Item 1. Financial Statements
BANG
HOLDINGS, CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
27,203
|
|
|
$
|
244,968
|
|
Accounts receivable
|
|
|
22,500
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
2,229
|
|
|
|
10,789
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
51,932
|
|
|
|
255,757
|
|
|
|
|
|
|
|
|
|
|
FURNITURE AND EQUIPMENT, Net
|
|
|
7,978
|
|
|
|
4,056
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
59,910
|
|
|
$
|
259,813
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
90,350
|
|
|
$
|
63,957
|
|
Accrued expenses
|
|
|
167,392
|
|
|
|
136,230
|
|
Accrued payroll and related expenses
|
|
|
286,108
|
|
|
|
211,599
|
|
Loan payable
|
|
|
6,500
|
|
|
|
6,500
|
|
Due to related party
|
|
|
62,500
|
|
|
|
65,507
|
|
Convertible notes payable
|
|
|
85,000
|
|
|
|
85,000
|
|
Convertible notes payable - related party
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
1,197,850
|
|
|
|
1,068,793
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,431,684 and 23,342,572 shares issued and outstanding, respectively
|
|
|
2,344
|
|
|
|
2,336
|
|
Additional paid in capital
|
|
|
3,026,187
|
|
|
|
2,836,375
|
|
Accumulated deficit
|
|
|
(4,166,471
|
)
|
|
|
(3,647,691
|
)
|
TOTAL STOCKHOLDERS’ DEFICIENCY
|
|
|
(1,137,940
|
)
|
|
|
(808,980
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$
|
59,910
|
|
|
$
|
259,813
|
|
See
accompanying notes to condensed consolidated financial statements.
BANG
HOLDINGS, CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising sales
|
|
$
|
37,500
|
|
|
$
|
—
|
|
|
$
|
37,500
|
|
|
$
|
—
|
|
Product sales
|
|
|
—
|
|
|
|
63
|
|
|
|
—
|
|
|
|
123
|
|
Total Revenue
|
|
|
37,500
|
|
|
|
63
|
|
|
|
37,500
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product costs
|
|
|
—
|
|
|
|
49
|
|
|
|
—
|
|
|
|
105
|
|
Sales and marketing
|
|
|
32,069
|
|
|
|
23,330
|
|
|
|
51,961
|
|
|
|
34,159
|
|
Professional fees
|
|
|
58,029
|
|
|
|
91,559
|
|
|
|
78,965
|
|
|
|
101,975
|
|
General and administrative
|
|
|
196,622
|
|
|
|
124,887
|
|
|
|
395,909
|
|
|
|
320,702
|
|
Total Costs and Operating Expenses
|
|
|
286,720
|
|
|
|
239,825
|
|
|
|
526,835
|
|
|
|
456,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS FROM OPERATIONS
|
|
|
(249,220
|
)
|
|
|
(239,762
|
)
|
|
|
(489,335
|
)
|
|
|
(456,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(14,764
|
)
|
|
|
(15,829
|
)
|
|
|
(29,445
|
)
|
|
|
(30,588
|
)
|
Total Other Expenses
|
|
|
(14,764
|
)
|
|
|
(15,829
|
)
|
|
|
(29,445
|
)
|
|
|
(30,588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
|
(263,984
|
)
|
|
|
(255,591
|
)
|
|
|
(518,780
|
)
|
|
|
(487,406
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(263,984
|
)
|
|
$
|
(255,591
|
)
|
|
$
|
(518,780
|
)
|
|
$
|
(487,406
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding during the year - basic and diluted
|
|
|
23,409,242
|
|
|
|
22,968,873
|
|
|
|
23,383,611
|
|
|
|
22,776,997
|
|
See
accompanying notes to condensed consolidated financial statements.
BANG
HOLDINGS, CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Six Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(518,780
|
)
|
|
$
|
(487,406
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
189,820
|
|
|
|
95,485
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
4,399
|
|
Depreciation expense
|
|
|
978
|
|
|
|
685
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(22,500
|
)
|
|
|
|
|
Prepaid expenses
|
|
|
8,560
|
|
|
|
(595
|
)
|
Accounts payable, accrued expenses and accrued payroll and related expenses
|
|
|
132,064
|
|
|
|
120,836
|
|
Due to related party - accrued rent
|
|
|
(3,007
|
)
|
|
|
—
|
|
Net Cash Used In Operating Activities
|
|
|
(212,865
|
)
|
|
|
(266,596
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Cash paid for purchase of fixed assets
|
|
|
(4,900
|
)
|
|
|
—
|
|
Net Cash Used In Investing Activities
|
|
|
(4,900
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Advances from related party
|
|
|
—
|
|
|
|
7,500
|
|
Repayments of related party advances
|
|
|
—
|
|
|
|
(7,500
|
)
|
Proceeds from loan payable
|
|
|
—
|
|
|
|
8,000
|
|
Proceeds from convertible note - related party
|
|
|
—
|
|
|
|
30,000
|
|
Proceeds from exercise of warrants
|
|
|
—
|
|
|
|
210,000
|
|
Proceeds from sale of securities
|
|
|
—
|
|
|
|
220,002
|
|
Net Cash Provided By Financing Activities
|
|
|
—
|
|
|
|
468,002
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE / (DECREASE) IN CASH
|
|
|
(217,765
|
)
|
|
|
201,406
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
244,968
|
|
|
|
17,264
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
27,203
|
|
|
$
|
218,670
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash paid for interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing & financing activities:
|
|
|
|
|
|
|
|
|
Debt discount on convertible notes issued in the form of warrants
|
|
$
|
—
|
|
|
$
|
10,500
|
|
Accrued stock-based compensation
|
|
$
|
—
|
|
|
$
|
55,260
|
|
Prepaid stock based compensation
|
|
$
|
—
|
|
|
$
|
19,753
|
|
Stock issued for settlement of loan
|
|
$
|
—
|
|
|
$
|
1,500
|
|
See
accompanying notes to condensed consolidated financial statements.
BANG
HOLDINGS CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF June 30, 2017
NOTE
1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN
(A)
Organization
Bang
Holdings Corp. was incorporated in the State of Colorado on May 13, 2014. The Company was organized to develop and sell E-Cigarette
products.
Bang
Vapor, Inc. was incorporated in the State of Florida on October 27, 2014. The Company was organized to develop and sell E-Cigarette
products.
Bang
Digital Media, Inc. was incorporated in the State of Florida on November 23, 2015. The Company was organized to develop digital
and electronic media.
(B)
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation
have been included. Operating results for the six month period ended June 30, 2017 may not necessarily be indicative of the results
that may be expected for the year ending December 31, 2017.
These
condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related
disclosures of the Company as of December 31, 2016 and for the year then ended, which were filed with the Securities and Exchange
Commission (“SEC”) on Form 10-K on April 10, 2017.
(C)
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts of Bang Holdings Corp. and its wholly owned subsidiaries Bang
Vapor, Inc. (from October 27, 2014) and Bang Digital Media, Inc. (from November 23, 2015) and are hereafter referred to as (the
“Company’). All intercompany accounts have been eliminated in the consolidation.
(D)
Going Concern
For
the six months ended June 30, 2017, the Company has incurred net operating losses and used cash in operations. As of June 30,
2017, the Company has an accumulated deficit of $4,166,471 and used cash in operations of $212,865. The company is also in default
on the repayment of its convertible note payable of $500,000. Losses have principally occurred as a result of the substantial
resources required for marketing of the Company’s products and services which included the general and administrative expenses
associated with its organization and product development.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated
financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification
of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management
believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity
for the Company to continue as a going concern.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A)
Cash and Cash Equivalents
The
Company considers all highly liquid temporary cash instruments with a maturity of three months or less to be cash equivalents.
(B)
Use of Estimates in Financial Statements
The
presentation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates during the period covered by these condensed consolidated financial statements include
the valuation of website costs, valuation of deferred tax asset, stock based compensation and beneficial conversion features on
convertible debt.
(C)
Fair value measurements and Fair value of Financial Instruments
The
Company adopted FASB ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as
follows:
Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data.
Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.
The
Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance
with ASC Topic 820.
Due
to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the
balance sheet dates.
(D)
Computer and Equipment and Website Costs
Computer
Equipment and Website Costs are capitalized at cost, net of accumulated depreciation. Depreciation is calculated by using the
straight-line method over the estimated useful lives of the assets, which is three to five years for all categories. Repairs and
maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of computer
equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting
gain or loss being recorded in operations.
Software
maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized.
The
Company has adopted the provisions of ASC 350-50-15, “Accounting for Web Site Development Costs.” Costs incurred in
the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized
and amortized over the life of the asset, estimated to be three years.
|
|
Depreciation/
|
|
|
Amortization
|
Asset
Category
|
|
Period
|
Furniture
and fixtures
|
|
5
Years
|
Computer
equipment
|
|
3
Years
|
Website
costs
|
|
3
Years
|
Computer
and equipment and website costs consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
11,745
|
|
|
$
|
6,845
|
|
Website development
|
|
|
|
|
|
|
—
|
|
Total
|
|
|
11,745
|
|
|
|
6,845
|
|
Impairments
|
|
|
|
|
|
|
—
|
|
Accumulated depreciation
|
|
|
(3,767
|
)
|
|
|
(2,789
|
)
|
Balance
|
|
$
|
7,978
|
|
|
$
|
4,056
|
|
Depreciation
expense for the six months ended June 30, 2017 and 2016 was $978 and $685, respectively.
Depreciation
expense for the three months ended June 30, 2017 and 2016 was $636 and $343, respectively.
(E)
Inventories
The
Company’s inventories consist entirely of purchased finished goods. Inventories are stated at lower of cost or market. Cost
is determined on the first-in, first-out basis. The Company wrote down inventory to net realizable value as of December 31, 2016
and recorded an inventory valuation allowance of $72,332. In July 2017, the inventory was sold for $15,000 to a third party.
(F)
Revenue Recognition
The
Company recognizes revenue on arrangements in accordance with FASB ASC Topic. 605 “Revenue Recognition”. In all cases,
revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service
is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue when the products
are shipped to the customers and collectability is reasonable assured.
The
Company recognizes revenue from advertising transactions when there is persuasive evidence of an arrangement, delivery has occurred,
the sales price is fixed or determinable and collectability is reasonably assured.
(G)
Accounts Receivable and Allowance for Doubtful Accounts
Accounts
receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require
collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the
outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if
receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management.
The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded,
which is the face amount of the receivable, net of the allowance for doubtful accounts. As of June 30, 2017 and December 31, 2016,
the Company’s accounts receivable balance was $22,500 and $0, respectively, and the allowance for doubtful accounts is $0
in each period.
(H)
Significant Customers
At
June 30, 2017, the Company had two customers representing 100% of the total accounts receivable balance.
For
the three and six months ended June 30, 2017, the Company had two customers that represented 80% and 20% of the total revenue.
(I)
Advertising, Marketing and Promotion Costs
Advertising,
marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on
the accompanying statement of operations. For the six months ended June 30, 2017 and 2016, advertising, marketing and promotion
expense was $15,100 and $16,804, respectively. For the three months ended June 30, 2017 and 2016, advertising, marketing and promotion
expense was $7,455 and $11,710, respectively.
(J)
Segments
The
Company operates in one segment and therefore segment information is not presented.
(K)
Loss Per Share
The
basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average
number of common shares during the period. The diluted loss per share is calculated by dividing the Company’s net loss by
the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. The Company had 1,879,107 shares
issuable upon the exercise of options and warrants and 1,900,058 shares issuable upon conversion of convertible notes payable
that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for six months ended
June 30, 2017. The Company had 869,277 shares issuable upon the exercise of options and warrants and 1,443,571 shares issuable
upon conversion of convertible notes payable that were not included in the computation of dilutive loss per share because their
inclusion is anti-dilutive for six months ended June 30, 2016.
(L)
Stock-Based Compensation
The
Company recognizes compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation. Under FASB
ASC Topic. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the
grant-date fair value and recognize the costs in the financial statements over the period during which employees are required
to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards,
share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their
fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity
instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB
ASC Topic 505, Equity Based Payments to Non-Employees. In general, the measurement date is when either a (a) performance commitment,
as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested.
The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular
grant as defined in the FASB Accounting Standards Codification.
(M)
Income Taxes
The
Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
(N)
Shipping and Handling Costs
The
Company includes shipping and handling fees billed to customers as revenue and shipping and handling costs to customers as cost
of revenue.
(O)
Reclassifications
Certain
items in the prior year financial statements have been reclassified to conform to the current year presentation.
(P)
Recent Accounting Pronouncements
In
August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15,
Presentation of Financial
Statements-Going Concern.
The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether
there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures.
For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial
doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are
issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of
Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been
deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods
and interim periods thereafter. We adopted the provisions of ASU 2014-15 on January 1, 2017. The adoption of ASU 2014-15 did not
materially impact our condensed consolidated financial position, results of operations or cash flows.
In
March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging” (topic 815). The FASB issued this update to
clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt
instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this
update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The updated
guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years.
Early adoption of the update is permitted. We adopted the provisions of ASU 2016-06 on January 1, 2017. The adoption of ASU 2016-06
did not materially impact our condensed consolidated financial position, results of operations or cash flows.
In
April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued
this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment
awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including:
(a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement
of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods
within those fiscal years. Early adoption of the update is permitted. We adopted the provisions of ASU 2016-09 on January 1, 2017.
The adoption of ASU 2016-06 did not materially impact our condensed consolidated financial position, results of operations or
cash flows.
In
August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash
Payments.” ASU No. 2016-15 addresses specific cash flow classification issues where there is currently diversity in practice
including debt prepayment and proceeds from the settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning
after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the new standard on
its condensed consolidated financial statements.
Other
recent accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or
are not believed by the Company management, to have a material impact on the Company’s present or future condensed consolidated
financial statements.
NOTE
3 – CONVERTIBLE NOTES PAYABLE
On
July 25, 2016, the Company entered into an agreement for the issuance of a convertible note to a third party lender for $50,000.
The note accrues interest at 10% per annum maturing on July 25, 2017 and is convertible into common stock at the discretion of
the holder at a conversion price of $1.50 per share, subject to adjustment. The outstanding principal balance on the note at June
30, 2017 and December 31, 2016 was $50,000. Accrued and unpaid interest on the note at June 30, 2017 and December 31, 2016 was
$4,671 and $2,192, respectively. The note is currently in default.
On
July 29, 2016, the Company entered in an agreement with a third party for a convertible promissory note for gross proceeds of
$10,000. The note bears interest at 10% per annum, is due on July 29, 2017 and is convertible into common stock at the discretion
of the holder at a conversion price of $1.50 per share, subject to adjustment. The outstanding principal balance on the note at
June 30, 2017 and December 31, 2016 was $10,000. Accrued and unpaid interest on the note at June 30, 2017 and December 31, 2016
was $923 and $427, respectively. The note is currently in default.
On
October 10, 2016, the Company entered in an agreement with a third party for a convertible promissory note for gross proceeds
of $25,000. The note bears interest at 10% per annum, is due on October 10, 2017 and is convertible into common stock at the discretion
of the holder at a conversion price of $1.50 per share, subject to adjustment. The outstanding principal balance on the note at
June 30, 2017 and December 31, 2016 was $25,000. Accrued and unpaid interest on the note at June 30, 2017 and December 31, 2016
was $1,809 and $569, respectively. The Company may prepay the note in cash in full according to the following schedule:
0-180
days: 117.5% of principal amount
180-270
days: 115.0% of principal amount
270-360
days: 112.5% of principal amount
NOTE
4 – CONVERTIBLE NOTES PAYABLE – RELATED PARTIES
On
August 22, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note for $500,000 and security
purchase agreement for 1,000,000 shares of common stock for $350,000 ($0.35 per share), respectively with a related party. The
note bears interest at an annual rate of 10% and is payable on or before 12 months from the date of issuance. The Company issued
the holder a total of 1,500,000 warrants exercisable at a cashless conversion price of $.35 for a period of 5 years. In addition,
the note may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a conversion
price of $0.35 per share, subject to adjustment.
The
outstanding principal balance on the note at June 30, 2017 and December 31, 2016 was $500,000. Accrued and unpaid interest on
the note at June 30, 2017 and December 31, 2016 was $143,014 and $118,219, respectively. The Company is currently in default of
the note, making the entire unpaid principal and interest due and payable.
NOTE
5 – STOCKHOLDERS’ EQUITY
During
the six months ended June 30, 2017, the Company issued 89,112 shares of common stock and recorded stock-based compensation with
a fair value of $120,335 which is included in total stock-based compensation.
NOTE
6 – OPTIONS AND WARRANTS
The
following tables summarize all options grants to employees during the six months ended June 30, 2017 and the related change during
the period is presented below.
|
|
Number of
Options
|
|
|
Weighted Average
Exercise Price
|
|
Stock Options
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
1,360,000
|
|
|
$
|
0.18
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Cancelled/Forfeited
|
|
|
(150,000
|
)
|
|
|
0.17
|
|
Balance at June 30, 2017
|
|
|
1,210,000
|
|
|
$
|
0.19
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Price Range
|
|
|
Number
Outstanding at
June 30, 2017
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable at
June 30, 2017
|
|
|
Weighted
Average
Exercise
Price
|
|
|
$.001 - $0.50
|
|
|
|
1,210,000
|
|
|
|
1.3
|
|
|
$
|
0.19
|
|
|
|
910,000
|
|
|
$
|
0.19
|
|
During
the six months ended June 30, 2017 and 2016, the Company recorded total option expense of $69,485 and $14,099, respectively. As
of June 30, 2017, the Company has $18,095 in stock-based compensation related to stock options that is yet to be vested. The intrinsic
value of the vested stock options at June 30, 2017 and December 31, 2016 was $1,189,440 and $1,004,530, respectively.
The
following tables summarize all warrant grants during the six months ended June 30, 2017 and the related change during the period
is presented below.
|
|
Number of Warrants
|
|
|
Weighted Average
Exercise Price
|
|
Stock Warrants
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
669,107
|
|
|
$
|
0.37
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
Balance at June 30, 2017
|
|
|
669,107
|
|
|
$
|
0.37
|
|
NOTE
7 – RELATED PARTIES
On
October 1, 2015, the Company entered into a property lease agreement with a Director of the Company and father of the President.
The term of the lease is for one year with an annual rent of $30,000 per year. The Company at it option has the right to extend
for 9 additional years. On July 1, 2016, the lease was cancelled and the Company entered into a new lease agreement (see below).
As of June 30, 2017 and December 31, 2016, the Company accrued rent of $22,500 and $22,500, respectively under the lease agreement
and is included in due to related party at June 30, 2017 and December 31, 2016. Rent expense under the lease for the six months
ended June 30, 2017 and 2016 was $0 and $15,000, respectively.
On
July 1, 2016, the Company entered into a property lease agreement with a Director of the Company and father of the President.
The term of the lease is for one year with an annual rent of $30,000 per year. The Company at it option has the right to extend
for 10 additional years. As of June 30, 2017 and December 31, 2016, the Company accrued rent of $30,000 and $15,000, respectively,
under the lease agreement and is included in due to related party at June 30, 2017 and December 31, 2016. Rent expense under the
lease for the six months ended June 30, 2017 was $15,000.
Prior
to July 1, 2016, the Company leased office space on a month to month basis from the Company president. The monthly rental payment
was $2,000 per month. No formal lease existed under the agreement. For the six months ended June 30, 2017 and 2016, the Company
recorded rent expense of $0 and $12,000, respectively. During the six months ended June 30, 2017, $18,007 was repaid. As of June
30, 2017 and December 31, 2016, the Company accrued rent of $10,000 and $28,000, respectively due to the Company’s president
and is included in due to related party at June 30, 2017 and December 31, 2016.
As
of June 30, 2017 and December 31, 2016, the Company owed its President accrued salary of $266,000 and $188,000, respectively.
On
December 6, 2016, the Company made a pre-payment of $10,000 to a non-profit church (the “Church”), for usage of the
Church’s facilities on April 20, 2017. An employee of the Company is a member of the board of directors and a founding member
of the Church.
On
March 20, 2017, the Company entered into an agreement with the Church to provide social media services. The agreement is for two
years, starting April 1, 2017, and the Company will be compensated $10,000 monthly along with compensation based on online views
and impressions calculated at a cost per thousand (“CPM”) of $10, to be calculated and paid by the Church on a monthly
basis. The CPM rate can be modified by the Company, at its sole discretion, every ninety days to reflect prevailing market rates.
Item 2. Management’s Discussion and Analysis of Operations
The
following discussion and analysis of the results of operations and financial condition of Bang Holdings Corp. (the “Company”,
“we”, “us” or “our”) should be read in conjunction with the financial statements of Bang Holdings
Corp. and the notes to those financial statements that are included elsewhere in this Form 10-Q. This 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 the Risk Factors and Business sections in the financial statements
and footnotes included in the Company’s Form 10-K filed on April 10, 2017 for the year ended December 31, 2016 Words such
as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,”
“expect,” “believe,” “intend,” “may,” “will,” “should,”
“could,” and similar expressions are used to identify forward-looking statements.
Business
Overview
Bang
Holdings Corp. was incorporated in the state of Colorado on May 13, 2014. It is a brand management and digital advertising company
that provides content and an influencer-based marketing network to the cannabis industry. We are a development-stage company and
since our inception we have generated only minimal revenues from business operations.
Bang
Holdings Corp wholly owns two subsidiaries, Bang Digital Media, a cannabis focused digital media company, and Bang Vapor, an e-juice
company.
Bang
Digital Media is the hub for all ‘cannabusiness’ related advertising, content creation, technology and marketing.
It consists of two divisions, the multi-platform 4TTnetwork, and a network of social media influencers that we call the Green
Monkey Network.
The 4TTnetwork is comprised primarily of
specifically targeted audiences. These are 4TwentyToday, VaporBang, American Toker, and 4TT/V which cross the social media platforms
of Facebook, Twitter, Instagram, SnapChat and YouTube.
4TwentyToday
is a digital, multi-platform channel that enables us to target advertising for Bang Holdings products and services across social
media platforms. We currently have in excess of 667,000 users of our network, with a steady growth rate of around three thousand
subscribers per week. By continuing to create targeted, quality content for this community on a daily basis 4TwentyToday has,
for example, created one of the most actively engaged marijuana pages on Facebook. This has built high levels of trust and goodwill
in the community, which will be convertible to revenues once we have reached a critical mass of users.
Using
the same skillset, we are developing VaporBang – a digital, multi-platform community for vaping enthusiasts. At more than
88,000 strong, ours is the largest vaping community on Facebook. This enabled us to carry out beta testing of product to this
targeted audience and to develop strong recognition for the Bang brand.
Our
most successful post on Facebook in 2016 had 15.6 million views, leading to 1,832,507 “reactions,” 610,000 “shares,”
and 164,000 “comments.” The post was created to build upon our social media footprint related to our business, not
specifically towards our products.
The
‘Green Monkey Network’ is a network of social media influencers who are open to working as ambassadors in the marijuana
industry. These influencers expand the Bang network by more than 12 million users.
Ultimately,
the KPI (Key Performance Indicator) of Bang Digital Media is in the direct and expanded growth of our networks. By continuing
to grow 4TwentyToday and the ‘Green Monkey Network’ to 100 million users we will have the digital reach to propel
marijuana-friendly brands into the spotlight.
During the first quarter of 2017, all Bang
Vapor digital property - i.e. Facebook and other social media pages, created content, subscriber lists, etc. were transferred to
Bang Digital Media. The entire stock of e-cigarette hardware and e-liquid was liquidated for $15,000. Bang Vapor was ultimately
dissolved on June 6, 2017.
Trademarks
On
April 15, 2015, the Company applied for trademarks for “BANG,” (Ser. No. 86598258 “BANG VAPOR,” (Ser.
No. 86598261) and “BANG VAPOR CLUB.” (Ser. No. 86598264). Those trademarks were granted and became officially registered
on March 29, 2016.
On
January 25
th
, 2017, the Company applied for trademarks for “American Toker,” (Ser. No. 87312970, Ser. No.
87312927, Ser. No. 87312838, Ser. No. 87312795). Those trademarks were granted and became officially registered on January 25
th
,
2017.
Marketing
and Sales
The
Company’s marketing strategy is a multi-pronged approach that includes viral marketing strategies, celebrity & social
influencer endorsements, affiliate marketing, conventional online advertising and attending tradeshows. During 2016, we spent
approximately $100,000 on the creation and growth of Bang Digital Media, the primary social media footprint of Bang Holdings Corp.
We employ only one full-time employee who handles all of the Company’s social media accounts, which currently has approximately
1,700,000 subscribers across various social media platforms, including, but not limited to, Facebook, YouTube, Instagram, Twitter
and Snapchat.
Viral
Marketing:
The marketing team aims to produce “hits” through the release of content developed by the
company on 4TwentyToday’s “YouTube” and “Facebook” pages, other social media, and our website. A
portion of our marketing budget will be allocated to developing viral videos produced by our CEO, Steve Berke. Mr. Berke has had
significant successes popularizing YouTube videos in the past, including, “Pot Shop,” which generated approximately
15.1 million views. In addition to Mr. Berke’s YouTube successes, his two campaigns for mayor of Miami Beach received national
coverage, including the cover of the New York Times, the cover of the Huffington Post and a 6-page spread in Maxim magazine. Mr.
Berke was named one of the top eight comedians to ever run for office by ABC News. We intend to capitalize on his popularity, and
reputation as a leading advocate for medical marijuana, through 4TwentyToday, a channel on YouTube and Facebook to promote the
Company. Our research has shown there are three distinct user groups in the vapor space; the hardcore vapor, ex-smokers/smokers
wanting to replace their nicotine addiction, and marijuana users. Marijuana enthusiasts are familiar with vaping technology and
are a niche market that is easy for us to reach.
Celebrity
and Social Influencer Endorsements:
We will build partnerships with influential social media personalities and celebrities
in several key genres to serve as brand ambassadors. Each brand ambassador will have their own affiliate website to sell Bang
products and make commissions off of each sale. By giving a unique platform to social media influencers to monetize their followings,
Bang Digital Media will be able to help their customers build brand awareness and employ an army of influencers to sell product
in the cannabis space.
Plan
of Operations
In
the twelve month period, we intend to develop our business in the following areas:
|
●
|
In
July 2017, Bang Vapor liquidated inventory and ceased all operations. Bang’s future in the vapor industry will be entirely
managed by Bang Digital Media and focused on content creation, social media and digital marketing.
|
|
●
|
Bang
Digital Media entered into an agreement with Elevation Ministries to run their digital marketing, social media, and to manage
exploitation rights of their ‘Church of Cannabis’ launching in Q2 2017. The two-year contract signed and announced
in Q1 2017, will be worth a minimum of $250K and potentially more than a $1 million with bonuses. Bang Digital Media will continue to pursue new clients to coordinate digital strategy, social media management,
video production, web development, and other online marketing services.
|
|
●
|
Bang
Digital Media is building out a fully automated digital advertising platform, with a projected Q4 2017 launch. The platform
allows publishers to always receive the highest price for their advertising space, while advertisers can reach the maximum
number of targeted customers, including cannabis customers, at the best price.
|
Results
of Operations
For
the three months ended June 30, 2017 and 2016
Revenue:
We generated advertising revenue of $37,500 for the three month period ending June 30, 2017, as compared to revenue of $63 from
the sale of products for the comparable three month period ended June 30, 2016.
Costs
and Operating Expenses:
We
incurred costs and operating expenses of $286,720 for the three months ended June 30, 2017, as compared to $239,825 during the
three months ended June 30, 2016, an increase of $46,895. The increase in costs and operating expenses is primarily attributable
to an increase of $8,739 in sales and marketing expenses, an increase of $71,735 in general and administrative expenses, offset by a decrease of $33,350 in professional fees. The decrease in our professional fees was due to a decrease in consulting
fees of approximately $21,600, primarily related to investor relations services and a decrease in accounting fees of approximately
$12,500 during the three months ended June 30, 2017.
Interest
Expense:
Interest
expense for the three months ended June 30, 2017 was $14,764, primarily attributable to the Company’s convertible notes.
During the three months ended June 30, 2016, the Company recorded interest expense of $15,829.
Net
Loss:
We
had a net loss of $263,984 for the three months ended June 30, 2017 as compared to $255,591 for the three months ended June 30,
2016, an increase of $8,393. The increase in net loss is primarily due to the increase in costs and operating expenses.
For
the six months ended June 30, 2017 and 2016
Revenue:
We generated $37,500 in advertising revenue for the six month period ended June 30, 2017, as compared to $123 from the sale
of products for the comparable six month period ended June 30, 2016.
Costs
and Operating Expenses:
We
incurred costs and operating expenses of $526,835 for the six months ended June 30, 2017, as compared to $456,941 during the six
months ended June 30, 2016, an increase of $69,894. The increase in costs and operating expenses is primarily attributable to
an increase of $17,802 in sales and marketing expenses, an increase of $75,207 in general and administrative expenses, offset by a decrease of $23,010 in professional fees. The increase in general and administrative expense is primarily due to an
increase in stock based compensation of approximately $56,000 during the six months ended June 30, 2017.
Interest
Expense:
Interest
expense for the six months ended June 30, 2017 was $29,445, primarily attributable to the Company’s convertible notes. During
the six months ended June 30, 2016, the Company recorded interest expense of $30,588.
Net
Loss:
We
had a net loss of $518,780 for the six months ended June 30, 2017 as compared to $487,406 for the six months ended June 30, 2016,
an increase of $31,374. The increase in net loss is primarily due to the increase in costs and operating expenses.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. We have been funding our operations through the sale of our common stock and loans.
Our
primary uses of cash have been for payroll and operating expenses. The following trends are reasonably likely to result in a material
decrease in our liquidity in the near term:
●
|
Development
of a Company website
|
●
|
Exploration
of potential marketing and advertising opportunities, and
|
●
|
The
cost of being a public company
|
Our
net revenues are not sufficient to fund our operating expenses. At June 30, 2017, we had a cash balance of $27,203. We currently
have no material commitments for capital expenditures. We estimate that based on current plans and assumptions, our available
cash will not be sufficient to satisfy our cash requirements under our present operating expectations without further financing.
Other than working capital, we presently have no other alternative source of working capital. We may need to raise significant
additional capital to fund our operating expenses, pay our obligations, and grow our company. Therefore, our future operations
may be dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt
securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn
in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities.
Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect
amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore,
if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities
may have rights, preferences or privileges senior to those of existing holders of our common stock. If we are unable to obtain
additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.
We
anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future.
Management has determined that additional capital will be required in the form of equity or debt securities. In addition, if we
cannot raise additional short term capital we will be forced to continue to further accrue liabilities due to our limited cash
reserves. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are
unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development,
which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our
equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders
will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges
senior to the common stock. If adequate funds are not available to us when needed on satisfactory terms, we may be required to
cease operating or otherwise modify our business strategy.
Our
liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs
associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002
and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations
to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.
Going
Concern and Management’s Liquidity Plans
As
reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of $4,166,471 at June 30,
2017 and a net loss of $518,780 for the six months ended June 30, 2017. The Company has generated only minimal revenues since
inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The
ability of the Company to continue its operations is dependent on management’s plans, which include the raising of capital
through debt and/or equity markets, with some additional funding from other traditional financing sources, including term notes,
until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to
incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no assurance
that the Company will be able to raise any additional capital.
The
Company may also require additional funding to finance the growth of our anticipated future operations as well as to achieve its
strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company,
if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.
The
Company’s plan regarding these matters is to raise additional debt and/or equity financing to allow the Company the ability
to cover its current cash flow requirements and meet its obligations as they become due. There can be no assurances that financing
will be available or if available, that such financing will be available under favorable terms. In the event that the Company
is unable to generate adequate revenues to cover expenses and cannot obtain additional financing in the near future, the Company
may seek protection under bankruptcy laws. The accompanying 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. These financial
statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a going concern.
Working
Capital
The
following table summarizes total current assets, liabilities and working capital at June 30, 2017, compared to December 31, 2016:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
|
Increase/(Decrease)
|
|
Current Assets
|
|
$
|
51,932
|
|
|
$
|
255,757
|
|
|
$
|
(203,825
|
)
|
Current Liabilities
|
|
$
|
1,197,850
|
|
|
$
|
1,068,793
|
|
|
$
|
129,057
|
|
Working Capital Deficit
|
|
$
|
(1,145,918
|
)
|
|
$
|
(813,036
|
)
|
|
$
|
332,882
|
|
At
June 30, 2017, we had a working capital deficit of $1,145,918, as compared to working capital deficit of $813,036 at December
31, 2016, an increase of $332,882.
Net
Cash Used In Operating Activities
Net
cash used in operating activities of $212,865 during the six months ended June 30, 2017 consisted primarily of an increase in
accounts payable and accrued expenses of $132,064 and a decrease in accrued rent payable to a related party of $3,007.
Net
cash used in operating activities of $266,596 during the six months ended June 30, 2016 consisted primarily of an increase in
accounts payable and accrued expenses of $120,836 and loss from operations adjusted by non-cash items totaling $100,569.
Net
Cash Used In Investing Activities
Net
cash used in investing activities during the six months ended June 30, 2017 consisted of the purchase of fixed assets of $4,900.
There was no cash used in (provided by) investing activities during the six months ended June 30, 2016.
Net
Cash Provided By Financing Activities
There
was no cash provided by financing activities during the six months ended June 30, 2017.
Net
cash provided by financing activities of $468,002 during the six months ended June 30, 2016 consisted primarily proceeds from
related party convertible notes of $30,000, proceeds from the exercise of warrants of $210,000, proceeds of loans payable of $8,000
and proceeds from the private placement of securities of $220,002.
Off-Balance
Sheet Arrangements
We
had no off-balance sheet arrangements as of June 30, 2017.
Critical
Accounting Policies and Estimates
Use
of Estimates in Financial Statements
The
presentation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates
during the period covered by these financial statements include the valuation of website costs, valuation of deferred tax asset,
and stock based compensation.
Fair
value measurements and Fair value of Financial Instruments
The
Company adopted FASB ASC Topic 820,
Fair Value Measurements
. ASC Topic 820 clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as
follows:
Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data.
Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.
The
Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance
with ASC Topic 820.
Due
to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the
balance sheet date.
Revenue
Recognition
The
Company recognizes revenue on arrangements in accordance with FASB ASC Topic 605,
Revenue Recognition
. In all cases, revenue
is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed
and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue when the products are shipped
to the customers and collectability is reasonable assured.
The
Company recognizes revenue from advertising transactions when there is persuasive evidence of an arrangement, delivery has occurred,
the sales price is fixed or determinable and collectability is reasonably assured.
Stock-Based
Compensation
The
Company recognizes compensation costs to employees under FASB ASC Topic 718,
Compensation – Stock Compensation.
Under
FASB ASC Topic. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on
the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required
to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards,
share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their
fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity
instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB
ASC Topic 505,
Equity Based Payments to Non-Employees
. In general, the measurement date is when either a (a) performance
commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments
are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of
each particular grant as defined in the FASB Accounting Standards Codification.
Recent
Accounting Pronouncements
In
August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15,
Presentation of Financial
Statements-Going Concern.
The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether
there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures.
For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial
doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are
issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of
Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been
deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods
and interim periods thereafter. We adopted the provisions of ASU 2014-15 on January 1, 2017. The adoption of ASU 2014-15 did not
materially impact our condensed consolidated financial position, results of operations or cash flows.
In
March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging” (topic 815). The FASB issued this update to
clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt
instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this
update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The updated
guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years.
Early adoption of the update is permitted. We adopted the provisions of ASU 2016-06 on January 1, 2017. The adoption of ASU 2016-06
did not materially impact our condensed consolidated financial position, results of operations or cash flows.
In
April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued
this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment
awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including:
(a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement
of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods
within those fiscal years. Early adoption of the update is permitted. We adopted the provisions of ASU 2016-09 on January 1, 2017.
The adoption of ASU 2016-06 did not materially impact our condensed consolidated financial position, results of operations or
cash flows.
In
August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash
Payments.” ASU No. 2016-15 addresses specific cash flow classification issues where there is currently diversity in practice
including debt prepayment and proceeds from the settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning
after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the new standard on
its condensed consolidated financial statements.
Other
recent accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or
are not believed by the Company management, to have a material impact on the Company’s present or future condensed consolidated
financial statements.