclude the tax collected and remitted to the State from revenue and
cost of sales.
Leases
All leases are reviewed for capital or
operating classification at their inception under the guidance of Accounting Standards Codification Topic 840, “Leases”
(“ASC 840”). We conduct operations primarily under operating leases. For leases that contain rent escalations, we
record the total rent payable during the lease term, as defined above, on a straight-line basis over the term of the lease and
record the difference between the rents paid and the straight-line rent as a deferred rent liability.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
Advertising Costs
We expense advertising costs as incurred
and recorded $206,874 and $72,598 during the six months ended April 30, 2017 and 2016, respectively.
Income Taxes
Deferred income taxes are provided to reflect
the differences between the tax bases of assets and liabilities and their reported amounts in the Financial Statements using enacted
tax rates in effect for the year in which the differences are expected to reverse. The Company performs an evaluation of the realizability
of deferred tax assets on a quarterly basis. This evaluation requires management to make use of estimates and assumptions and considers
all positive and negative evidence and factors, such as the scheduled reversal of temporary differences, the mix of earnings in
the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies.
The Company accounts for unrecognized tax
benefits based upon its assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.
The Company reports a liability for unrecognized tax benefits resulting from unrecognized tax benefits taken or expected to be
taken in a tax return and recognizes interest and penalties, if any, related to its unrecognized tax benefits in income tax expense.
Intangible Assets
Intangible assets are amortized using the
straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and
take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.
All of our intangible assets are subject to amortization. No impairment of intangible assets was identified for the six months
ended April 30, 2017 or 2016.
Impairment of Long-Lived Assets
The Company reviews the carrying value
of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value
of an asset should no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating
the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted
cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s
carrying value and estimated fair value.
Investments in Equity Interest
The Company reviews its investments for
other-than-temporary impairment whenever events or changes in business circumstances indicate that the carrying value of the investment
may not be fully recoverable. Investments identified as having an indication of impairment are subject to further analysis to determine
if the impairment is other-than-temporary and this analysis requires estimating the fair value of the investment. The determination
of fair value of the investment involves considering factors such as current economic and market conditions, the operating performance
of the companies including current earnings trends and forecasted cash flows, and other company and industry specific information.
Share-based Expenses
ASC 718 “
Compensation –
Stock Compensation”
prescribes accounting and reporting standards for all share-based payment transactions in which employee
services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity
instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including
grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values.
That expense is recognized over the period during which an employee is required to provide services in exchange for the award,
known as the requisite service period (usually the vesting period).
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
The Company accounts for stock-based compensation
issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “
Equity – Based Payments
to Non-Employees”
Measurement of share-based payment transactions with non-employees is based on the fair value of whichever
is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based
payment transaction is determined at the earlier of performance commitment date or performance completion date.
Fair Value of Financial Instruments
The Company believes that the fair value
of its financial instruments comprising cash, accounts payable, and convertible notes approximate their carrying amounts. As of
April 30, 2017 and October 31, 2016, the Company had no Level 1 or Level 2 financial assets or liabilities, and Level 3 financial
liabilities consisted of the Company’s derivative liability.
The following table presents the fair value measurement information
for the Company as of April 30, 2017:
|
|
Carrying Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
250,556
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
250,556
|
|
The following table presents the fair value measurement information
for the Company as of October 31, 2016:
|
|
Carrying Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
218,943
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
218,943
|
|
Loss per Share
Basic loss per common share equals net
loss divided by weighted average common shares outstanding during the period. Diluted loss per share includes the impact on dilution
from all contingently issuable shares, including options, warrants and convertible securities. The common stock equivalents from
contingent shares are determined by the treasury stock method. The Company incurred net losses for the three and six months ended
April 30, 2017, and therefore, basic and diluted loss per share for those periods are the same as all potential common equivalent
shares would be antidilutive. For the six months ended April 30, 2017, the Company had 33,000 common stock warrants outstanding,
at an exercise price of $6.00 per share, expiring on August 31, 2020, that were excluded from the calculation of diluted net loss
per share because to do so would be anti-dilutive.
Recent Accounting Pronouncements
Balance Sheet Classification of Deferred
Taxes
In November 2015, the Financial Accounting
Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-17, Income Taxes (Topic 740):
Balance Sheet Classification of Deferred Taxes, simplifying the balance sheet classification of deferred taxes by requiring all
deferred taxes, along with any related valuation allowance, to be presented as noncurrent. This ASU is effective for the Company
beginning in the first quarter of 2017, allows for early adoption and may be applied either prospectively or retrospectively. This
ASU is not expected to have a material impact on the Company’s Financial Statements.
Simplifying the Measurement of Inventory
In July 2015, the FASB issued ASU 2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory, amending the subsequent measurement of inventory by requiring
inventory to be measured at the lower of cost and net realizable value instead of the lower of cost or market value. This ASU
is effective for the Company beginning in the first quarter of 2017, allows for early adoption and must be applied prospectively
after the date of adoption. The Company has adopted ASU 2015-11 and the implementation had no
material impact on the Company’s Financial Statements.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606), replacing most existing revenue recognition guidance under GAAP and eliminating
industry specific guidance. The core principal of the new guidance is that an entity should recognize revenue for the transfer
of goods and services equal to an amount it expects to be entitled to receive for those goods and services. In August 2015, the
FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective
date by one year. This ASU will be effective for the Company beginning in the first quarter of 2018, allows for early adoption
in the first quarter of 2017 and may be applied using either a full retrospective approach or a modified retrospective approach.
This ASU is not expected to have a material impact on the Company’s Financial Statements.
The Company does not expect the adoption
of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations
or cash flows.
Reclassifications
Certain reclassifications have been made
to the prior year financial statements to conform to the current year presentation.
NOTE 3 – GOING CONCERN AND LIQUIDITY
CONSIDERATIONS
The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has a cumulative net loss since inception of $2,840,591, negative working capital
of $1,830,146 and has required additional capital raises and credit card advances to support its operations. These factors raise
substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s
continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving capital
from shareholders and other related parties and obtain financing from third parties. No assurance can be given that the Company
will be successful in these efforts.
The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and Equipment
Property and equipment consists of the following:
|
|
April 30, 2017
|
|
|
October 31, 2016
|
|
Equipment
|
|
$
|
68,182
|
|
|
$
|
68,182
|
|
Web sites
|
|
|
32,956
|
|
|
|
32,956
|
|
Leasehold improvements
|
|
|
19,002
|
|
|
|
19,002
|
|
Office equipment
|
|
|
86,028
|
|
|
|
5,533
|
|
Property and equipment
|
|
|
206,168
|
|
|
|
125,673
|
|
Less: accumulated depreciation
|
|
|
(39,539
|
)
|
|
|
(27,163
|
)
|
Property and equipment, net
|
|
$
|
166,629
|
|
|
$
|
98,510
|
|
Depreciation expense for the six months
ended April 30, 2017 and 2016, is $12,376 and $1,659, respectively.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 5 – COMMITMENTS AND CONTINGENCIES
License Agreement with University of Rochester
On April 16, 2015, the Company entered
into an exclusive patent license agreement with University of Rochester (“Rochester”). Rochester granted the Company
a worldwide exclusive, royalty-bearing license, with the right to sublicense, for patents and technology related to the treatment
of diabetes (the “Patent Products”). According to the agreement, the Company will reimburse Rochester for all mutually
agreed fees and costs relating to the filing, prosecution, and maintenance of patent applications, including without limitation,
interferences, oppositions, and reexaminations, and the maintenance and defense of patents in patent rights, including fees and
cost incurred on, and after the closing date of the agreement.
As partial consideration for the rights
conveyed by Rochester under this agreement, the Company agreed to issue 25,437 shares of the Company’s common stock to Rochester
as a one-time, non-refundable, non-creditable license issue fee valued at $200,000 based upon the average price per share during
the week preceding the closing date, which was $7.86. Rochester could not transfer the shares before August 30, 2016. The Company
capitalized the $200,000 as an intangible license asset on the consolidated balance sheet.
In addition to the above license fee, for
the term of the agreement on an annual basis measured from the closing date of the agreement, the Company will pay at the beginning
of the following year a non-refundable minimum annual maintenance fee of $15,000 in cash or Company stock each year prior to the
onset of clinical trials. The Company has not made this payment and is in default on the agreement. Rochester will waive the pre-clinical
trial annual maintenance fee if the Company spends at least $200,000 annually on the drug development that would enhance the patent
rights conveyed. After onset of clinical trials, the Company will pay a non-refundable minimum annual maintenance fee of $25,000
in cash or Company stock each year or part of year until the first product is commercialized and sales royalty payments begin.
Annual maintenance fees paid in cash will be credited against the costs of maintaining the Patent Rights for that year.
During the term of this Agreement, the
Company agreed to pay to Rochester an earned royalty of 5% of the first $10,000,000, 4% of the second $10,000,000, 3% of the third
$10,000,000, 2% of the fourth $10,000,000 in net sales revenue produced from Patent Products, and l % of all remaining net sales
revenue produced from Patent Products. Earned royalty payments are due and payable within 30 days of the end of each calendar quarter.
The Company agreed to pay to Rochester
50% of all cash and non-cash consideration derived from sublicenses granted by the Company in Patent Products, excluding earned
royalties, loans, equity investments, and research and development support.
The Company agreed to pay Rochester the
milestone payments per product as set forth below:
|
a)
|
If the Company sponsors Phase I, II and III clinical trials, the Company will pay $500,000 within 30 days of approval of any Patent Product; and
|
|
b)
|
If the Company sells a controlling interest in or sublicenses substantially all of the Patent Products before the initiation of Phase II clinical trial, the Company will pay:
|
|
1)
|
$200,000 within 30 days of initiation of Phase II clinical trial;
|
|
2)
|
$200,000 within 30 days of initiation of Phase III clinical trial; and
|
|
3)
|
$300,000 within 30 days of approval of a Patent Product,
|
As of October 31, 2016, and through the
date of this filing, none of the milestones noted above for Rochester have been met.
The term of this Agreement will commence
on the closing date and will end upon the latest of (i) expiration of the last-to-expire valid claim of the Patent Products; or
(ii) the 10 year anniversary of commercial launch of any Patent Product.
The University of Rochester License required
that the Company spend $200,000 annually on drug development or pay an annual maintenance fee of $15,000 in cash or an equivalent
number of the Company’s common stock. The Company has defaulted on these requirements. Although the Company has not received
a notice of default from Rochester regarding the default, the Company recognized an impairment charge of $191,667 related to the
Rochester License, which represents the net book value of the intangible license, prior to the Brown Transaction.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 5 – COMMITMENTS AND CONTINGENCIES (CONT’D)
Faulk Pharmaceuticals
On July 14, 2015, the Company closed on
an asset acquisition agreement with Faulk Pharmaceuticals, Inc. (“Faulk”). The assets include 23 granted patents owned
by Faulk, related to the treatment of cancer, virus infections, and treatment of parasitic infections. (“Faulk Assets”)
The Company issued 50,000 shares of restricted
common stock, with a fair market value of $274,000 based on our then closing stock price of $5.48. The shares may be sold
by Faulk, assigned or transferred in accordance with securities laws and vest monthly over the following schedule:
|
1)
|
33% of the shares beginning 6 months after the closing date;
|
|
2)
|
an additional 33% of the shares beginning 9 months after the closing date; and
|
|
3)
|
the remaining 34% of the shares beginning 12 months after the closing date.
|
For each calendar year continuing until
the date that is 10 years after the expiration of the last of the patents conveyed to the Company, a royalty on net revenue received
by the Company in that year from the sales or licenses of any products commercialized by the Company, its successors or assignees
as a direct result of the assets acquired or the technology or processes related to the assets acquired, in the following amount:
|
1)
|
5% of the first $10,000,000 in such net revenue;
|
|
2)
|
4% of the second $10,000,000 in such net revenue;
|
|
3)
|
3% of the third $10,000,000 in such net revenue;
|
|
4)
|
2% of the forth $10,000,000 in such net revenue; and
|
|
5)
|
1% of such net revenue in excess of $40,000,000.
|
Officer Compensation
In November 2015, the board of directors authorized compensation
for Mr. Levine, the Chief Executive Officer of the Company, as follows:
|
·
|
A $25,000 lump sum payment;
|
|
·
|
2016 salary established at $15,000 per month commencing January 15, 2016;
|
|
·
|
Healthcare reimbursement of $1,000 per month; and
|
|
·
|
2016
bonus, if warranted, will be determined at the discretion of the compensation committee of the Board of Directors and paid in
a lump sum in November or December 2016. The bonus was not paid.
|
In April 2016, the Company retained Steven
M. Plumb, CPA as Chief Financial Officer, through a contract with his consulting firm, Clear Financial Solutions, Inc. (“Clear
Financial”). Clear Financial is paid $6,000 per month for Mr. Plumb’s services. In February 2014, Brown entered into
consulting agreements with Mr. Davis and Mr. Plumb. The agreements were modified on May 1, 2016 such that Mr. Davis, the President
and Chief Operating Officer is paid $11,000 per month by Brown and Mr. Plumb, the Chief Financial Officer, is paid $4,500 per month
by Brown. The contracts expire on December 19, 2017.
During the six months ended April 30,
2017, Mr. Levine, Mr. Davis, and Mr. Plumb were paid $68,000, $74,500 and $77,500, respectively, which is current period compensation
and liquidation of amounts owed from prior periods.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 6 – INTANGIBLE ASSETS
Intangible assets consisted of the following as of April 30,
2017 and October 31, 2016:
|
|
Useful life
|
|
|
April 30, 2017
|
|
|
October 31, 2016
|
|
Faulk Patents
|
|
|
10
|
|
|
$
|
274,000
|
|
|
$
|
274,000
|
|
Customer Lists
|
|
|
3
|
|
|
|
55,702
|
|
|
|
–
|
|
Copyrights
|
|
|
5
|
|
|
|
886,570
|
|
|
|
–
|
|
Accumulated amortization and impairment
|
|
|
|
|
|
|
(114,385
|
)
|
|
|
(35,392
|
)
|
Intangible assets, net
|
|
|
|
|
|
$
|
1,101,887
|
|
|
$
|
238,608
|
|
Amortization expense for the six months ended April 30, 2017
and 2016 is $78,993 and $0, respectively.
NOTE 7 – RELATED PARTY TRANSACTIONS
On November 7, 2016, the Company agreed
to issue 500,000 shares of its restricted common stock to the Vice Chairman of the Board, Richard Corbin. The fair market value
of the common stock was $395,000 on the date of issuance.
On December 23, 2016, the Company sold
333,334 shares of restricted common stock to the Vice Chairman of the Board of Directors, Richard Corbin, for gross proceeds of
$50,000.
On January 30, 2017, the Company borrowed
$70,000 from Richard Corbin, the Vice Chairman of the Board. The loan was due on February 10, 2017, at which time the Company will
repay the loan and $1,000 of interest. The Company is currently in default. As of April 30, 2017, the outstanding balance was $45,000.
As of April 30, 2017 and October 31, 2016,
total advances from certain officers, directors and shareholders of the Company were $88,000, which were used for payment of general
operating expenses. The related parties advances have no conversion provisions into equity, have no paperwork associated with them
and do not incur interest.
The Company uses credit cards of
related parties to pay for certain operational expenses. The Company has agreed to pay the credit card balances, including related
interest. As of April 30, 2017 and October 31, 2016, the Company has outstanding balances on these credit cards of $411,999 and
$271,704, respectively.
During the six months ended April 30,
2017, the Company advanced $65,394 to an urgent care center that is managed by the President and CFO of the Company, who
collectively own 6% of the equity of the urgent care center. The Company owns 5% of the equity in the urgent care center. On
April 30, 2017, the Company recognized an impairment charge of $111,361 related to the investment.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 8 – NOTES PAYABLE
Notes payable consists of the following:
|
|
As of,
|
|
|
|
April 30, 2017
|
|
|
October 31, 2016
|
|
Note payable dated September 9, 2016, bearing interest at 14.9% per annum, due September 9, 2017
|
|
$
|
68,140
|
|
|
$
|
49,799
|
|
Note payable dated May 14, 2015, bearing interest at 18% per annum, due October 2017, guaranteed by the officers of the Company.
|
|
|
101,606
|
|
|
|
100,496
|
|
Note payable dated May 19, 2015, bearing interest at 33% per annum, due September 14, 2017, and guaranteed by the officers of the Company. The effective interest rate is 35.6% per annum.
|
|
|
144,973
|
|
|
|
241,770
|
|
Note payable dated October 23, 2014, bearing interest at 10% per annum and due in August 2017
|
|
|
109,115
|
|
|
|
131,960
|
|
Note payable dated March 16, 2015 bearing interest at 9%, due June 30, 2017.
|
|
|
51,000
|
|
|
|
51,000
|
|
Note payable dated January 1, 2017, bearing interest at 8%, due September 30, 2017. The note is secured by the membership interest of Premier Purchasing and Marketing Alliance, LLC held by the Company.
|
|
|
50,000
|
|
|
|
–
|
|
Non-interest bearing note payable dated January 1,
2017, due in three installments of $16,666 each on January 31, 2017, February 28, 2017 and March 31, 2017. The note is
secured by the membership interest of Premier Purchasing and Marketing Alliance, LLC held by the Company. As of the
filing date, the Company has made the required installment payments.
|
|
|
50,000
|
|
|
|
–
|
|
Non-interest bearing note payable dated January 1, 2017, due on March 1, 2017. The Company is currently in default on this note. The note is secured by the membership interest of Premier Purchasing and Marketing Alliance, LLC held by the Company.
|
|
|
36,830
|
|
|
|
–
|
|
Note payable dated January 30, 2017, bearing interest at 10%, due February 10, 2017. The Company is currently in default on this note.
|
|
|
45,000
|
|
|
|
–
|
|
Note payable dated January 17, 2017, bearing interest at 7%, due on January 17, 2018, and guaranteed by the officers of the Company.
|
|
|
56,182
|
|
|
|
–
|
|
Note payable dated March 16, 2015 bearing interest at 9%, due June 30, 2017
|
|
|
82,066
|
|
|
|
–
|
|
Note payable dated February 21, 2017, bearing interest at 28% per annum, due February 21, 2018, and guaranteed by the officers of the Company.
|
|
|
22,092
|
|
|
|
–
|
|
Total notes payable
|
|
|
817,004
|
|
|
|
575,025
|
|
Less original issue discount
|
|
|
(156,240
|
)
|
|
|
(156,240
|
)
|
Amortization of discount
|
|
|
107,328
|
|
|
|
82,063
|
|
Notes payable, net
|
|
$
|
768,092
|
|
|
$
|
500,848
|
|
NOTE 9 – STOCK PAYABLE
As of October 31, 2016, the Company has
324,000 shares of its restricted common stock that were fully vested and have not been issued. The shares have a fair market value
of $118,230 as of October 31, 2016, of which 300,000 shares valued at $84,562 is owed to related parties. These shares were issued
during the six months ended April 30, 2017 and the stock payable balance was $0 on April 30, 2017.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
|
|
April 30,
|
|
|
October 31,
|
|
Description
|
|
2017
|
|
|
2016
|
|
On August 20, 2015, the Company executed a convertible note payable in the original principal amount of $247,000 for net proceeds of $220,000, payable on March 31, 2018 bearing interest at 10% per annum. This note is convertible into the Company’s common stock at $7.50 per share unless the market capitalization of the Company falls below $15,000,000, at which point the conversion price will equal the market price of the Company’s common stock on the date of conversion. On October 29, 2015, the market capitalization of the Company fell below $15,000,000 and the variable conversion feature became permanent. The note is unsecured. See below.
|
|
$
|
205,000
|
|
|
$
|
265,000
|
|
|
|
|
|
|
|
|
|
|
During the year ended October 31, 2016, the Company sold convertible promissory notes in
aggregate amount of $87,000 to three investors. During the six months ending April 30, 2017, the Company sold an additional
note with a face value of $50,000. The notes bear interest at 10% per annum and may be converted into the common stock of the
Company upon the completion of a capital raise of $500,000 by December 31, 2016 (a “Qualified Raise”). The notes
may be converted into common stock at 75% of the price of the capital raised in the Qualified Raise. On December 31, 2016,
notes with a principal and accrued interest balance of $88,626 were converted into 709,008 shares of the Company’s
common stock. The remaining note is due on December 31, 2017.
|
|
|
50,000
|
|
|
|
87,000
|
|
|
|
|
|
|
|
|
|
|
On January 29, 2017, the Company executed a non-interest bearing convertible note in the original principal amount of $300,000, payable on January 20, 2018. The note is convertible into the Company’s common stock at $0.50 per share, no earlier than one year from the date of the note. The note is secured by the membership units of One Exam Prep, LLC held by the Company.
|
|
|
300,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable, net
|
|
$
|
555,000
|
|
|
$
|
352,000
|
|
On October 11, 2016, the Company entered
into a Settlement Agreement with Typenex Co-Investment, LLC (“Typenex”), whereby the Company and Typenex agreed to
modify the terms of the Secured Convertible Promissory Note dated August 20, 2015 (the “Note”) between the Company
and Typenex. Under the terms of the Settlement Agreement, the parties agreed that the Company will repay $265,000 plus accrued
interest (the “Settlement Amount”) in fourteen payments. The first thirteen payments will be in the amount of $20,000
and the fourteenth payment will be in the amount of the unpaid balance of the Settlement Amount. The first payment was due and
paid on October 21, 2016. Subsequent payments are due on the fifth day of each month thereafter. The Company will make the first
thirteen payments as follows: (i) $10,000 in cash, and (ii) if elected by Typenex in its sole discretion, up to $10,000 in shares
of Company’s common stock. The conversion price of the portion of the payment to be made in the Company’s common stock
will be based upon the market price which shall mean 60% multiplied by the average of the three (3) lowest Closing Bid Prices in
the ten (10) Trading Days immediately preceding the applicable payment date.
On May 12, 2017, Typenex sold the Note
to an unrelated third party. In connection with the sale of the Note, the Company and the purchaser agreed to modify the terms
of the Note so as to change the conversion price from a variable conversion rate to $0.04 per share.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 11 – LONG TERM DEBT
Long term debt consists of unsecured notes
payable to the former shareholders of the Company related to the acquisition of Brown Book Shop, Inc. The notes bear interest at
8% per annum and are due February 1, 2019, with monthly principal and interest payments totaling $4,629. The balance on the notes
is $357,136 and $370,056 at April 30, 2017 and October 31, 2016, respectively.
Years ending April 30,
|
|
|
Future Principal Payments
|
|
|
2018
|
|
|
$
|
25,341
|
|
|
2019
|
|
|
|
90,348
|
|
|
2020
|
|
|
|
16,204
|
|
|
2021
|
|
|
|
17,549
|
|
|
2022
|
|
|
|
19,006
|
|
|
Thereafter
|
|
|
|
188,688
|
|
|
|
|
|
$
|
357,136
|
|
The fair values approximate the related
carrying values of the Company’s long-term debt, including current maturities.
NOTE 12 – CAPITALIZED LEASES
The Company has an obligation under a capitalized
lease for certain equipment with a lease term of five years, expiring through May 2021. The capital lease obligation totaled $71,578
at April 30, 2017, and require monthly payments of $2,044. Interest is imputed at an average rate of approximately 18.00%. At April
30, 2017, the cost of rental equipment under capital leases amounted to $76,410 and related accumulated depreciation amounted to
$5,258. The rental equipment may be repurchased at favorable prices by the Company upon expiration of the lease term (generally
at the fair market value of the equipment at the expiration of the lease). The liability under each lease is secured by the underlying
equipment on the lease.
At April 30, 2017, future minimum lease
payments by year and the present value of future minimum capital lease payments are as follows:
Years ending April 30,
|
|
|
Amount
|
|
|
2018
|
|
|
$
|
24,528
|
|
|
2019
|
|
|
|
24,528
|
|
|
2020
|
|
|
|
24,528
|
|
|
2021
|
|
|
|
24,528
|
|
|
2022
|
|
|
|
4,171
|
|
|
Total minimum payments
|
|
|
$
|
102,283
|
|
|
Less amount representing interest
|
|
|
|
(30,705
|
)
|
|
Present value of minimum lease payments
|
|
|
|
71,578
|
|
|
Less: current portion
|
|
|
|
(12,654
|
)
|
|
Total long-term portion
|
|
|
$
|
58,924
|
|
NOTE 13 – DERIVATIVE LIABILITIES
On August 20, 2015, the Company issued
a convertible note agreement with a variable conversion feature that gave rise to an embedded derivative instrument. The derivative
feature has been valued using a binomial lattice-based option valuation model using holding period assumptions developed from
the Company’s business plan and management assumptions, and expected volatility from comparable companies including OTC
Pink® and small-cap companies. Increases or decreases in the Company’s share price, the volatility of the share price,
changes in interest rates in general, and the passage of time will all impact the value of the derivative instrument. The Company
re-values the derivative instrument at the end of each reporting period and any changes are reflected as changes in derivative
liabilities in the consolidated statements of operations. The assumptions used are as follows:
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 13 – DERIVATIVE LIABILITIES
(CONT’D)
|
|
April 30, 2017
|
|
|
October
31, 2016
|
|
Market value of common stock on measurement date (1)
|
|
$
|
0.55
|
|
|
$
|
0.56
|
|
Adjusted conversion price (2)
|
|
$
|
0.1800
|
|
|
$
|
0.2304
|
|
Risk free interest rate (3)
|
|
|
0.99%
|
|
|
|
0.68%
|
|
Life of the note in years
|
|
|
0.811 years
|
|
|
|
1.726 years
|
|
Expected volatility (4)
|
|
|
583.67%
|
|
|
|
360.57%
|
|
Expected dividend yield (5)
|
|
|
–
|
|
|
|
–
|
|
|
(1)
|
The market value of common stock is based on closing market price as of initial valuation date.
|
|
(2)
|
The adjusted conversion price is calculated based on conversion terms described in the note agreement.
|
|
(3)
|
The risk-free interest rate was determined by management using the 2 year Treasury Bill as of the respective offering or measurement date.
|
|
(4)
|
The volatility factor was estimated by management using the historical volatilities of the Company’s stock.
|
|
(5)
|
Management determined the dividend yield to be 0% based upon its expectation that it will not pay dividends for the foreseeable future.
|
The valuation of the derivative liability
was $250,556 and $218,943 on April 30, 2017 and October 31, 2016. During the six months ended April 30, 2017, the Company recognized
derivative expense of $113,853 related to the change in fair value and gain on debt extinguishment of $82,240 as a result of principal
payments totaling $60,000.
NOTE 14 – STOCKHOLDERS’
EQUITY
On November 7, 2016, the Company agreed
to issue 500,000 shares of its restricted common stock to the Vice Chairman of the Board, Richard Corbin. The fair market value
of the common stock was $395,000 on the date of issuance.
On November 7, 2016, the Company agreed
to issue 75,000 shares of restricted common stock to James Sapirstein, a former director of the Company, for his service as a director.
The fair market value of the common stock was $59,250 on the date of issuance.
On November 7, 2016, the
Company formed a Scientific Advisory Board (“SAB”) comprised of David Barshis, John Norton, and Heinz-Josef Lenz.
The Company agreed to issue 150,000 shares of its restricted common stock to each member of the SAB or a total of 450,000
shares of common stock as compensation for their service on the SAB. The fair market value of the common stock was $355,500
on the date of issuance.
On November 8, 2016, the Company issued
23,187 shares of restricted common stock to the former Chairman of the Board for the settlement of stock payable. The fair market
value of the common stock was $60,287 on the date of issuance.
On November 8, 2016, the Company issued
25,317 shares of restricted common stock to a consultant as compensation. The fair market value of the common stock was $20,000
on the date of issuance.
On November 8, 2016, the Company issued
180,000 shares of restricted common stock to Steven Plumb, the Company’s Chief Financial Officer, as compensation. These
shares had been authorized by the board of directors in March 2016 and were vesting on a monthly basis. In November 2016, the board
of directors agreed to accelerate the vesting of the shares and issue all of the shares originally granted. The fair market value
of the common stock was $150,505 on the date of grant.
On November 22, 2016, the Company sold
566,666 shares of restricted common stock for gross proceeds of $85,000.
On December 23, 2016, the Company sold
333,334 shares of restricted common stock to the Vice Chairman of the Board of Directors, Richard Corbin, for gross proceeds of
$50,000.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 14 – STOCKHOLDERS’
EQUITY (CONT’D)
On December 31, 2016, investors holding
convertible notes with a face value of $87,000 converted their notes into 709,008 shares of restricted common stock according to
the terms of the agreement.
In December 2016 and January 2017, the
Company sold an aggregate of 1,256,667 shares of restricted common stock for gross proceeds of $188,500.
On January 19, 2017, the Company issued
25,253 shares of restricted common stock to a consultant for services rendered. The fair market value of the shares on the date
of issuance was $25,000.
On January 19, 2017, the Company issued
645,000 shares of restricted common stock under the terms of an Exchange Agreement with the owners of Premier Purchasing and Marketing
Alliance, LLC. The fair market value of the shares on the date of issuance was $370,875.
On January 30, 2017, the Company sold 53,333
shares of restricted common stock for gross proceeds of $8,000.
On February 6, 2017, the Company issued
12,500 shares of restricted common stock to a consultant for services rendered pursuant to a consulting agreement entered on February
15, 2017. The fair market value of the common stock was $7,188 on the date of issuance.
On February 10, 2017, the Company sold
166,667 shares of restricted common stock for gross proceeds of $25,000.
On March 1, 2017, the Company sold 500,000
shares of restricted common stock to two investors for gross proceeds of $75,000.
On March 7, 2017, the Company issued 27,778
shares of restricted common stock to a consultant for services rendered pursuant to a consulting agreement entered on January 18,
2017. The fair market value of the common stock $25,000 on the date of issuance.
On March 20, 2017, the Company issued 48,077
shares of restricted common stock to a consultant for services rendered pursuant to a consulting agreement entered on January 18,
2017. The fair market value of the common stock $25,000 on the date of issuance.
On April 20, 2017, the Company issued 47,170
shares of restricted common stock to a consultant for services rendered pursuant to a consulting agreement entered on January 18,
2017. The fair market value of the common stock $25,000 on the date of issuance.
On April 14, 2017, the Company sold 66,667
shares of restricted common stock to an investor for gross proceeds of $10,000.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 15 – ACQUISITIONS
Premier Acquisition
On January 19, 2017, the Company executed
a Share Exchange Agreement (the “Premier Exchange Agreement”), by and between the Company, Premier Purchasing and Marketing
Alliance LLC (“Premier”), and the sole member of Premier, Scott Schwartz. In connection with the closing of the transactions
contemplated by the Premier Exchange Agreement (the “Premier Exchange”), we acquired 100% of the outstanding membership
interests of Premier from Mr. Schwartz in consideration for $557,705 in consideration as follows:
|
·
|
$136,830 in notes payable;
|
|
·
|
$370,875 of common stock - 645,000 shares
of restricted common stock (the “Premier Shares”).
|
The amounts owed under the First Note,
Second Note and Hill Note are secured by a Security Agreement, providing Mr. Schwartz a first priority security interest in all
of the membership interests of Premier. The Premier Exchange has an effective date of January 1, 2017.
The Premier Share Exchange included standard
and customary representations, warranties and indemnification rights. Premier, also known as National Electrical Wholesale Providers
(NEWP), is in the business of servicing electrical wholesalers throughout the United States with electrician related study material
including the National Electrical Code. Premier provides a complete line of printed reference materials in addition to eBooks,
downloadable digital formatting, and mobile applications to all distributors.
Premier has significant corporate accounts
with electrical wholesale conglomerates making them one of the largest wholesalers of National Electrical Codes in the United States.
Premier also covers HVAC, Plumbing, Industrial and Residential trade reference materials with online training for product education,
certification and current code practices.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 15 – ACQUISITIONS
(CONT’D)
Premier services several multibillion dollar
companies such as Consolidated Electrical Distributors and Home Depot reaching thousands of accounts in locations throughout the
United States.
The following preliminary information summarizes
the allocation of the fair values assigned to the assets at the purchase date:
|
|
Amount
|
|
Cash and cash equivalents
|
|
$
|
–
|
|
Inventory
|
|
|
58,524
|
|
Customer list
|
|
|
55,702
|
|
Copyrights
|
|
|
443,479
|
|
Total identifiable assets
|
|
|
557,705
|
|
Less: liabilities assumed
|
|
|
–
|
|
Total purchase price
|
|
$
|
557,705
|
|
The following table summarizes the costs
of amortizable intangible assets related to the Premier acquisition:
|
|
Estimated Cost
|
|
|
Useful life (years)
|
|
Customer list
|
|
$
|
55,702
|
|
|
|
3
|
|
Copyrights
|
|
|
443,479
|
|
|
|
5
|
|
Total
|
|
$
|
499,181
|
|
|
|
|
|
The results of Premier are included
in the consolidated financial statements effective January 1, 2017. The following schedule contains pro-forma consolidated results
of operations for the six months ended April 30, 2017 and 2016 as if the acquisition occurred on November 1, 2015. The pro forma
results of operations are presented for informational purposes only and are not indicative of the results of operations that would
have been achieved if the acquisition had taken place on November 1, 2015, or of results that may occur in the future:
|
|
Six months ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
As Reported
|
|
|
Pro Forma
|
|
|
As Reported
|
|
|
Pro Forma
|
|
Revenue
|
|
$
|
2,928,827
|
|
|
$
|
3,185,700
|
|
|
$
|
1,605,291
|
|
|
$
|
1,735,040
|
|
Income (loss) from operations
|
|
|
(1,899,956
|
)
|
|
|
(1,897,984
|
)
|
|
|
(25,965
|
)
|
|
|
(36,771
|
)
|
Net income (loss)
|
|
$
|
(2,070,105
|
)
|
|
$
|
(2,068,133
|
)
|
|
$
|
(71,590
|
)
|
|
$
|
(82,396
|
)
|
Earnings (loss) per common share-Basic
|
|
$
|
(0.05
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Earnings (loss) per common share-Diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
One Exam Prep Acquisition
On January 26, 2017, the Company executed
a Share Exchange Agreement (the “One Exam Exchange Agreement”), by and between the Company, One Exam Prep LLC (“One
Exam”), and the sole member of One Exam, Rob Estell. In connection with the closing of the transactions contemplated by
the One Exam Exchange Agreement (the “One Exam Exchange”), we acquired 100% of the outstanding membership interests
of One Exam from Mr. Estell in consideration for the Non-Recourse Secured Convertible Promissory Note (the “Secured Note”).
The amount owed under the Secured Note
is secured by a Security and Pledge Agreement, providing Mr. Estell a first priority security interest in all of the membership
interests of One Exam, and allowing him to take over control and ownership of One Exam if we default in our obligations under the
Secured Note. The One Exam Exchange has an effective date of January 1, 2017. The One Exam Share Exchange included standard and
customary representations, warranties and indemnification rights.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 15 – ACQUISITIONS (CONT’D)
As additional consideration for agreeing
to the terms of the transaction, we agreed to issue Mr. Estell up to 1,000,000 shares of restricted common stock of the Company,
as an earn-out, with shares being issued in fiscal 2017 and/or fiscal 2018 (up to a maximum of 1,000,000 in aggregate for both
years (the “Earn-Out Shares”)), based on the following calculation: (a) total annual revenue of One Exam (for the years
ended December 31, 2017 and 2018, as applicable) minus $1,000,000, divided by three, (b) plus total net profit of One Exam minus
$100,000, multiplied by three, multiplied by (c) 0.30. For example:
Annual revenue of One Exam
|
|
$
|
4,000,000
|
|
Less: $1,000,000
|
|
|
(1,000,000
|
)
|
Sub-total
|
|
|
3,000,000
|
|
Divided by 3
|
|
|
Divided by 3
|
|
Sub-total
|
|
|
1,000,000
|
|
Net profit of One Exam
|
|
|
200,000
|
|
Less: $100,000
|
|
|
(100,000
|
)
|
Sub-total
|
|
$
|
1,100,000
|
|
Times .30
|
|
|
Times 0.30
|
|
Common shares up to 1,000,000
|
|
|
330,000
|
|
One Exam is in the business of exam preparation
with a focus on construction training and certification. One Exam offers eLearning courses and weekly training classes and certification
in a wide variety of topics for contractors with continuing education in 22 states with a goal of servicing all 50 states. One
Exam owns over 70 domains pertaining to contractor licensing and continuing education throughout the United States. One Exam has
written dozens of courses which are offered both in an online e-learning setting or in a classroom.
The Non-Recourse Secured Convertible Promissory
Note (the “Secured Note”) provided to Mr. Estell at closing evidences the principal amount of $300,000 owed to Mr.
Estell, which does not accrue interest. Beginning on the first business day which falls thirty days after the earlier of (a) January
20, 2018; and (b) the date we determine in our sole discretion, and continuing month to month thereafter, a portion of the principal
amount of the Secured Note equal to the lesser of (A) ten percent (10%) of the total trading volume of our common stock for the
thirty (30) days prior to such applicable date; and (B) such number of shares of common stock as equals 4.99% of our then outstanding
shares of common stock, multiplied by $0.50 per share, automatically converts into common stock. Additionally, on the first business
day following January 20, 2019, the remaining balance of the Secured Note converts into common stock at a conversion price of $0.50
per share. If we fail to comply with any of the provisions of the Secured Note, Mr. Estell’s sole remedy is to take back
ownership of the membership interests representing 100% of the ownership of One Exam. The Secured Note contains standard and customary
events of default and may be prepaid at any time without penalty. Mr. Estell also entered into a Lock-Up Agreement with us in connection
with the closing.
If we fail to comply with any of the provisions
of the Secured Note, Mr. Estell’s sole remedy is to take back ownership of the membership interests representing 100% of
the ownership of One Exam. The Secured Note contains standard and customary events of default and may be prepaid at any time without
penalty. Mr. Estell also entered into a Lock-Up Agreement with us in connection with the closing.
As part of the One Exam Exchange, we entered
into a Consulting Agreement with Mr. Estell. The Consulting Agreement continues until December 31, 2020, terminable by either party
with 90 days prior notice at any time, or 10 days’ notice by us upon the material breach of any term of the Consulting Agreement
by Mr. Estell. We agreed to pay Mr. Estell compensation of $1,500 per week during the first year of the term; $1,575 per week during
the second year of the term; and $1,654 per week during the third year of the term and Mr. Estell agreed to customary confidentiality
and work made for hire terms in the agreement. We also agreed that Mr. Estell would be paid a $60,000 signing bonus, payable in
four installments of $15,000 each on April 30, 2017, May 30, 2017, June 30, 2017 and July 30, 2017, and that Mr. Estell could earn
a bonus on June 30th and December 31st, of each year during the term of the agreement, beginning with periods after January 1,
2017 equal to (a) total revenue generated by One Exam and other related companies and assets we may acquire in the future, less
(i) $500,000, less (ii) 50% of the total revenue for the prior annual period of any related companies and assets we may acquire
in the future, (b) divided by 100 (rounded down to the nearest $250,000 increment); plus (x) total gross profit generated by One
Exam and other related companies and assets we may acquire in the future, less (i) $37,500, less (ii) 50% of the total gross profit
for the prior annual period of any related companies and assets we may acquire in the future; (y) divided by 100 (rounded down
to the nearest $25,000 increment)(the “ Bonus ”). We are required to calculate the Bonus as soon as practicable after
each June 30th and December 31st, and pay the Bonus due promptly after such calculation is made. In the event that the revenue
or gross profit calculation above is negative, we shall decrease the applicable Bonus, provided that the Bonus may not be less
than $0, provided further that any negative Bonus calculation for any period ending June 30th, carries over and adjusts downward
any positive Bonus for any period ending December 31st.
ProBility Media Corp.
(formerly Panther Biotechnology, Inc.)
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 15 – ACQUISITIONS (CONT’D)
The following preliminary information
summarizes the allocation of the fair values assigned to the assets at the purchase date:
|
|
Amount
|
|
Cash and cash equivalents
|
|
$
|
14,232
|
|
Inventory
|
|
|
159,961
|
|
Property and equipment
|
|
|
76,410
|
|
Copyrights
|
|
|
443,091
|
|
Total identifiable assets
|
|
|
693,694
|
|
Less: liabilities assumed
|
|
|
(121,694
|
)
|
Less: contingent consideration and bonus consideration
|
|
|
(272,000
|
)
|
Total purchase price (less contingent and bonus consideration)
|
|
$
|
300,000
|
|
The following table summarizes the costs
of amortizable intangible assets related to the One Exam acquisition:
|
|
|
Estimated Cost
|
|
|
Useful life (years)
|
|
|
Copyrights
|
|
|
$
|
443,091
|
|
|
|
5
|
|
|
Total
|
|
|
$
|
443,091
|
|
|
|
|
|
The results of One Exam are included
in the consolidated financial statements effective January 1, 2017. The following schedule contains pro-forma consolidated
results of operations for the six months ended April 30, 2017 and 2016 as if the acquisition occurred on November 1, 2015.
The pro forma results of operations are presented for informational purposes only and are not indicative of the results of
operations that would have been achieved if the acquisition had taken place on November 1, 2015, or of results that may occur
in the future:
|
|
Six months ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
As Reported
|
|
|
Pro Forma
|
|
|
As Reported
|
|
|
Pro Forma
|
|
Revenue
|
|
$
|
2,928,827
|
|
|
$
|
3,097,052
|
|
|
$
|
1,605,291
|
|
|
$
|
1,801,020
|
|
Income (loss) from operations
|
|
|
(1,899,956
|
)
|
|
|
(1,893,438
|
)
|
|
|
(25,965
|
)
|
|
|
(15,662
|
)
|
Net income (loss)
|
|
$
|
(2,070,105
|
)
|
|
$
|
(2,063,587
|
)
|
|
$
|
(71,590
|
)
|
|
$
|
(61,287
|
)
|
Earnings (loss) per common share-Basic
|
|
$
|
(0.05
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Earnings (loss) per common share-Diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
NOTE 16 – SUBSEQUENT EVENTS
On May 1, 2017, the
Company authorized the issuance of 670,000 shares of common stock to Evan Levine, CEO of the Company, and has agreed to
issue 670,000 shares of common stock to both Noah Davis, COO and Steven Plumb, CFO, and 233,000 shares of common stock to
Rich Corbin, Jr., Chairman of the Board of Directors, as compensation. These shares have not yet been issued. The fair market
value of the grants to Levine, Davis, and Plumb on the date of grant was $368,500, for a total of $1,105,000. The fair market
value of the grant to Corbin was $128,150 on the date of grant.
On May 15, 2017, the Company issued 12,500
shares of restricted stock to a consultant for services rendered. The fair market value of the common stock $5,375 on the date
of issuance.
On May 18, 2017, the Company entered into
a binding letter of intent to purchase 100% of the outstanding common stock of W Marketing, Inc. in exchange for a) a note in the
amount of $75,000 bearing interest at 8% and payable in twelve equal monthly installments, b) 900,000 shares of the Company’s
common stock valued at $450,000, and c) assume up to $70,000 in existing debt. If on the date of closing the share price is below
$0.50 per share then the Company will issue additional shares to reach the same $450,000 in value.
The Company previously issued common stock
for capital raising services and the consultant failed to raise the required funds. On May 1, 2017, the Company entered into a
settlement agreement and received and canceled 547,373 shares of common stock.
In June 2017, the Company sold convertible
notes payable with a face value of $378,000 to 5 investors. The notes bear interest at 15%, are due in one year and are convertible
at $0.15 per share.
In June 2017, the Company sold a convertible
note payable with a face value of $200,000 to an investor. The note bears interest at 12% and is due in June 2020 and is convertible
at $0.25 per share. The Company is obligated to make monthly principal and interest payments of $2,000 per month to the note holder.
On June 18, 2017, the Vice Chairman of
the Board, who holds a $50,000 note dated January 30, 2017, with the Company agreed to convert the principal balance on his note
into a convertible note that bears interest at 12% and is due in June 2020 and is convertible at $0.25 per share. The Company
is obligated to make monthly principal and interest payments of $500 per month to the note holder.