Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant
computed by reference to the price at which the common stock was last sold on the OTC Bulletin Board on June 30, 2015 was $0. For
purposes of this calculation, shares of common stock held by each officer and director and by each person who owns 10% or more
of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. The determination of affiliate
status is not necessarily a conclusive determination for other purposes.
This Annual Report on Form
10-K (this “Annual Report”) contains forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), that reflect our current estimates, expectations and projections about our future results, performance,
prospects and opportunities. Forward-looking statements include, without limitation, statements about our market opportunities,
our business and growth strategies, our projected revenue and expense levels, possible future consolidated results of operations,
the adequacy of our available cash resources, our financing plans, our competitive position and the effects of competition and
the projected growth of the industries in which we operate, as well as the following statements:
This Annual Report also
contains forward-looking statements attributed to third parties relating to their estimates regarding the size of the future market
for products and systems such as our products and systems, and the assumptions underlying such estimates. Forward-looking
statements include all statements that are not historical facts and can be identified by forward-looking statements such as “may,”
“might,” “should,” “could,” “will,” “intends,” “estimates,”
“predicts,” “projects,” “potential,” “continue,” “believes,” “anticipates,”
“plans,” “expects” and similar expressions. Forward-looking statements are only predictions based on our
current expectations and projections, or those of third parties, about future events and involve risks and uncertainties.
Although we believe that
the expectations reflected in the forward-looking statements contained in this Annual Report are based upon reasonable assumptions,
no assurance can be given that such expectations will be attained or that any deviations will not be material. In light of these
risks, uncertainties and assumptions, the forward-looking statements, events and circumstances discussed in this Annual Report
may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking
statements. Important factors that could cause our actual results, level of performance or achievements to differ materially from
those expressed or forecasted in, or implied by, the forward-looking statements we make in this Annual Report are discussed under
“Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and elsewhere in this Annual Report and include:
You should not place undue
reliance on any forward-looking statements. In addition, past financial or operating performance is not necessarily a reliable
indicator of future performance, and you should not use our historical performance to anticipate future results or future period
trends. Except as otherwise required by federal securities laws, we disclaim any obligation or undertaking to disseminate any updates
or revisions to any forward-looking statement contained in this Annual Report to reflect any change in our expectations or any
change in events, conditions or circumstances on which any such statement is based. All forward-looking statements attributable
to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements included in this
Annual Report.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol "BXNG." However,
at this time there is no liquid market for our common stock.
Holders
According to the records
of our transfer agent, as of April 8, 2016, there were approximately 54 holders of record of our common stock, which number does
not reflect beneficial stockholders who hold their stock in nominee or “street” name through various brokerage firms.
Dividend Policy
We have not declared any dividends since incorporation
and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to
pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our
business. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our
Board of Directors may deem relevant.
Recent Sales of Unregistered Securities
On March 4, 2015, the
Company entered into an agreement to purchase two trade names for 500,000 shares of common stock. The shares are due upon the assignment
of the trade names by the United States Patent and Trademark Office (Ser. No 86210260 and Ser. No. 86210253). During the year ended
December 31, 2015 the Company recorded the issuance of the shares of common stock with a fair value of $250,000 ($.50) per share.
The Company immediately impaired the value of the trademarks as it does not intend to use them in the future.
On September 25, 2015 a related party exercised
285,714 warrants for cash proceeds of $100,000.
On November 12, 2015,
the Company issued 100,000 shares of common stock with a fair value of $50,000 for a consulting agreement expiring on February
1, 2016.
We made the foregoing stock
issuances in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.
Item 6. Selected Financial Data
As a “Smaller Reporting Company,”
we are not required to provide the information required by this item.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following plan of operation provides information
which management believes is relevant to an assessment and understanding of our results of operations and financial condition.
The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are
often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which,
by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
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.
Our independent registered public accounting firm has issued a going
concern opinion. This means there is substantial doubt that we can continue as an on-going business unless we obtain additional
capital to pay our ongoing operational costs. Accordingly, we must locate sources of capital to pay our operational costs.
Our operational expenditures are primarily related to development
of Bang’s multi-channel advertising network, marketing costs associated with attracting and retaining users, and the costs
related to being a fully reporting company with the Securities and Exchange Commission.
2015 was a transformative year for Bang Holdings. We quintupled
the direct reach of our 4TwentyToday network of channels over the course of the year to around 500,000 users and expanded the reach
of our social influencer network to more than 11 million. At five persons, our core team has remained small and highly efficient,
and has built a firm foundation for growth in the quarters and years to come.
Business Overview
Bang Holdings Corp wholly owns two subsidiaries,
Bang Digital Media, a cannabis focused digital media company, and Bang Vapor, an e-juice company that can crossover to the cannabis
market.
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, and 4TT/V which cross the social media platforms of Facebook,
Twitter, Massroots, Instagram 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 350,000 users of our network, with a steady growth rate of around two percent 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 80,000 strong, ours is the largest vaping
community on Facebook. This has enabled us to carry out beta testing of our product and to develop strong recognition for the Bang
brand while soft-launching our e-liquid.
Our most successful post on Facebook in
2015 had 5.4 million views, leading to 309,000 “reactions,” 95,000 “shares,” and 92,000 “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 10 million users.
Ultimately, the KPI 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.
Bang Vapor is a marketer of vaporizer pens
and E-liquid for the vaporizer industry, through the use of a razor and razor blade model. “Electronic cigarettes”
or “e-cigs” and “vaporizers” are battery-powered products that enable users to inhale nicotine vapor without
smoke, tar, ash or carbon monoxide. Electronic cigarettes are comprised of three functional components: (i) a mouthpiece, (ii)
the heating element that vaporizes the liquid nicotine so it can be inhaled and (iii) the electronics. Although the Company will
generate revenues from vaporizer hardware sales (sold for between $40 and $200) through our website www.bangvapor.com and in vape
shops nationwide, we will primarily be enrolling customers in our e-liquid subscription service – i.e. The Bang Vapor Club.
The subscription service works as follows: For $19.95 the club member receives a starter kit consisting of a free vaporizer pen
and three 12ML bottles of e-liquid – of which, the member can pick any three from our line of 20 gourmet, “Made in
the USA” flavors. Thereafter, the customer is automatically charged $19.95 per month for three 12ML flavors of e-liquid.
In order to maximize retention rates, we give bonus ‘mystery’ gifts to club members every month – these are low
cost, but high perceived value, items such as T-Shirts, USB Drives, sample bottles of e-liquid and replacement vaporizer hardware.
We will also sign up Bang Vapor Club members via social media influencers who are being contracted to our Company as brand ambassadors
– each of whom have their own circle of influence of between 150,000 and 2,000,0000 fans.
Bang Vapor completed its soft launch in the
first quarter of 2016.
Plan of Operations
In the twelve month period, we intend to develop our business in
four areas:
·
|
Establish retail distribution with vaporizer shops and tobacco/headshops. There are between 5,000-7,000 “vape shops” that are dedicated exclusively to selling e-liquid and vaporizer pens. In addition, there are approximately 10,000 tobacco shops (or head shops) that have historically only sold cigarettes, tobacco and smoking pipes, but is now offering various vaping products. Our sales team is currently establishing relationships with regional and national distributors, and are attending trade shows. In addition, the Company is currently advertising the products in trade publications and plans to expand these efforts will be attained in relation to the profits generated by the Company. We plan on targeting approximately 1,000 shops during our first year. Our estimated budget for this is approximately $40,000.
|
·
|
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 YouTuber’s and Vine stars to monetize their social media followings, Bang Vapor will be able to build brand awareness and employ an army of influencers to sell product in order to become a leading brand in the e-cig/vaporizer space. Compensation to social media personalities and celebrities will be bonus incentivized along with a commission structure. Therefore, we anticipate no up-front expenditures.
|
·
|
Open the Bang Vapor Club online. Distribution of our products purchased on-line is anticipated to be performed by the United States Postal Service. We plan on maintaining a limited inventory of several flavor and two personal vapor lines. We plan to expand the inventory line based upon the data we receive during the initial launch of the website. The anticipated cost for completion of the website, maintenance and the development of new features over the course of the next twelve (12) months is approximately $35,000.
|
If we are unable to build our customer base
or gain any clients, we will be forced to cease our development and/or marketing operations until we raise money. Attempting to
raise capital after failing in any phase of our development plan could be difficult. As such, if we cannot secure additional proceeds,
we will have to cease operations and investors would lose their entire investment.
We intend to raise additional capital
through private placements now that we have
a quotation on the OTC Bulletin Board. If we need additional
cash but are unable to raise it, we will either suspend marketing operations until we do raise the cash, or cease operations
entirely. Other than as described in this paragraph, we have no other financing plans.
Financing
On August 22, 2014, the Company entered into a Securities Purchase Agreement with Platinum Partners Liquid
Opportunity Master Fund LP (“Platinum”) whereby the Company issued 1,000,000 shares of Common Stock to the Company
at $0.35 per share for a purchase price of $350,000. In consideration for Platinum agreeing to purchase the 1,000,000 shares, the
Company agreed to issue to Platinum share purchase warrants entitling Platinum the right to acquire 1,500,000 shares of the Company’s
Common stock, at $0.35 per share. In October 2014, Platinum purchased the 10% Convertible Debenture for the aggregate amount of
$500,000. On September 25, 2015, Platinum exercised 285,714 warrants for cash proceeds of $100,000. On January 26, 2016 the related
party exercised 28,581 warrants for cash proceeds of $10,000. On March 16, 2016 the related party exercised 285,714 warrants for
cash proceeds of $100,000. Subsequent to December 31, 2015 the Company’s President loaned the Company $30,000 pursuant to
a convertible debenture. The Loan bears interest at 10% per annum, is due on January 29, 2017 and is convertible into common stock
at $1.50 per share at the discretion of the holder. In addition, the Company agreed to issue 30,000 warrants with an exercise price
of $2.00 that expire January 29, 2021.
Results of Operations
For the year ended December 31, 2015 and for period from May
13, 2014 (inception) to December 31, 2014
We have generated $576 in revenue for the year ended December 31,
2015 compared to $13 for the period from May 13, 2014 (inception) to December 31, 2014. We incurred operating expenses of $1,403,818
for the year ended December 31, 2015 compared to $604,309 for the period from May 13, 2014 (inception) to December 31, 2014. We
had a net loss of $1,697,215 for the year ended December 31, 2015, a majority of which is general and administrative fees of $820,620
and sales and marketing fees of $320,038 compared to a net loss of $760,822 for the period from May 13, 2014 (inception) to December
31, 2014, a majority of which is general and administrative fees of $363,716 and interest expense of $156,628.
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.
Our primary uses of cash have been for payroll,
marketing, consulting, legal, accounting and audit fees. 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 December 31, 2015, we had a cash balance of $17,264. Since inception, we raised $500,000 and $350,000
from the sale of warrants and a convertible debenture to Platinum Partners Liquid Opportunity Master Fund LP, $66,600 from the
sale of common stock through a private placement and $100,000 from the exercise of warrants to fund our operating expenses, pay
our obligations, and grow our company. We currently have no material commitments for capital expenditures. We may be required to
raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We
estimate that based on current plans and assumptions, that our available cash will not be sufficient to satisfy our cash requirements
under our present operating expectations, without further financing, through June 2016. Other than working capital, we presently
have no other alternative source of working capital. We may not have sufficient working capital to fund the expansion of our operations
and to provide working capital necessary for our ongoing operations and obligations. We may need to raise significant additional
capital to fund our operating expenses, pay our obligations, and grow our company. We do not anticipate we will be profitable in
2016. 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. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability
to continue to conduct business operations. 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. Therefore, our auditors have raised substantial
doubt about our ability to continue as a going concern.
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
For the year ended December 31, 2015, the Company has incurred net operating losses and used cash in operations.
As of December 31, 2015, the Company has an accumulated deficit of $2,458,037 and used cash in operations of $519,391 for the year
ended December 31, 2015. Losses have principally occurred as a result of the substantial resources required for marketing of the
Company’s products which included the general and administrative expenses associated with its organization and product development.
We currently have a burn rate of approximately $48,000 a month.
These conditions raise
substantial doubt about the Company’s ability to continue as a going concern. These 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.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as
of December 31, 2015.
Critical Accounting Policies and Estimates
Use of Estimates in Financial Statements
The presentation of 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, stock based compensation and any beneficial conversion features on convertible
debt.
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.
Recent Accounting Pronouncements
In April 2015, the FASB
issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” this Update as part of its initiative to
reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different balance
sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing
debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting
Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not
recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with
the guidance in FASB Concepts Statement No. 6,
Elements of Financial Statements
, which states that debt issuance costs
are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts
Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify
presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with
debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update.
For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years. The adoption of this standard on January 1, 2015 did not
have any effect on the financial statements.
In August 2014, the FASB
issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic
205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there
is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance.
In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments
require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain
principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term
substantial
doubt,
(2) require an evaluation every reporting period including interim periods, (3) provide principles for considering
the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result
of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is
not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued
(or available to be issued). The amendments in this Update are effective for public and nonpublic entities for annual periods ending
after December 15, 2016. The Company is currently evaluating the effects of adopting this ASU.
In August 2015, FASB issued
ASU No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the effective
date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee
benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including
interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the
guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within
annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier
as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period.
All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December
15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in
which the entity first applies the guidance in ASU No. 2014-09. 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.
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 financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk
As a “Smaller Reporting Company,”
we are not required to provide the information required by this item.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, including
supplementary data and the accompanying report of independent registered public accounting firm filed as part of this Annual Report
on Form 10-K, are listed in the Index to Consolidated Financial Statements and Financial Statement Schedules on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure
Controls and Procedures
The Company maintains
a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. An evaluation was carried out under the supervision and with the participation
of the Company's management, including the Company's Principle Executive Officer and Principal Financial Officer, of the effectiveness
of the Company's disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation,
the Company's Principle Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and
procedures were not effective as of such period end. Management will endeavor to enhance the Company's disclosure controls and
procedures to cause them to become effective.
Management's Annual
Report on Internal Control over Financial Reporting.
Management is responsible
for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial
reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes
in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting
includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance
that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts
and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that
unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would
be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not
intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Management conducted
an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control
– Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that
evaluation, management concluded that the Company's internal control over financial reporting was not effective as of December
31, 2015.
The matters involving
internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our
board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
(3) inadequate segregation of duties consistent with control objectives; (4) lack of expertise with complex GAAP and Securities
and Exchange Commission ("SEC") reporting matters and (5) management is dominated by one individual without adequate
compensating controls. The aforementioned material weaknesses were identified by our Principal Executive and Financial Officer
in connection with the review of our financial statements as of December 31, 2015. At this time, management has decided that given
the risks associated with this lack of segregation of duties, the potential benefit of adding additional personnel to clearly segregate
duties does not justify the expenses associated with such benefit. Management will periodically review this matter and may make
modifications, including adding additional personnel, it determines appropriate.
Our management, including
the Principal Executive Officer and Principal Financial Officer, does not expect that the Company’s internal control over
financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their
costs. Further, because of the inherent limitations in all controls systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion
of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are
subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of
compliance with policies or procedures.
This annual report
does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules
of the SEC that do not apply to the Company as a smaller reporting company.
Changes in Internal Control Over Financial Reporting
There were no changes in
our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15
under the Exchange Act that occurred during the year ended December 31, 2015 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
During the year ended December 31, 2015, the Company issued
500,000 shares of common stock for a trademark valued at $250,000 ($.50 per share).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2015 AND 2014
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) 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.
(C) Going Concern
For the year ended December
31, 2015, the Company has incurred net operating losses and used cash in operations. As of December 31, 2015, the Company has an
accumulated deficit of $2,458,037 and used cash in operations of $519,391. 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 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 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
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, 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 inured 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:
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
6,845
|
|
|
$
|
2,794
|
|
Website development
|
|
|
17,174
|
|
|
|
6,750
|
|
Total
|
|
|
24,019
|
|
|
|
9,544
|
|
Impairments
|
|
|
(17,174
|
)
|
|
|
—
|
|
Accumulated depreciation
|
|
|
(1,420
|
)
|
|
|
(172
|
)
|
Balance
|
|
$
|
5,425
|
|
|
$
|
9,372
|
|
Depreciation expense
for the year ended December 31, 2015 was $1,248 and $172 for the period May 13, 2014 to December 31, 2014. During the year ended
December 31, 2015 the Company impaired $17,174 of costs associated with the development of its website.
(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.
(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) 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 year ended December 31, 2015 and 2014, advertising, marketing and promotion expense was $35,742 and $22,873,
respectively.
(H) Segments
The Company operates
in one segment and therefore segment information is not presented.
(I)
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 has
1,514,286 shares issuable upon the exercise of options and warrants and 1,428,571 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 year ended December 31, 2015. The Company has 1,650,000 shares issuable upon the exercise of options and
warrants and 1,428,571 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 the ended December 31, 2014.
(J) 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.
(K) 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.
The Company’s income tax expense
differs from the “expected” tax expense for federal income tax purpose by applying the Federal & State blended
rate of 37.63% as follows:
|
|
2015
|
|
|
2014
|
|
Expected income tax (benefit) expense at the statutory rate of 37.63%
|
|
$
|
(638,622
|
)
|
|
$
|
(286,297
|
)
|
Tax effect of expenses that are not deductible for income tax purposes (net of other amounts deductible for tax purposes)
|
|
|
279,053
|
|
|
|
162,945
|
|
Change in valuation allowance
|
|
|
359,609
|
|
|
|
123,352
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
The components of deferred income taxes are as follows:
|
|
2015
|
|
|
2014
|
|
Deferred income tax asset:
|
|
|
|
|
|
|
-
|
|
Fixed assets
|
|
$
|
4,308
|
|
|
$
|
-
|
|
Net operating loss carryforwards
|
|
|
478,653
|
|
|
|
123,352
|
|
Valuation allowance
|
|
|
(482,961
|
)
|
|
|
(123,352
|
)
|
Deferred income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 2015, the Company has a net operating loss carry forward of approximately $478,653
and a deferred tax asset related to the timing difference on fixed asset depreciation of $4,304 available to offset future taxable
income through 2035. This results in deferred tax assets of approximately $482,961 as of December 31, 2015. The valuation
allowance increased during the year ended December 31, 2015 by approximately $359,609. Tax returns for the year ended December 31,
2014 and 2015 remain open to Internal Revenue Service and State audits.
(L
) 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.
(M) Recent Accounting Pronouncements
In April 2015, the
FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” this Update as part of its initiative
to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different
balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing
debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting
Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not
recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with
the guidance in FASB Concepts Statement No. 6,
Elements of Financial Statements
, which states that debt issuance costs are
similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts
Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify
presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with
debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update.
For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years. The adoption of this standard on January 1, 2015 did not
have any effect on the financial statements.
In August 2014, the
FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern
(Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently,
there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about
an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update
provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures.
The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding
upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of
the term
substantial doubt,
(2) require an evaluation every reporting period including interim periods, (3) provide principles
for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated
as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial
doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are
issued (or available to be issued). The amendments in this Update are effective for public and nonpublic entities for annual periods
ending after December 15, 2016. The Company is currently evaluating the effects of adopting this ASU.
In August 2015, FASB
issued ASU No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the
effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain
employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017,
including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities
should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting
periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No.
2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within
that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period
beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual
reporting period in which the entity first applies the guidance in ASU No. 2014-09. 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.
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 financial statements.
NOTE 3 – PREPAID EXPENSES
On August 22, 2014, the Company issued 500,000 shares of common stock with a fair value of $175,000 for
a one year consulting agreement. During the year ended December 31, 2015 and for the period from May13, 2014 to December 31, 2014,
the Company has expensed $111,893 and $63,107, respectively.
On November 12, 2015,
the Company issued 100,000 shares of common stock with a fair value of $50,000 for a consulting agreement expiring on February
1, 2016. For the year ended December 31, 2015 the Company has expensed $30,247.
NOTE 4 – CONVERTIBLE NOTE PAYABLE – RELATED PARTY
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
|
|
|
|
|
|
Loan Amount
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Discount
|
|
|
—
|
|
|
|
(243,724
|
)
|
Balance
|
|
$
|
500,000
|
|
|
$
|
256,276
|
|
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 $350,000 ($.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. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of
0%, annual volatility of 353%, risk free interest rate of 1.68%, and expected life of 5 years for a fair value of $524,960. The
Company allocated $190,900 for the fair value of the convertible note payable. 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 Company recorded a debt discount of $190, 900 for the fair value of the beneficial conversion feature and $190,900
for the value of the warrants received. As of December 31, 2015 and December 31, 2014 the Company amortized $243,724 and $138,076
and accrued interest of $68,082 and $18,082, respectively. As of December 31, 2015 the convertible note payable is currently in
default.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
On November 1, 2014,
the Company entered into an employment agreement with an employee. The agreement is for a period of three years, provides for an
annual base salary totaling $45,000. In addition the Employee is entitled to shares of common stock equaling $50,000 on July 1,
2015, $50,000 on July 1, 2016 and $75,000 on July 1, 2017, as of December 31, 2015, the Company accrued $97,813 for the value of
common stock owed to the employee. In addition the Company issued 50,000 options exercisable at $.50 per share vesting on July
1, 2015 and exercisable for 3 years. The stock options were valued using the Black-Scholes Option Pricing Model with the following
assumptions: dividend yield of 0%, annual volatility of 353%, risk free interest rate of 1.68%, and expected life of 3 years with
a fair value of $17,454. For the year ended December 31, 2015, the Company recorded an expense of $13,073 for the vested portion
of stock options (see Note 9).
On November 1, 2014,
the Company entered into an employment agreement with an employee. The agreement is for a period of three years, provides for an
annual base salary totaling $65,000. In addition the Employee is entitled to shares of common equaling $30,000 on July 1, 2015,
$50,000 on July 1, 2016 and $75,000 on July 1, 2017. As of December 31, 2015, the Company accrued $117,813 for the value of common
stock owed to the employee. In addition the Company issued 50,000 exercisable at $.50 per share vesting on July 1, 2015 and are
exercisable for 3 years. The stock option were valued using the Black-Scholes Option Pricing Model with the following assumptions:
dividend yield of 0%, annual volatility of 353%, risk free interest rate of 1.68%, and expected life of 3 years with a fair value
of $17,454 For year ended December 31, 2015, the Company recorded an expense of $13,073 for the vested portion of stock options
(see Note 9).
On November 1, 2014,
the Company entered into an employment agreement with an employee. The agreement is for a period of three years, provides for an
annual base salary totaling $50,000. In addition the Employee is entitled to shares of common equaling $25,000 on July 1, 2015,
$50,000 on July 1, 2016 and $75,000 on July 1, 2017. As of December 31, 2015, the Company accrued $92,813 for the value of common
stock owed to the employee. In addition the Company issued 50,000 exercisable at $.50 per share vesting on July 1, 2015 and are
exercisable for 3 years. The stock option were valued using the Black-Scholes Option Pricing Model with the following assumptions:
dividend yield of 0%, annual volatility of 353%, risk free interest rate of 1.68%, and expected life of 3 years with a fair value
of $17,454. For the year ended December 31, 2015, the Company recorded an expense of $13,073 for the vested portion of stock options
(see Note 9).
On September 1, 2015,
the Company entered into an employment agreement with an employee. The agreement is for a period of three years, provides for an
annual base salary totaling $25,000. In addition the Employee is entitled to shares of common equaling $25,000 on February 2, 2016,
$25,000 on February 2, 2017 and $25,000 on February 2, 2018. As of December 31, 2015, the Company accrued $28,889 for the value
of common stock owed to the employee. In addition the Company issued 50,000 stock options exercisable at $.50 per share vesting
on February 2, 2016, and are exercisable for 3 years, 50,000 exercisable at $.50 per share vesting on February 2, 2017, and are
exercisable for 3 years and 50,000 stock options exercisable at $.50 per share vesting on February 2, 2018, and are exercisable
for 3 years . The stock option were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend
yield of 0%, annual volatility of 537%, risk free interest rate of .95%, and expected life of 3 years with a fair value of $75,000.
For the year ended December 31, 2015, the Company recorded an expense of $29,329 for the vested portion of stock options (see Note
9).
On August 22, 2014,
the Company issued 500,000 shares of common stock with a fair value of $175,000 for $500 of cash to a related party. The Company
recorded the difference between the fair value and the cash received as a prepaid expense and will amortize the fair value over
the life of the agreement. In addition, the Company agreed to pay cash of $150,000 over the life of the agreement, or 12 months.
During the year ended December 31, 2015 the Company paid a total of $39,000.
On March 4, 2015, the
Company entered into an agreement to purchase two trade names for 500,000 shares of common stock. The shares are due upon the assignment
of the trade names by the United States Patent and Trademark Office (Ser. No 86210260 and Ser. No. 86210253). During the year ended
December 31, 2015 the Company recorded the issuance of the shares of common stock with a fair value of $250,000 ($.50) per share.
The Company immediately impaired the value of the trademarks as it does not intend to use them in the future.
On September 9, 2015, the Company agreed
to issue 10,000 shares of common stock with a fair value of $5,000 ($0.50 per share) the fair value on the date of issuance to
a consultant for media relations. The Company agreed to issue an additional 10,000 shares of common stock with a fair value of
$5,000 ($0.50 per share) the fair value on the date of issuance on the 18 month anniversary of the agreement. As of December 31,
2015 the Company expensed $1,111 and has not issued the shares of common stock.
On November 12, 2015,
the Company issued 100,000 shares of common stock with a fair value of $50,000 for a consulting agreement expiring on February
1, 2016. For the year ended December 31, 2015 the Company has expensed $30,247.
NOTE 6 –
STOCKHOLDERS EQUITY
The Company is authorized
to issue up to 500,000,000 shares of common stock, par value $0.0001, and up to 50,000,000 shares of preferred stock par value
$.0001.
On May 13, 2014, the Company issued a total of 19,550,000 shares of common stock valued at $19,550 ($.0001
per share) the fair market value on the date of issuance to five founders of the Company.
On August 22, 2014, the Company sold a total of 250,000 shares of common stock for $250 to two individuals.
The shares were issued below fair value and the company recorded additional compensation costs for the fair value of the
shares of $87,250. On August 22, 2014 the Company issued entered into an agreement to issue an unsecured convertible promissory
note and security purchase agreement for 1,000,000 shares of common stock for $500,000 and $350,000 ($.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. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of
0%, annual volatility of 789%, risk free interest rate of 1.68%, and expected life of 5 years for a value of $524,960. The Company
allocated $190,800 for the fair value of the convertible note payable. 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 Company recorded a debt discount of $190,900 for the fair value of the beneficial conversion feature and $190,900 for the value
of the warrants received. In addition the Company recorded offering costs of $15,000.As of December 31, 2014 the Company amortized
$138,076 and accrued interest of $18,082.
On August 22, 2014, the Company issued
500,000 shares of common stock valued at $175,000 ($.35 per share) for the fair market value on the date of issuance for cash of
$500 an addition to the Company agreed to pay cash of $150,000 and $6,500 per month to a related entity for business consulting
services. The Agreement is for a one year. As of December 31, 2014 the Company paid a total of $148,160 and recorded a prepaid
expense of $209,340.
On March 4, 2015,
the Company entered into an agreement to purchase two trade names for 500,000 shares of common stock. The shares are due upon the
assignment of the trade names by the United States Patent and Trademark Office (Ser. No 86210260 and Ser. No. 86210253). During
the year ended December 31, 2015 the Company recorded the issuance of the shares of common stock with a fair value of $250,000
($.50) per share. The Company immediately impaired the value of the trademarks as it does not intend to use them in the future.
During the year ended
December 31, 2015, the Company sold 132,650 shares of common stock for proceeds of $ 66,362.
On September 25, 2015 a related party exercised
285,714 warrants for cash proceeds of $100,000.
On November 12, 2015,
the Company issued 100,000 shares of common stock with a fair value of $50,000 for a consulting agreement expiring on February
1, 2016. For the year ended December 31, 2015 the Company has expensed $30,247.
At December 31, 2015 the Company accrued $5,694 for legal fees that the Company can settle for 5,694 shares
of common stock.
On September 9, 2015, the Company agreed to issue 10,000 shares of common stock with a fair value of $5,000
($0.50 per share) the fair value on the date of issuance to a consultant for media relations. The Company agreed to issue an additional
10,000 shares of common stock with a fair value of $5,000 ($0.50 per share) the fair value on the date of issuance on the 18 month
anniversary of the agreement. As of December 31, 2015 the Company expensed $1,111 and has not issued the shares of common stock.
NOTE 7 – OPTIONS AND WARRANTS
The following tables
summarize all options grants to employees for the year ended December 31, 2015 and the related changes during the is period are
presented below:
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price
|
|
Stock Options
|
|
|
|
|
|
|
|
|
Balance
at May 13, 2014 (Inception)
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
150,000
|
|
|
$
|
.50
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
150,000
|
|
|
$
|
.50
|
|
Granted
|
|
|
150,000
|
|
|
|
.50
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
Balance at December 31, 2015
|
|
|
300,000
|
|
|
$
|
.50
|
|
|
|
|
2015 Options Outstanding
|
|
|
Options Exercisable
|
|
Price
|
|
|
Number
Outstanding at
December 31,
2015
|
|
|
Weighted
Average
Remaining
Contractual
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable at
December 31,
2014
|
|
|
Weighted
Average
Exercise
Price
|
|
$
|
0.50
|
|
|
|
300,000
|
|
|
|
—
|
|
|
$
|
.50
|
|
|
|
150,000
|
|
|
$
|
.50
|
|
As of December 31, 2015 the future value on unvested stock options
was $45,670.
On November 1, 2014, the Company issued
three employees each 50,000 stock options exercisable at $.50 per share vesting on July 1, 2015 and are exercisable for 3 years.
The stock option were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%,
annual volatility of 353%, risk free interest rate of 1.68%, and expected life of 3 years for a fair value of $52,362
On
September 1, 2015, the Company issued one employee 150,000 stock options exercisable at $.50 per share vesting 50,000 shares
on July 1, 2016, 2017 and 2018 and are exercisable for 3 years. The stock option were valued using the Black-Scholes Option
Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 537%, risk free interest rate of
.95%, and expected life of 3 years for a fair value of $75,000.
The following tables summarize all warrant
grants to for the year ended December 31, 2015 and 2014 and the related changes during the period are presented below.
|
|
Number of Warrants
|
|
|
Weighted Average
Exercise Price
|
|
Stock Warrants
|
|
|
|
|
|
|
|
|
Balance at May 13, 2014 (Inception)
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
1,500,000
|
|
|
$
|
.35
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
1,500,000
|
|
|
$
|
.35
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
(285,714
|
)
|
|
|
.35
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
Balance at December 31, 2015
|
|
|
1,214,286
|
|
|
$
|
.35
|
|
On August 22, 2014 the Company entered
into an agreement to issue an unsecured convertible promissory note in the amount of $500,000 convertible at a price of $0.35 per
share and security purchase agreement for 1,000,000 shares of common stock for $350,000 ($.35 per share), 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. On September
25, 2015 the related party exercised 285,714 warrants for cash proceeds of $100,000
NOTE 8 – 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 $350,000 ($.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. The warrants were valued using
the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 353%, risk free
interest rate of 1.68%, and expected life of 5 years for a fair value of $524,960. The Company allocated $190,800 for the fair
value of the convertible note payable. 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 Company recorded a debt
discount of $190,800 for the fair value of the beneficial conversion feature and $190,900 for the value of the warrants received.
As of December 31, 2015 and December 31, 2014 the Company amortized $500,000 and $138,076 and recorded accrued interest of $68,082
and $18,082, respectively. See footnote 4 .
On August 22, 2014,
the Company issued 500,000 shares of common stock with a fair value of $175,000 for $500 of cash to a related party. The Company
recorded the difference between the fair value and the cash received as a prepaid expense and will amortize the fair value over
the life of the agreement. In addition, the Company agreed to pay cash of $150,000 over the life of the agreement, or 12 months.
For the year ended
December 31, 2015, the Company accrued rent of $23,500 to the Company’s president.
As of December 31, 2015
the Company owed its President accrued salary of $38,200.
The Company’s President
made advances of $600 he made on behalf of the Company as of December 31, 2015 these amounts were recorded as due to related party.
On October 1, 2015 the
Company entered into lease with the 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. As of December
31, 2015 the Company recorded rent expense of $7,500. As of December 31, 2015 the Company accrued as due to related party $7,500.
NOTE 9 – SUBSEQUENT EVENTS
On January 26, 2016
the related party exercised 28,581 warrants for cash proceeds of $10,000.
Subsequent to December 31, 2015 the Company’s
President loaned the Company $30,000 pursuant to a convertible debenture. The Loan bears interest at 10% per annum, is due on January
29, 2017 and is convertible into common stock at $1.50 per share at the discretion of the holder. In Addition the Company agreed
to issue 30,000 warrants with an exercise price of $2.00 that expire January 29, 2021.
In February, 2016 the Company President
advanced the Company an additional $7,500.
These amounts were repaid as of March 31, 2016.
On March 16, 2016 the related party exercised
285,714 warrants for cash proceeds of $100,000.
On March 21, 2016
the Company agreed to covert a $1,500 loan made on January 22, 2016 into 3,000 shares of common stock
On April 5, 2016 the Company entered
into a consulting agreement for investor relation services for a monthly retainer of $5,000 per month for the first three months
and $7,500 per month thereafter in addition the Company agreed to issue 75,000 shares of common stock payable 15,000 shares due
within 10 days 6,000 shares per month for 10 months commencing on the 3-month anniversary of this Agreement. These terms are for
a twelve month (12) period and either party may terminate this Agreement with a 14-day written notice.