UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

 

FORM 10-Q

(Mark One)

 

    QUATERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE THREE MONTH PERIOD ENDED: MARCH 31, 2016

 

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from  ______________ to ______________

 

Commission File Number: 333-148987

 

NEXT GROUP HOLDINGS, INC

(Exact name of Registrant as specified in its charter)

 

Florida

 

20-3537265

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

1111 BRICKEL AVE, SUITE 2200, MIAMI, FL 33131

(Address of principal executive offices)

 

800-611-3622

(Registrant's telephone number)

 

PLEASANT KIDS, INC

2600 WEST OLIVE AVENUE, 5F, BURBANK, CA 91505

(Former Name, Former Address and Former Fiscal Year, if changed since last report)

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

 

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

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 2, 2016 the issuer had 225,160,716 shares of its common stock issued and outstanding.

 

 

 

 

 

 

Part I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NEXT GROUP HOLDINGS, INC

 

(Unaudited)

 

Table of Contents

 

 

 

Pages

 

 

 

Unaudited Consolidated Balance Sheets

 

2

 

 

 

Unaudited Consolidated Statements of Operations

 

3

 

 

 

Unaudited Consolidated Statements of Cash Flows

 

4

 

 

 

Unaudited Statement of Stockholders' Deficit

 

5

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

6 - 18

 

 

1

 

 

  

NEXT GROUP HOLDINGS, INC

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$

36,513

 

 

$

18,047

 

Accounts receivable, net

 

 

63,691

 

 

 

62,734

 

Finance deposit

 

 

25,000

 

 

 

25,000

 

Loan receivable, related party

 

 

60,000

 

 

 

60,000

 

Loan receivable

 

 

40,000

 

 

 

40,000

 

Total Current Assets

 

 

225,204

 

 

 

205,781

 

Fixed Assets

 

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $1,646

 

 

2,926

 

 

 

-

 

Total Fixed Assets

 

 

2,926

 

 

 

-

 

Other Assets

 

 

 

 

 

 

 

 

Due from Next Cala 360 - related party

 

 

129,615

 

 

 

132,179

 

License fee

 

 

180,550

 

 

 

201,385

 

Total Other Assets

 

 

310,165

 

 

 

333,564

 

Total Assets

 

$

538,295

 

 

$

539,345

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Bank overdraft

 

$

1,996

 

 

$

-

 

Accounts payable

 

 

325,371

 

 

 

299,053

 

Accrued expenses

 

 

2,716

 

 

 

-

 

Accrued interest

 

 

23,934

 

 

 

-

 

Accrued interest - related party

 

 

351

 

 

 

349

 

Accrued salary

 

 

53,025

 

 

 

-

 

Loan payable

 

 

30,000

 

 

 

30,000

 

Note payable, related party

 

 

280,000

 

 

 

280,000

 

Note payable, related party - Asiya Communication

 

 

95,120

 

 

 

95,120

 

Note payable, related party - Next Communication

 

 

3,016,671

 

 

 

3,025,522

 

Note payable - Pleasant Kids

 

 

-

 

 

 

384,060

 

Convertible notes payable, net of debt discounts of $310,807 and $0

 

 

650,193

 

 

 

-

 

Derivative liability

 

 

1,028,352

 

 

 

-

 

Total Current Liabilities

 

 

5,507,729

 

 

 

4,114,104

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

5,507,729

 

 

 

4,114,104

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, authorized 60,000,000 shares; Series A preferred stock; $0.001 par value, designated 50,000,000;  0 shares issued and outstanding as of March 31, 2016 and December 31,2015, respectively.

 

 

-

 

 

 

-

 

Series B preferred stock, $0.001 par value, designated 10,000,000; 10,000,000 issued and outstanding as of March 31, 2016 and December 31, 2015, respectively

 

 

10,000

 

 

 

10,000

 

Common stock, authorized 360,000,000 shares, $0.001 par value, 223,778,886 and 177,539,180 issued and outstanding as of March 31, 2016 and December 31, 2015, respectively

 

 

223,779

 

 

 

177,539

 

Additional paid in capital

 

 

(709,906

)

 

 

(23,868

)

Subscription receivable

 

 

(10,000

)

 

 

(10,000

)

Accumulated deficit

 

 

(4,465,358

)

 

 

(3,711,178

)

Total Next Group Holdings, Inc. Deficit

 

 

(4,951,485

)

 

 

(3,557,507

)

 

 

 

 

 

 

 

 

 

Non-controlling Interest in Subsidiaries

 

 

 

 

 

 

 

 

Non-controlling interest - additional paid-in capital in consolidated subsidiaries

 

 

38,570

 

 

 

38,570

 

Non-controlling interest - accumulated deficit in consolidated subsidiaries

 

 

(56,519

)

 

 

(55,822

)

Non-controlling interest in subsidiaries

 

 

(17,949

)

 

 

(17,252

)

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

 

$

538,295

 

 

$

539,345

 

  

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 

2

 

 

 

NEXT GROUP HOLDINGS, INC

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months

 

 

 

Ended March 31,

 

 

 

2016

 

 

2015

 

Revenues

 

$

82,303

 

 

$

108,925

 

Revenues, related party

 

 

-

 

 

 

44,121

 

Cost of Revenues, related party

 

 

107,161

 

 

 

11,262

 

Gross Profit (Loss)

 

 

(24,858

)

 

 

141,784

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Consulting fees

 

 

21,500

 

 

 

-

 

Professional services

 

 

216,576

 

 

 

7,270

 

Officer compensation

 

 

73,196

 

 

 

128,710

 

General and administrative expense

 

 

114,959

 

 

 

53,300

 

Total Operating Expenses

 

 

426,231

 

 

 

189,280

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(451,089

)

 

 

(47,496

)

 

 

 

 

 

 

 

 

 

Other Income (Expense):

 

 

 

 

 

 

 

 

Other income

 

 

2,879

 

 

 

-

 

Interest expense

 

 

(276,900

)

 

 

-

 

Penalties on convertible notes payable

 

 

(14,490

)

 

 

-

 

Change in fair value of embedded derivative liability

 

 

(15,277

)

 

 

-

 

Total other income (expenses)

 

 

(303,788

)

 

 

-

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(754,877

)

 

 

(47,496

)

 

 

 

 

 

 

 

 

 

Income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net loss before non-controlling interest

 

 

(754,877

)

 

 

(47,496

)

Net loss attributable to non-controlling interest

 

 

697

 

 

 

-

 

Net loss attributable to Next Group Holdings, Inc.

 

$

(754,180

)

 

$

(47,496

)

 

 

 

 

 

 

 

 

 

Loss per share; Basic and diluted

 

$

(0.00

)

 

$

(0.00

)

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

196,938,335

 

 

 

219,373,975

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 

3

 

 

 

NEXT GROUP HOLDINGS, INC

STATEMENT OF STOCKHOLDERS' DEFICIT

March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Non-Controlling Interest

 

 

 

Series A

 

 

Series B

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Next Group

 

 

Additional

 

 

 

 

 

Non-

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Subscription

 

 

Holdings

 

 

Paid-in

 

 

Accumulated

 

 

Controlling

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Receivable

 

 

Deficit

 

 

Capital

 

 

Deficit

 

 

Interest

 

Balance, December 31, 2015

 

 

-

 

 

$

-

 

 

 

10,000,000

 

 

$

10,000

 

 

 

177,539,180

 

 

$

177,539

 

 

$

(23,868

)

 

$

(3,711,178

)

 

$

(10,000

)

 

$

(3,557,507

)

 

$

38,570

 

 

$

(55,822

)

 

$

(17,252

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recapitalization

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

44,784,795

 

 

 

44,785

 

 

 

(1,077,401

)

 

 

-

 

 

 

-

 

 

 

(1,032,616

)

 

 

-

 

 

 

-

 

 

 

-

 

Shares issued in exchange for loan pay

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

450,000

 

 

 

450

 

 

 

12,810

 

 

 

-

 

 

 

-

 

 

 

13,260

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock issued for conversion of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,004,911

 

 

 

1,005

 

 

 

95,453

 

 

 

-

 

 

 

-

 

 

 

96,458

 

 

 

-

 

 

 

-

 

 

 

-

 

Forgiveness of imputed interest on related party note payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

60,168

 

 

 

-

 

 

 

-

 

 

 

60,168

 

 

 

-

 

 

 

-

 

 

 

-

 

Derivative liability write off due to conversion of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

222,932

 

 

 

-

 

 

 

-

 

 

 

222,932

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss for period ending March 31, 2016

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(754,180

)

 

 

-

 

 

 

(754,180

)

 

 

-

 

 

 

(697

)

 

 

(697

)

Balance March 31, 2016

 

 

-

 

 

$

-

 

 

 

10,000,000

 

 

$

10,000

 

 

 

223,778,886

 

 

$

223,779

 

 

$

(709,906

)

 

$

(4,465,358

)

 

$

(10,000

)

 

$

(4,951,485

)

 

$

38,570

 

 

$

(56,519

)

 

$

(17,949

)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 

4

 

 

 

NEXT GROUP HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Three

 

 

For the Three

 

 

 

Months Ended

 

 

Months Ended

 

 

 

March 31, 2016

 

 

March 31, 2015

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net Loss before non-controlling interest

 

$

(754,877

)

 

$

(47,496

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Imputed interest

 

 

60,168

 

 

 

-

 

Debt discount amortization

 

 

157,059

 

 

 

-

 

Depreciation expense

 

 

216

 

 

 

-

 

Debt issue costs expensed

 

 

20,000

 

 

 

-

 

Default penalties on convertible notes

 

 

14,490

 

 

 

-

 

Loss on derivative liability

 

 

15,277

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(957

)

 

 

(74,833

)

Prepaid expenses

 

 

20,835

 

 

 

-

 

Accrued salary

 

 

3,000

 

 

 

-

 

Accrued interest

 

 

26,166

 

 

 

-

 

Accrued expense

 

 

2,716

 

 

 

-

 

Accounts payable

 

 

66,068

 

 

 

(7,904

)

Net Cash Used by Operating Activities

 

 

(369,839

)

 

 

(130,233

)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Notes receivable

 

 

-

 

 

 

(60,611

)

Repayments of related party receivable

 

 

2,564

 

 

 

-

 

Net Cash Provided by Investing Activities

 

 

2,564

 

 

 

(60,611

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Bank overdraft

 

 

908

 

 

 

-

 

Proceeds from convertible notes

 

 

392,500

 

 

 

-

 

(Repayments of) proceeds from related party loans

 

 

(8,851

)

 

 

220,899

 

Cash assumed through reverse recapitalization

 

 

1,184

 

 

 

-

 

Net Cash Provided by Financing Activities

 

 

385,741

 

 

 

220,899

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash

 

 

18,466

 

 

 

30,055

 

Cash at Beginning of Period

 

 

18,047

 

 

 

28,755

 

Cash at End of Period

 

$

36,513

 

 

$

58,810

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

-

 

Cash paid for income taxes

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing activities

 

 

 

 

 

 

 

 

Common stock issued as loan repayment

 

$

13,260

 

 

$

-

 

Common stock issued for conversion of note principal

 

$

86,940

 

 

$

-

 

Common stock issued for conversion of accrued interest

 

$

9,518

 

 

$

-

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 

5

 

 

 

NEXT GROUP HOLDINGS, INC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

  

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Next Group Holdings, Inc, (the Company) was incorporated under the laws of the State of Florida on September 21, 2005  to act as a holding company for its subsidiaries, both current and future. Its subsidiaries are Meimoun and Mammon, LLC (100% owned), Next Cala, Inc (94% owned). NxtGn, Inc. (65% owned) and Next Mobile 360, Inc. (100% owned). 

 

Meimoun and Mammon, LLC (M&M) was formed under the laws of the State of Florida on May 21, 2001 as a real estate investment company. During the year ended December 31, 2010, M&M began winding down real estate operations and engaged in telecommunications services. M&M acquired telecom registrations, licenses and authorities to provide telecom services to the retail and wholesale markets including sales of prepaid long distance telecom services and Mobile Virtual Network Operator (MVNO) services. The services are sold under the brand name Next Mobile 360 and through the subsidiary of the same name.

 

Next Cala, Inc, (Cala) was formed under the laws of Florida on July 10, 2009 to the purpose of offering prepaid and reloadable debit cards to the retail market. Cala serves consumers in the underbanked and unbanked populations through Incomm, a leading provider of payment remittance services worldwide.

 

NxtGn, Inc. (NxtGn) was formed under the laws of Florida on August 24, 2011 to develop a unique High Definition telepresence product (AVYDA) which allows users to connect with celebrities, public figures, healthcare and education applications via a mobile phone, tablet or personal computer.

 

On December 31, 2015, NGH completed an Agreement and Plan of Merger (the "Merger Agreement”) with Pleasant Kids, Inc. ("Pleasant Kids”) and its wholly owned subsidiary, NGH Acquisition Corp. ("Acquisition Sub”), pursuant to which NGH merged with Acquisition Sub and Acquisition Sub was then merged into PLKD effective December 31, 2015. Under the terms of the Merger Agreement, the NGH shareholders received shares of PLKD common stock such that the NGH shareholders received approximately 80% of the total common shares and 100% of the preferred shares of PLKD issued and outstanding following the merger. Due to the nominal assets and limited operations of PLKD prior to the merger, the transaction was accorded reverse recapitalization accounting treatment under the provision of Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC”) 805 whereby NGH became the accounting acquirer (legal acquiree) and PLKD was treated as the accounting acquiree (legal acquirer). The historical financial records of the Company are those of the accounting acquirer (NGH) adjusted to reflect the legal capital of the accounting acquire (PLKD). As the transaction was treated as a recapitalization, no intangibles, including goodwill, were recognized. Concurrent with the effective date of the reverse recapitalization transaction, the Company adopted the fiscal year end of the accounting acquirer of December 31.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC”) for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States for annual financial statements and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this report. The accompanying consolidated condensed balance sheet as of December 31, 2015 has been derived from our unaudited financial statements. The condensed consolidated statements of operations and cash flows for the three months ended March 31, 2016 are not necessarily indicative of the results of operations or cash flows to be expected for any future period or for the year ending December 31, 2016.

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management and in the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position and results of operations as of the dates and for the periods presented.

 

Effective January 12, 2016, the Company changed its name from Pleasant Kids, Inc. ("PLKD”) to Next Group Holdings, Inc. ("NGH”).

 

 

6

 

 

 

Basis of Presentation

 

This summary of accounting policies for Next Group Holdings, Inc. is presented to assist in understanding the Company's financial statements. The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America ("GAAP" accounting) and have been consistently applied in the preparation of the unaudited interim consolidated financial statements.

 

Use of Estimates

 

The preparation of unaudited interim consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make 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 financial statements. Actual results could differ from those estimates. Estimates are used when accounting for allowances for bad debts, collectability of accounts receivable, and fair value calculations related to embedded derivative features of outstanding convertible notes payable.

 

Cash

 

For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. The Company held no cash equivalents as of March 31, 2016 or December 31, 2015.

 

Revenue recognition

 

The Company follows paragraph 605-10-S99 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

Property and equipment

 

Property and equipment are stated at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Maintenance and repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized. At the time of retirement or disposal of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations.

 

Impairment of Long-Lived Assets

 

In accordance with ASC Topic 360, formerly SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of its asset based on estimates of its undiscounted future cash flows. If these estimated future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the difference between the asset's estimated fair value and its carrying value. There was no impairment to its long-lived assets as of March 31, 2016 and December 31, 2015, respectively.

 

Non-Controlling Interest

 

The Company reports the non-controlling interest in its majority owned subsidiaries in the consolidated balance sheets within the stockholders' deficit section, separately from the Company's stockholders' deficit. Non-controlling interest represents the non-controlling interest holders' proportionate share of the equity of the Company's majority-owned subsidiaries. Non-controlling interest is adjusted for the non-controlling interest holders' proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

 

 

7

 

 

 

Derivative Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

 

Fair Value of Financial Instruments

 

Fair value of certain of the Company's financial instruments including cash, accounts receivable, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, "Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

 

Fair value, as defined in ASC 820, is 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. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company's credit risk.

 

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

 

The Company used Level 2 inputs for its valuation methodology for the conversion option liability in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs:

 

 

 

March 31, 2016

 

Annual dividend yield

 

 

-

 

Expected life (years)

 

 

.05 - 1

 

Risk-free interest rate

 

 

.59

%

Expected volatility

 

 

608.52

%

 

 

 

Carrying Value

 

 

Fair Value Measurements at

 

 

 

As of

 

 

March 31, 2016

 

 

 

March 31,

 

 

Using Fair Value Hierarchy

 

 

 

2016

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$

1,028,352

 

 

$

-

 

 

$

-

 

 

$

1,028,352

 

Total

 

$

1,028,352

 

 

$

-

 

 

$

-

 

 

$

1,028,352

 

 

 

8

 

 

 

For the three months ending March 31, 2016 and 2015, the Company recognized a loss of $15,277 and $0 on the change in fair value of derivative liabilities. As at March 31, 2016 the Company did not identify any other assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 825-10.

 

Income Taxes

 

Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Use of net operating loss carry forwards for income tax purposes may be limited by Internal Revenue Code section 382 if a change of ownership occurs.

 

Basic Income (Loss) Per Share

 

Basic income (loss) per share is calculated by dividing the Company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

 

At March 31, 2016, the Company has nine outstanding convertible notes payable with conversion rights. The amount of outstanding principal on these convertible notes total $548,500 plus accrued interest of $18,955 for total convertible debts as of March 31, 2016 of $567,455 representing 5,158,106 new dilutive common shares if converted at the applicable rates. The effects of these notes have been excluded as the conversion would be anti-dilutive due to the net loss incurred in each period presented.

 

Dividends

 

The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.

 

Advertising Costs

 

The Company's policy regarding advertising is to expense advertising when incurred.

 

Stock-Based Compensation

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of subtopic 505-50 of the FASB Accounting Standards Codification ("Sub-topic 505-50”) and subtopic 718-20 for awards classified as equity to employees. 

 

Related Parties

 

The registrant follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the Related parties include (a) affiliates of the registrant; (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the registrant; (e) management of the registrant; (f) other parties with which the registrant may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

Accounts Receivable

 

Accounts receivable balances are established for amounts owed to the Company from its customers from the sales of services and products. The Company closely monitors the collectability of outstanding accounts receivable and provide an allowance for doubtful accounts based on estimated collections of outstanding amounts.

 

Loans Receivable

 

The Company carries loans receivable for unsecured amounts lent to unrelated and related parties. The balance due to the Company monitored for collectability. An allowance for uncollectible loans is established based on the estimated collectability of outstanding loans.

 

Subscription Receivable

 

During the year ended December 31, 2014, the Company accepted a $10,000 subscription receivable that remains outstanding as of March 31, 2016 and December 31, 2015. The subscription receivable is shown as a reduction to equity on the balance sheet pursuant to ASC 505.

 

 

9

 

 

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Recently Issued Accounting Standards 

 

In April 7, 2015 the FASB issued Accounting Standards Update "ASU” 2015-03 on "Interest — Imputation of Interest (Subtopic 835-30)” To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this Update. This ASU 2015-3 is effective for annual periods ending after December 15, 2015, and interim periods and annual periods thereafter. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

 

NOTE 3 - GOING CONCERN

 

The Company's unaudited condensed interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company has a minimum cash balance available for payment of ongoing operating expense, has experienced losses from operations since inception, and it does not have a source of revenue sufficient to cover its operating costs. Its continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company. These factors raise substantial doubt about the Company's ability to continue as a going concern.

 

NOTE 4 - LOANS RECEIVABLE

 

At the time of the merger discussed in Note 2, the Company had a loan that was made to an individual totaling $40,000 which was the balance on March 31, 2016 and on December 31, 2015, respectively. This loan was not memorialized in writing and accordingly, carries no terms as to repayment, interest or default.

 

As discussed in Note 7, during the year ended December 31, 2014, the Company made a series of loans to the sister of Mr. Arik Maimon, our Chief Executive Officer totaling $60,000. No repayments have been made leaving a total principal balance of $60,000 due at March 31, 2016 and December 31, 2015, respectively. These loans were not memorialized in writing and accordingly, carry no terms as to repayment, interest or default.

 

 

10

 

 

 

NOTE 5 - FIXED ASSETS

 

Property, plant and equipment consist of the following at March 31, 2016 and December 31, 2015:

 

 

 

March 31,
2016

 

 

December 31,
2015

 

Office equipment

 

$

4,572

 

 

$

-

 

Less: accumulated depreciation

 

 

(1,646

)

 

 

-

 

Property and equipment, net

 

$

2,926

 

 

$

          -

 

 

All of the equipment owned by the Company as of March 31, 2016 was acquired through the reverse recapitalization as discussed in Note 2. Depreciation expense for the three months ended March 31, 2016 and 2015 was $216 and $0, respectively.

 

NOTE 6 - CONVERTIBLE NOTES PAYABLE

 

The following is a summary of all of the convertible notes outstanding as of March 31, 2016:

 

Issue Date

 

Due Date

 

Holder

 

Principal

 

 

Discount

 

 

Carrying Value

 

 

Accrued Interest

 

8/12/2015

 

8/12/2016

 

Noteholder 1

 

$

82,500

 

 

$

(31,644

)

 

$

50,856

 

 

$

4,068

 

10/15/2015

 

10/15/2016

 

Noteholder 1

 

 

82,500

 

 

 

(45,205

)

 

 

37,295

 

 

 

2,947

 

11/25/2015

 

11/24/2016

 

Noteholder 1

 

 

82,500

 

 

 

(53,568

)

 

 

28,932

 

 

 

2,296

 

12/21/2015

 

12/21/2016

 

Noteholder 1

 

 

27,000

 

 

 

(19,677

)

 

 

7,323

 

 

 

580

 

1/15/2016

 

1/15/2017

 

Noteholder 1

 

 

131,250

 

 

 

-

 

 

 

131,250

 

 

 

2,186

 

3/8/2016

 

3/8/2017

 

Noteholder 1

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

241

 

7/27/2015

 

7/27/2016

 

Noteholder 2

 

 

37,000

 

 

 

(12,164

)

 

 

24,836

 

 

 

1,987

 

11/20/2015

 

11/20/2016

 

Noteholder 2

 

 

37,000

 

 

 

(23,619

)

 

 

13,381

 

 

 

1,070

 

11/9/2015

 

11/9/2016

 

Noteholder 3

 

 

75,000

 

 

 

(46,438

)

 

 

28,562

 

 

 

2,285

 

3/8/2016

 

3/8/2017

 

Noteholder 3

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

241

 

1/19/2016

 

1/15/2017

 

Noteholder 4

 

 

131,250

 

 

 

-

 

 

 

131,250

 

 

 

2,071

 

3/9/2016

 

3/8/2017

 

Noteholder 4

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

241

 

11/9/2015

 

11/9/2016

 

Noteholder 5

 

 

100,000

 

 

 

(62,739

)

 

 

37,261

 

 

 

2,981

 

11/9/2015

 

11/9/2016

 

Noteholder 6

 

 

25,000