NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 1: THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements are presented on the accrual basis, under the assumption that the company is a going concern and in conformity with accounting principles generally accepted in the United States.
The Company
The Company is Moms Online, Inc. (“Moms Online”), a Nevada corporation, was incorporated on October 1, 2010 as an early stage, emerging growth company. Moms Online, Inc. was formed as a wholly owned subsidiary of Ice Lounge Media, Inc. (“ICE”) to hold, create, collect and adapt social media site aimed at mothers “moms.”
ICE spun out Moms Online to the ICE shareholders in late 2013 in an effort to further the ongoing focus of Moms Online on the continued development of websites devoted to moms and to reduce the dual funding obligations of ICE and Moms Online. The spin off was accomplished through a share dividend from ICE to its shareholders. Following the spin-off, ICE retained 50% of the Company while the other 50% was held by the 41 original shareholders of ICE.
On September 25, 2014 the Company filed a Form 10. The Form 10 was approved by the SEC on January 23, 2015. The company received its symbol (“MOMC”) from FINRA on September 10, 2015. Even though the company is public, none of its shares have traded publicly as of the date of this filing.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments, including cash and cash equivalents, trade receivables, accounts payable and other accrued liabilities, approximate fair value because of their short maturities.
Use of Management's Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Revenue Recognition
The Company has no revenues at this time. We will recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Under SAB 104, revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.
Allowance for doubtful accounts
Our allowance for doubtful accounts is maintained to provide for losses arising from customers’ inability to make required payments. If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. There were no receivables or allowance as of December 31, 2016 and 2015.
Impairment of Long-Lived Assets
The Company adopted ASC 360-10, which requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Discontinued operations includes all components of an entity with operations that:
(1) can be distinguished from the rest of the entity, and
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(2) will be eliminated from the ongoing operations of the entity in a disposal transaction.
Since inception, most of our time has been focused on creating our business model and related website. Certain costs incurred in development of our website were capitalized with a total of $17,831 allocated to our website development in 2013. In 2014, the Company enhanced its website with mobile-enabled features and functionality. Consequently, $68,655 additional costs were capitalized to the website. No additional amounts were capitalized in the years ended December 31, 2016 or 2015. The capitalized website development costs are amortized over the estimated useful life of three years.
All long-lived assets are evaluated for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Any impairment in value is recognized as an expense in the period when the impairment occurs. There was no impairment recognized during 2016 or 2015.
Stock-Based Compensation
The Company accounts for the issuance of stock, stock options, stock warrants and other share based payment arrangements in accordance with the provisions of ASC 718-10. We measure compensation costs related to our share-based payment transactions at fair value on the grant date and recognize those costs in the financial statements over the vesting period during which the employee provides service in exchange for the grant. Stock based compensation to nonemployees is accounted for in accordance with ASC 505. The company recognized $21,242 and $3,123 deferred stock compensation costs during the years ended December 31, 2016 and 2015, respectively.
Income Taxes
Income taxes are accounted for in accordance with FASC 740-20, “Accounting for Income Taxes.” Under FASC 740-20, deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized
The Company’s operations have not changed significantly compared to prior years. The Company’s tax position taken in prior years for deferred income taxes has been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain. Management reviews these items regularly in light of changes in tax laws and court rulings at both federal and state levels.
To address accounting for uncertainty in tax positions, the Company clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosures, and transition.
The Company files income tax returns in the U.S. federal jurisdiction, and the state of California. Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income. Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if, if any.
Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.
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NOTE 2: GOING CONCERN
As shown in the accompanying financial statements, we have incurred losses in each year since inception and have a working capital deficit of $135,332 as of December 31, 2016. These conditions raise substantial doubt as to our ability to continue as a going concern. In response to these conditions, we may raise additional capital through the sale of equity securities, through an offering of debt securities or through borrowings from financial institutions or individuals. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Repayment of investment from Sister Corp
There is an informal agreement between Social Quotient, Inc. (“SQI”), the company’s affiliate (sister corp.) and the Company that calls for the company to give recognition to SQI for the equity contributed to the company “from inception to the future date in which the company might be engaged in a merger or change in control”. The amount of consideration contingently due from the company was $95,224 and $103,996 as of December 31, 2016 and 2015, respectively. This contingent liability amount can be satisfied in cash (minimum), or currently $.02 per share; debt; or equity conversion in the event of a merger or transaction in which there is a change in Control.
NOTE 3: RELATED PARTY TRANSACTIONS AND RELATIONSHIPS:
All directors are related parties. IceLounge Media, Inc. “ILMI” funded 100% of the development of the
Momscorner.com
website prior to December 31, 2013. ILMI spun off the website to the Company. All amounts due to related parties were converted to stock in 2013 by prior agreement. The stock fair value was determined to be $0.5168 per share, based on the fair values of the website and the anticipated public filing.
During the year ended December 31, 2016 ILMI paid certain net expenses for and on behalf of the Company of $16,222, bringing the total due to parent of $161,888 as of December 31, 2016, which is due on demand and bears no interest. During the year ended December 31, 2015 ILMI paid certain net expenses for and on behalf of the Company of $51,481 bringing the total due to parent of $145,666 as of December 31, 2015, which is due on demand and bears no interest. During the year ended December 31, 2014 ILMI paid certain expenses for and on behalf of the Company with an outstanding balance due of $94,185 as of December 31, 2014. In addition, Social Quotient Inc. the company’s affiliate (sister corp.) paid $25,992 of expenses for and in behalf of the Company. These amounts were accounted for as paid in capital.
In addition, Social Quotient Inc. the company’s affiliate (sister corp.) paid $9,685 and $25,992, of expenses for and in behalf of the Company for the years ended December 31, 2016 and 2015, respectively. These amounts were accounted for as paid in capital. Also, the Company re-paid SQI $15,000 and $0 for the years ended December 31, 2016 and 2015, respectively, which was accounted for as a reduction in paid-in capital.
On June 6, 2016 the Board of Directors of IMLI agreed to transfer from its own holdings of the company’s common stock, 25,000 shares to a company shareholder because he was the first to invest in all three of the IMLI family of companies.
The Company licenses its technology platform from ILMI, under an Agreement which calls for an automatic 12 month renewal each year on October 1, and a monthly lease payment of $4,167. The company accrued $50,000 for platform lease expense for each of the twelve month periods ended December 31, 2016 and 2015.
WB Capital, a related party with common principal ownership, provides Merger & Acquisition and project management services to the Company as a consultant. There is no written agreement governing the relationship. The Company accrued $2,500 a month for these services. Due to the Company’s lack of available cash, the amounts were not paid during either of the years ended December 31, 2016 or 2015. The Company owed WB Capital $60,000 and $30,000 as of December 31, 2016 and 2015, respectively.
Scott E. Lybbert, Acting CFO and Director, provides accounting and reporting services to the Company as a consultant. There is no written agreement governing the relationship. The Company paid Mr. Lybbert $2,250 and $8,458 for the years ended December 31, 2016 and 2015, respectively. Mr. Lybbert hired support staff to ensure a more proper segregation of duties. Consequently, in addition to accruing $1,250 a month (for twelve months), an additional $375 (for nine months), and $208 (for an intern) has been accrued for these services. Consequently, the company recorded an additional liability of $16,333 as of December 31, 2016 for a total of $22,583 as of the same date. The Company owed Mr. Lybbert $6,250 as of December 31, 2015. Subsequently, Mr. Lybbert passed away in February 2017.
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The company pays a financial services consultant, who began working for the company at the end of the first quarter of 2016. The company has accrued invoices from this consultant in the amount of $13,200 for the year ended December 31, 2016, of which $9,750 have been paid, leaving a balance payable of $3,450 as of December 31, 2016.
NOTE 4: WEBSITE AND INTANGIBLE ASSETS
Since inception, most of the Company’s resources have been focused on creating its business model and related website. Certain costs incurred in development of our website were capitalized with a total of $17,831 allocated to our website development in 2013. In 2014, the Company enhanced its website with mobile-enabled features and functionality. Consequently, $68,655 additional costs were capitalized to the website in 2014. No additional amounts were capitalized in the years ended December 31, 2016 or 2015. The Company began amortizing its capitalized website costs of $86,486 on January 1, 2015, over its estimated useful life of three years. The Company recognized Amortization expense of $28,829 and $28,829, for the years ended December 31, 2016 and 2015, respectively.
NOTE 5: PROVISION FOR INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of December 31, 2016 and 2015:
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|
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|
|
|
|
|
2016
|
|
2015
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|
Deferred tax assets:
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|
|
|
|
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NOL Carryover
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$
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267,900
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$
|
112,400
|
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Related Party Accruals
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96,700
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|
70,900
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Valuation Allowance
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(364,600)
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(183,300)
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Net deferred tax asset
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$
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-
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$
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-
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The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2016 and 2015 due to the following:
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2016
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|
2015
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Book Loss
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$
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181,000
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$
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90,700
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|
Change in Valuation Allowance
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(181,000)
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(90,700)
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|
Provision for Income Taxes
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$
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-
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$
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-
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At December 31, 2016, the Company had net operating loss carry-forwards of approximately $686,800 that may be offset against future taxable income from the year 2016 through 2036. No tax benefit has been reported in the December 31, 2016 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.
NOTE 6: EQUITY
Reverse Split
During the second quarter of 2014, the Board of Directors declared a one-for-four reverse stock split and to recall previously issued shares in exchange for the post reverse split shares. The stock split decreased the Company's outstanding shares from approximately 17 million shares to 4.3 million shares as of December 31, 2014. All historical share and per share information has been recast to reflect the changes in the Company's equity structure.
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Common stock
The authorized capital stock of the Company consists of 75,000,000 shares of Common stock, par value $.001 per share, of which 4,755,673 were outstanding as of December 31, 2016.
The holders of Common Stock are entitled to one vote per share on each matter submitted to a vote at any meeting of shareholders. Shares of Common Stock do not carry cumulative voting rights and, therefore, a majority of the shares of outstanding Common Stock will be able to elect the entire board of directors and, if they do so, minority shareholders would not be able to elect any persons to the board of directors. Moms Online’s bylaws provide that a majority of the issued and outstanding shares of Moms Online constitutes a quorum for shareholders’ meetings.
Shareholders of Moms Online have no preemptive rights to acquire additional shares of Common Stock or other securities. The Common Stock is not subject to redemption and carries no subscription or conversion rights. In the event of liquidation of Moms Online, the shares of Common Stock are entitled to share equally in corporate assets after satisfaction of all liabilities.
Holders of Common Stock are entitled to receive such dividends, as the board of directors may from time to time declare out of funds legally available for the payment of dividends. Moms Online seeks growth and expansion of its business through the reinvestment of profits, if any, and does not anticipate that we will pay dividends in the foreseeable future.
During the year ended December 31, 2016, the company issued 367,534 shares of common stock for cash of $328,150, and 161,250 shares of common stock for services, valued at 153,438 (included in the shares issued for services were 31,250 shares issued to the Company’s President, Kevin Ghim, valued at $23,438). During the year ended December 31, 2015 the company issued 108,667 shares to 3 existing shareholders and 4 new shareholders for $81,500, or $.75 per share.
The company also recognized $12,492 of deferred stock compensation during the year ended December 31, 2016 to recognize one year of a four year stock compensation agreement calling for the payment of 100,000 shares, valued at the time of agreement (October 30, 2015) at $.50 a share, over a four year period to a consultant. These shares have not been issued yet due to a yet unfulfilled vesting clause, and are accounted for as a deferred compensation component of paid in capital. The company also recognized $8,750 of deferred stock compensation during the year ended December 31, 2016 to recognize seven months of a two year stock compensation agreement calling for the payment of 40,000 shares, valued at the stated price and stock value at the time of agreement (June 1, 2016) at $.75 a share, over a two year period to a second consultant/shareholder. These shares have not been issued yet due to a yet unfulfilled vesting clause, and are accounted for as a deferred compensation component of paid in capital.
NOTE 7: COMMITMENTS
The Company licenses its technology platform from IceLounge Media for $50,000 per year under an initial five year license agreement, which began on October 1, 2010, and was amended on January 1, 2014 for price and service increases. The initial 5 year term expired on October 1, 2015. The Lease calls for automatic 12 month renewals on the anniversary date. As of December 31, 2016 the Company is committed to nine month’s lease payments, or $37,500 for the remainder of the current lease term, expiring on October 1, 2017. If neither party terminates the lease by July 1, 2017, the Lease will automatically renew again and the Company will be obligated for an additional 12 months. The Company expects to renew the lease.
Note 8: SUBSEQUENT EVENTS
On February 14, 2017, the Company issued 5,000 restricted shares to a third party contractor, for services.
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