NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
Basis of Presentation
The unaudited interim financial statements of Moms Online, Inc. (the Company) have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information in accordance with Securities and Exchange Commission (SEC) Regulation S-X rule 8-03. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented herein. The financial data and other information disclosed in these notes to the interim financial statements related to the period are unaudited. The results for the three month periods ended March 31, 2017 are not necessarily indicative of the results to be expected for any subsequent quarters or for the entire year ending December 31, 2017. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2016.
NOTE 2: GOING CONCERN AND CONTINGENCIES
Going Concern
As shown in the accompanying financial statements, we have incurred losses in each year since inception and have a working capital deficit and an accumulated deficit of $1,113,202 as of March 31, 2017. 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 companys 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 at March 31, 2017 and December 31, 2016. 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 of the company 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 three months ended March 31, 2016, ILMI paid certain net expenses for and on behalf of the Company of $8,992, which were accounted for as amounts due to parent and are due on demand. During the three months ended March 31, 2017, the Company paid back $3,903.
In addition, Social Quotient Inc. paid $nil and $5,919 of expenses, respectively, for and in behalf of the Company, for the three months ended March 31, 2017 and 2016, respectivelywhich were accounted for as paid in capital.
On June 6, 2016 the Board of Directors of ILMI agreed to transfer from its own holdings of the companys common stock, 25,000 shares to a company shareholder because he was the first to invest in all three of the ILMI 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 $12,500 for platform lease expense for each of the three month periods ended March 31, 2017 and 2016.
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MOMS ONLINE, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 3: RELATED PARTY TRANSACTIONS AND RELATIONSHIPS (continued)
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 Companys lack of available cash, the amounts were not paid during either of the three months ended March 31, 2017 or March 31, 2016. The Company owed WB Capital $67,500 as of March 31, 2017.
Scott E. Lybbert, prior CFO, provided accounting and reporting services to the Company as a consultant. There was no written agreement governing the relationship. For the three months ended March 31, 2016, the Company accrued $3,750, for Lybberts services (no amounts were accrued for the three months ended March 31, 2017). During the three months ended March 31, 2017, the Company paid back $4,000. Mr. Lybbert passed away in February 2017. As of March 31, 2017, $19,708 was owed to Mr. Lybberts estate.
NOTE 4: WEBSITE AND INTANGIBLE ASSETS
Since inception, most of the Companys 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 have been capitalized since 2014. 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 $7,207 and $7,207, for the three months ended March 31, 2017 and 2016, respectively.
NOTE 5: EQUITY
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 4,760,673 were outstanding as of March 31, 2017.
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 Onlines 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 three months ended March 31, 2017, the company recognized $6,250 of deferred stock compensation to recognize one quarter of a four year stock compensation agreement calling for the payment of 100,000 shares. 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 $5,000 of deferred stock compensation to recognize one quarter of a two year stock compensation agreement calling for the payment of 40,000 shares. 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 $2,500 of deferred stock compensation to recognize one quarter of a two year stock compensation agreement calling for the payment of 20,000 shares. 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.
On February 14, 2017, the Company issued 5,000 restricted shares to a third party contractor, for services. The Company recorded professional fees expense of $5,000 for these shares. The related agreement specifies 40,000 shares will be issued over a two year period, upon completion of certain milestones.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto. See "ITEM 1 FINANCIAL STATEMENTS".
Management's Discussion and Analysis:
Certain statements in this Report constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes in government regulations; availability of management and other key personnel; availability, terms and deployment of capital; relationships with third-party equipment suppliers; and worldwide political stability and economic growth. The words believe, expect, anticipate, intend and plan and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made
Results of Operations
Net loss for the three months ended March 31, 2017 increased $21,334, or 30% over the $71,208 net loss for the three months ended March 31, 2016 due to an increase in selling, general and administrative costs of $11,364 or 47%. Legal and professional fees also increased by $7,077, or 75% due to the increased cost of being a public company.
Liquidity and Capital Resources:
At its current level of operations, the Company will need to raise additional capital during the next fiscal year. The Company has a relatively moderate amount of cash and had depended upon ILMI (its parent company) and Social Quotient (its sister company) for funding in the past. It is managements intent to continue to have the Company break away from its dependencies and to be self-sufficient.
CURRENT PLAN OF OPERATIONS
The Company plans to sell stock to raise sufficient capital to begin marketing the website, grow its user base and website traffic in order to begin generating revenues. Additional personnel will be added and managed as they become affordable. The company will also pursue potential merger or acquisition candidates as they may present themselves
Management encourages its shareholders to communicate directly with the Company for its typical investor relations, including address changes and for general corporate information by calling or writing to the Company at its administrative offices or by posting a message to Management also encourages shareholders to keep their address current with the Company.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This annual report includes forward looking statements which involve risks and uncertainties. Such statements can be identified by the use of forward-looking language such as "will likely result", "may", "are expected to", "is anticipated", "estimate", "believes", "projected", or similar words. All statements, other than statements of historical fact included in this section, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company's actual results could differ materially from those anticipated in any such forward-looking statements as a result of various risks, including, without limitation, the dependence on a single line of business; the failure to close proposed financing; rapid technological change; inability to attract and retain key personnel; the potential for significant fluctuations in operating results; the loss of a major customer; and the potential volatility of the Company's common stock.
ITEM 4: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding managements control objectives. You should note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon the foregoing evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures over financial reporting were not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff:
We do not yet have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of March 31, 2017. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, the segregation of all conflicting duties has not always been possible or economically feasible. To the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have sufficient segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
Management will seek to provide sufficient resources toward the proper mitigation of these material control weaknesses.
Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting that occurred during the first quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.