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Timestamp: 2020-07-14 13:28:03
Document Index: 541208285

Matched Legal Cases: ['arty 11', 'arty 280', 'arty 60', 'arty 42', 'arty 60', 'arty 60', '§ 1350', '§ 906', '§ 1350', '§ 906']

NEXT GROUP HOLDINGS, INC. (Form: 10-Q, Received: 08/19/2016 14:56:19)
FOR THE THREE MONTH PERIOD ENDED: JUNE 30, 2016
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 15, 2016 the issuer had 244,765,646 shares of its common stock issued and outstanding.
Unaudited Statement of Changes in Stockholders’ Deficit 4
Notes to Unaudited Consolidated Financial Statements 6 - 28
Cash $ 109,792 $ 18,047
Accounts receivable, net 60,136 62,734
Prepaid expenses 1,046,414 -
Total current assets 1,341,342 205,781
Related party receivable 95,452 132,179
License fee, net 159,722 201,385
Total assets $ 1,596,516 $ 539,345
Bank overdraft $ 7 $ -
Accounts payable and accrued liabilities 636,451 299,053
Loan payable 27,500 30,000
Convertible notes payable, net of discounts and debt issue costs 900,710 -
Derivative liability 911,521 -
Related party payable 3,082,016 3,504,702
Interest payable, related party 11,589 349
Notes payable, related party 280,000 280,000
Total current liabilities 5,849,794 4,114,104
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 June 30, 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 June 30, 2016 and December 31, 2015, respectively 10,000 10,000
Common stock, authorized 360,000,000 shares, $0.001 par value, 230,413,988 and 177,539,180 issued and outstanding as of June 30, 2016 and December 31, 2015, respectively 230,414 177,539
Additional paid in capital 2,993,633 (23,868 )
Accumulated deficit (7,455,259 ) (3,711,178 )
Total Next Group Holdings, Inc. stockholders' deficit (4,231,212 ) (3,557,507 )
Non-controlling interest: additional paid in capital in consolidated subsidiaries 39,139 38,570
Non-controlling interest: accumulated deficit in consolidated subsidiaries (61,205 ) (55,822 )
Total non-controlling interest in subsidiaries (22,066 ) (17,252 )
Total liabilities and stockholders' deficit $ 1,596,516 $ 539,345
Revenue $ 2,707 $ 33,268 $ 85,010 $ 142,194
Revenue, related party 60 41,737 60 85,857
Total revenue 2,767 75,005 85,070 228,051
Cost of revenue, related party 42,193 168,356 149,354 179,618
Gross profit (loss) (39,426 ) (93,351 ) (64,284 ) 48,433
Officer compensation 1,371,539 64,404 1,444,735 193,114
Professional fees 1,234,695 9,655 1,472,771 16,925
General and administrative 102,548 64,640 217,507 117,940
Total operating expenses 2,708,782 138,699 3,135,013 327,979
Loss from operations (2,748,208 ) (232,050 ) (3,199,297 ) (279,546 )
Other income 7,366 - 10,245 -
Other expense (45,000 ) (45,000 )
Loss on disposal of equipment (2,926 ) - (2,926 ) -
Interest expense (613,282 ) - (890,182 ) -
Penalties on convertible notes payable - - (14,490 ) -
Gain on derivative liability 407,463 - 392,186 -
Total other income (expense) (246,379 ) - (550,197 ) -
Net loss before income taxes (2,994,587 ) (232,050 ) (3,749,464 ) (279,546 )
Net loss before controlling interest (2,997,587 ) (232,050 ) (3,749,464 ) (279,546 )
Net income attributable to non-controlling interest 4,686 - 5,383 -
Net loss attributable to Next Group Holdings, Inc. $ (2,989,901 ) $ (232,050 ) $ (3,744,081 ) $ (279,546 )
Loss per share, basic and diluted $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.00 )
Weighted average number of common shares outstanding 231,173,801 219,373,975 224,349,687 219,373,975
Series B Preferred Stock Common Stock Additional Paid-in Accumulated Subscription Total Stockholders' Additional Paid-in Accumulated Total Non-Controlling
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 (1,077,400 ) - - (1,032,615 ) - - -
Common shares rescinded - - (4,000,000 ) (4,000 ) 4,000 - - - - - -
Stock based compensation - - - - 1,123,735 - - 1,123,735 - - -
Shares issued for services - - 8,774,959 8,775 2,084,053 - - 2,092,828 - - -
Shares issued for other expense - - 200,535 200 44,800 - - 45,000 - - -
Shares issued in exchange for loan principal - - 450,000 450 12,810 - - 13,260 - - -
Shares issued for conversion of debt - - 2,664,519 2,665 237,551 - - 240,216 - - -
Forgiveness of imputed interest on related party payable - - - - 120,026 - - 120,026 569 - 569
Derivative liability write off due to conversion of debt - - - - 467,926 - - 467,926 - - -
Net loss for period ending June 30, 2016 - - - - - (3,744,081 ) - (3,744,081 ) - (5,383 ) (5,383 )
Balance June 30, 2016 10,000,000 $ 10,000 230,413,988 $ 230,414 $ 2,993,633 $ (7,455,259 ) $ (10,000 ) $ (4,231,212 ) $ 39,139 $ (61,205 ) $ (22,066 )
UNAUDITED CONSOLIDATED OF CASH FLOWS
Net Loss $ (3,749,464 ) $ (279,546 )
Imputed interest 120,595 -
Stock based compensation 1,123,735 -
Common stock issued for services 1,046,414 -
Common stock issued for other expense 45,000 -
Excess fair market value of derivatives charged to interest expense 288,126 -
Debt discount amortization 375,565 -
Amortization of debt issue costs 11,941 -
Depreciation expense 217 -
Loss on disposal of equipment 2,926 -
License fee amortization 41,663 -
Gain on derivative fair value adjustment (392,186 ) -
Accounts receivable 2,598 (114,838 )
Accounts payable 340,801 129,544
Related party interest payable 11,240 -
Net Cash Used in Operating Activities (716,339 ) (264,840 )
Due from related parties 36,727 (68,018 )
Net Cash Provided by Investing Activities 36,727 (68,018 )
Bank overdraft (1,081 ) -
Loans payable (2,500 ) -
Proceeds from convertible notes 812,380 -
(Repayments of) proceeds from related party loans (38,626 ) 305,483
Cash acquired through reverse recapitalization 1,184 -
Net Cash Provided by Financing Activities 771,357 305,483
Net Increase (Decrease) in Cash 91,745 (27,375 )
Cash at End of Period $ 109,792 $ 1,380
Common stock issued for conversion of note principal $ 224,495 $ -
Common stock issued for prepaid expense $ 1,046,414 $ -
Common stock issued for conversion of accrued interest $ 15,721 $ -
Debt issue costs paid on behalf of company $ 42,375 $ -
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). Additionally, Next Cala, Inc. has a 60% interest in NextGlocal, a joint venture formed in May 2016.
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 January 1, 2016, 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 January 1, 2016. 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.
On May 27, 2016, the Cala entered into a Joint Venture Agreement (the “Agreement”) with Glocal Payments Solutions, Inc (“Glocal”) to form a joint venture in which Cala has a 60% controlling interest and Glocal has a 40% interest. The Joint Venture will seek to launch and activate up to 45,000 prepaid debit cards under the Cala brand by December 31, 2016 and 360,000 additional cards during the 2017 calendar year. Either party may terminate the agreement at December 31, 2016 if certain objectives are not met.
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 have been derived from our unaudited financial statements. The condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 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 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 loans receivable, potential impairment losses of the capitalized license fee and fair value calculations related to embedded derivative features of outstanding convertible notes payable.
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 June 30, 2016 or December 31, 2015.
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. The Company had no property or equipment as of June 30, 2016 or December 31, 2015.
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 June 30, 2016 and December 31, 2015, respectively.
Except as discussed in Note 7 – Derivative Liabilities 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 as of June 30, 2016.
Certain prior-year amounts have been reclassified in order to conform to the current-year presentation
At June 30, 2016, the Company has ten outstanding convertible notes payable with conversion rights that are exercisable. The amount of outstanding principal on these convertible notes total $658,445 plus accrued interest of $24,594 for total convertible debts as of June 30, 2016 of $683,039 representing 10,698,391 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.
The Company entered into an agreement with a certain vendor whereby it obtained a license to market and distribute certain closed loop general purpose reloadable debit cards for an initial term of three years. The Company remitted $250,000 as a license fee in connection with the agreement which it is recognizing over the initial term of the agreement on a straight line basis. The unamortized balance of the license fee was $159,722 and $201,385 as of June 30, 2016 and December 31, 2015, respectively.
During the year ended December 31, 2014, Cala accepted a $10,000 subscription receivable that remains outstanding as of June 30, 2016 and December 31, 2015. The subscription receivable is shown as a reduction to equity on the balance sheet pursuant to ASC 505.
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 reviewed the provisions of this ASU and determined there was an impact on our results of operations, cash flows or financial condition and have implemented this ASU accordingly.
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition ("ASC 605") and most industry-specific guidance throughout ASC 605. The standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective on December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial position and results of operations.
In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," ("ASU 2015-11"). ASU 2015-11 amends the existing guidance to require that inventory should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out or the retail inventory method. ASU 2015- 11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-11 on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers - Principal versus Agent Considerations." This Update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue From Contracts with Customers when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In these circumstances, an entity is required to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The amendments in the Update clarify the implementation guidance on principal versus agent considerations. The Update is effective, along with ASU 2014-09, for annual and interim periods beginning after December 15, 2017. The adoption of ASU 2016- 08 is not expected to have a material impact on our consolidated financial statement or disclosures.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718)" ("ASU 2016- 09"). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating ASU 2016-09 and its impact on its consolidated financial statements or disclosures.
In April 2016, the FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" ("ASU 2016-1O"). The amendments in this update clarify the following two aspects to Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The entity first identifies the promised goods or services in the contract and reduce the cost and complexity. An entity evaluates whether promised goods and services are distinct. Topic 606 includes implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The Company is currently evaluating ASU 2016-10 and its impact on its consolidated financial statements or disclosures.
At the time of the reverse recapitalization discussed in Note 1 – Organization and Description of Business , the Company had a loan that was made to an individual totaling $40,000 which was the balance on June 30, 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 8 – Related Party Transactions , 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 June 30, 2016 and December 31, 2015, respectively. These loans were not memorialized in writing and accordingly, carry no terms as to repayment, interest or default.
The Company acquired $4,572 of equipment net of accumulated depreciation of $1,430 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business. The Company disposed of this property in April 2016 and recorded a loss on disposal of $2,926 during the three months ended June 30, 2016. The Company does not have any capitalized property or equipment at June 30, 2016. Depreciation expense was $216 during the three and six months ended June 30, 2016.
The following is a summary of all of the convertible notes outstanding as of June 30, 2016:
Noteholder 1 10/15/2015 10/15/2016 $ 82,500 $ (24,429 ) $ - $ 58,071 $ 4,593
Noteholder 1 11/25/2015 11/24/2016 82,500 (33,086 ) - 49,414 3,942
Noteholder 1 12/21/2015 12/21/2016 27,000 (12,920 ) - 14,080 1,118
Noteholder 1 1/15/2016 1/15/2017 131,250 - (3,398 ) 127,852 4,804
Noteholder 1 3/8/2016 3/8/2017 50,000 - (1,724 ) 48,276 1,238
Noteholder 1 4/11/2016 4/11/2017 82,500 (62,533 ) (3,221 ) 16,746 1,447
Noteholder 1 5/16/2016 5/16/2017 100,000 - (4,383 ) 95,617 986
Noteholder 2 11/20/2015 11/20/2016 37,000 (14,434 ) - 22,566 1,808
Noteholder 3 11/9/2015 11/9/2016 56,945 (20,871 ) - 36,074 3,579
Noteholder 3 3/8/2016 3/8/2017 50,000 - (1,724 ) 48,276 1,238
Noteholder 3 5/16/2016 5/16/2017 100,000 - (4,383 ) 95,617 986
Noteholder 4 1/19/2016 1/15/2017 131,250 - (3,435 ) 127,815 4,689
Noteholder 4 3/9/2016 3/8/2017 50,000 - (1,724 ) 48,276 1,238
Noteholder 5 11/9/2015 11/9/2016 100,000 (37,137 ) - 62,863 4,975
Noteholder 6 11/9/2015 11/9/2016 25,000 (9,325 ) - 15,675 1,240
Totals $ 1,270,945 $ (339,801 ) $ (30,434 ) $ 900,710 $ 40,775
Noteholder 1:
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on August 12, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $72,450 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on August 12, 2016. The Note is convertible into the Company's common stock at the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. The Company incurred a penalty of $14,490 under the terms of the note related to a DTC chill which was added to the then outstanding principal balance during the six months ended June 30, 2016. During the six months ended June 30, 2016, the Company issued 905,625 common shares for the conversion of $86,940 of principal which included the penalty and 99,286 common shares for the conversion of $9,518 of accrued interest. There was $0 of principal and $0 of accrued interest due at June 30, 2016.
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on August 19, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $82,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a 7% OID such that the purchase price was $76,875. The Note, together with accrued interest at the annual rate of 8%, is due on August 19, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. During the six months ended June 30, 2016, the Company issued 873,015 common shares for the conversion of $82,500 of principal and 44,010 common shares for the conversion of $4,159 of accrued interest. There was $0 of principal and $0 of accrued interest due at June 30, 2016.
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on October 19, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $82,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on October 15, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of June 30, 2016, there was $82,500 of principal and $4,593 of accrued interest due as of June 30, 2016.
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on November 25, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $82,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on November 25, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $82,500 of principal and $3,942 of accrued interest due at June 30, 2016.
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on December 21, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $27,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on December 21, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $27,000 of principal and $1,118 of accrued interest due at June 30, 2016.
On January 15, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $131,250 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on January 15, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $131,250 of principal and $4,804 of accrued interest due at June 30, 2016.
On March 8, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $50,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on March 8, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $50,000 of principal and $1,238 of accrued interest due at June 30, 2016.
On April 11, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $82,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on April 11, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $82,500 of principal and $1,447 of accrued interest due at June 30, 2016.
On May 16, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $100,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on May 16, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $100,000 of principal and $986 of accrued interest due at June 30, 2016.
Noteholder 2:
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on July 30, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $37,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a 5% OID such that the purchase price was $35,000. The Note, together with accrued interest at the annual rate of 8%, is due on July 30, 2016. The Note is convertible into the Company's common stock commencing at any time from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. During the six months ended June 30, 2016, the Company issued 440,476 common shares for the conversion of $37,000 of principal and 24,329 common shares for the conversion of $2,043 of accrued interest. There was $0 of principal and $0 of accrued interest due at June 30, 2016.
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on November 20, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $37,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a 5% OID such that the purchase price was $35,000. The Note, together with accrued interest at the annual rate of 8%, is due on November 20, 2016. The Note is convertible into the Company's common stock commencing at any time from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $37,000 of principal and $1,808 of accrued interest due at June 30, 2016.
Noteholder 3:
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on November 9, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $75,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on November 9, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. During the six months ended June 30, 2016, the Company issued 277,778 common shares for the conversion of $18,055 of principal. There was $56,945 of principal and $3,579 of accrued interest due as of June 30, 2016.
On March 8, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $50,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on March 8, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $50,000 of principal and $1,238 of accrued interest due at June 30, 2016.
On May 16, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $100,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on May 16, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $100,000 of principal and $986 of accrued interest due at June 30, 2016.
Noteholder 4:
On January 19, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $131,250 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on January 19, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $131,250 of principal and $4,869 of accrued interest due at June 30, 2016.
On March 9, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $50,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on March 9, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $50,000 of principal and $1,238 of accrued interest due at June 30, 2016.
Noteholder 5:
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on November 9, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party for the principal amount of $100,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on November 9, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $100,000 of principal and $4,975 of accrued interest due at June 30, 2016.
Noteholder 6:
Through the reverse recapitalization as discussed in Note 2, the Company acquired a convertible note payable that was entered into by Pleasant Kids (PLKD) on November 9, 2015. PLKD sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $25,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on November 9, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. There was $25,000 of principal and $1,238 of accrued interest due at June 30, 2016.
There was $40,775 and $0 accrued interest due on all convertible notes as of June 30, 2016 and December 31, 2015, respectively.
As of June 30, 2016 the Company had a $911,521 derivative liability balance on the balance sheet and recorded a gain from derivative liability fair value adjustment of $407,463 and $392,486 during the three and six months ended June 30, 2016, respectively. The derivative liability activity comes from convertible notes payable as follows:
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $82,500 Convertible Promissory Notes to an unrelated party that matures on August 12, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $163,369 which was recorded as a derivative liability on the balance sheet.
During the six months ended June 30, 2016, the noteholder elected to convert all outstanding principal and accrued interest to common stock. At June 30, the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $7,260 gain from change in fair value of derivatives and a change in value due to conversion of $140,119 for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 126%, (3) risk-free interest rate of .23%, (4) expected life of 0.35 of a year, and (5) estimated fair value of the Company’s common stock of $0.25 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $72,450 Convertible Promissory Notes to an unrelated party that matures on September 21, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $144,016 which was recorded as a derivative liability on the balance sheet.
During the six months ended June 30, 2016, the noteholder elected to convert all outstanding principal and accrued interest to common stock. At June 30, the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $78,916 loss from change in fair value of derivatives and a change in value due to conversion of $222,932 for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 491%, (3) risk-free interest rate of 49%, (4) expected life of 0.54 of a year, and (5) estimated fair value of the Company’s common stock of $0.28 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $82,500 Convertible Promissory Notes to an unrelated party that matures on October 15, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $164,342 which was recorded as a derivative liability on the balance sheet.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $91,232 and recorded a $73,110 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 92%, (3) risk-free interest rate of .26%, (4) expected life of 0.29 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $82,500 Convertible Promissory Notes to an unrelated party that matures on November 24, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $164,659 which was recorded as a derivative liability on the balance sheet.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $94,194 and recorded a $70,465 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 102%, (3) risk-free interest rate of .26%, (4) expected life of 0.40 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $27,000 Convertible Promissory Notes to an unrelated party that matures on December 21, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $53,961 which was recorded as a derivative liability on the balance sheet.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $32,975 and recorded a $20,986 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 128%, (3) risk-free interest rate of .36%, (4) expected life of 0.48 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $37,000 Convertible Promissory Notes to an unrelated party that matures on July 27, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $73,377 which was recorded as a derivative liability on the balance sheet.
During the six months ended June 30, 2016, the noteholder elected to convert all outstanding principal and accrued interest to common stock. At June 30, the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $4,648 gain from change in fair value of derivatives and a change in value due to conversion of $68,729 for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 111%, (3) risk-free interest rate of .30%, (4) expected life of 0.30 of a year, and (5) estimated fair value of the Company’s common stock of $0.24 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $37,000 Convertible Promissory Notes to an unrelated party that matures on November 20, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $72,943 which was recorded as a derivative liability on the balance sheet.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $49,352 and recorded a $23,591 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 101%, (3) risk-free interest rate of .26%, (4) expected life of 0.39 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $75,000 Convertible Promissory Notes to an unrelated party that matures on November 9, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $149,708 which was recorded as a derivative liability on the balance sheet.
During the six months ended June 30, 2016, the noteholder elected to convert $18,055 of principal to common stock. At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $75,598 and recorded a $37,964 gain from change in fair value of derivatives and $36,146 change in value due to conversion for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 101%, (3) risk-free interest rate of .26%, (4) expected life of 0.36 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $100,000 Convertible Promissory Notes to an unrelated party that matures on November 9, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $199,632 which was recorded as a derivative liability on the balance sheet.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $139,449 and recorded a $66,876 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 101%, (3) risk-free interest rate of .26%, (4) expected life of 0.36 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company acquired an $25,000 Convertible Promissory Notes to an unrelated party that matures on November 9, 2016 through the reverse recapitalization discussed in Note 1 – Organization and Description of Business . The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the acquisition date of the note was $50,000 which was recorded as a derivative liability on the balance sheet.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $33,189 and recorded a $16,811 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 101%, (3) risk-free interest rate of .26%, (4) expected life of 0.36 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company entered into an $82,500 convertible note payment with an unrelated party that matures on April 11, 2017. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, a t the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at April 11, 2016 to be $178,542 which was recorded on the balance sheet of which $82,500 was recorded as a debt discount on the convertible note and will be recognized over the life of the instrument. The remaining $96,042 of value was immediately recognized as interest expense.
At June 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $134,075 and recorded a $44,467 gain from change in fair value of derivatives for the six months ended June 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 221%, (3) risk-free interest rate of .26%, (4) expected life of 0.78 of a year, and (5) estimated fair value of the Company’s common stock of $0.14 per share.
As discussed in Note 6 – Convertible Notes Payable , the Company entered into an $82,500 convertible note payment with an unrelated party that matures on April 11, 2017. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 45% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
A summary of the changes in derivative liabilities balance for the six months ended June 30, 2016 is as follows:
Balance, December 31, 2015 $ -
Acquired in reverse recapitalization 1,236,007
Initial measurement of derivative liabilities 535,626
Change in fair market value (392,186 )
Change due to conversion (467,926 )
Balance, June 30, 2016 $ 911,121
The following table summarizes all stock option activity for the six months ended June 30:
Granted 11,000,000 0.255
Outstanding, June 30, 2016 11,000,000 $ 0.255
The following table discloses information regarding outstanding and exercisable options at June 30, 2016:
Option Shares Weighted
$ 0.18 10,000,000 $ 0.18 4.92 3,333,334 $ 0.18
1.00 1,000,000 1.00 4.90 0
11,000,000 $ 0.255 4.91 3,333,334 $ 0.18
Of the 10,000,000 options issued, on third vested immediately upon execution of the related agreement, resulting in an immediate stock based expense of $558,323 being recognized. The remaining shares vest based on performance milestones which the Company believes is 50% likely of occurring resulting in stock based expense of $558,328. The remaining fair value of the unvested shares will be recognized according to the estimated probability of the performance obligations being achieved. The fair value of the 1,000,000 stock options granted with an exercise price of $1.00 will be amortized over their expected lives of five years resulting in stock based compensation expense of $7,083. Total stock based compensation expense was $1,123,735 during the three and six months ended June 30, 2016 leaving an unrecognized expense of $721,235 as of June 30, 2016. In determining the compensation cost of the stock options granted, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in these calculations are summarized as follows:
Expected term of options granted 0 - 5 years
Expected volatility range 788 - 850 %
Range of risk-free interest rates 0.87 - 1.41 %
The Company follows the provisions of ASC 850— Related Party Transactions & Disclosures relating to the identification of related parties and disclosure of related party transactions.
The Company has had extensive dealings with related parties including those in which our Chief Executive Officer holds a significant ownership interest as well as an executive position during the six months ended June 30, 2016 and year ended December 31, 2015. Due to our operational losses, the Company has relied to a large extent on funding received from Next Communications, Inc., an organization in which our Chief Executive Officer and Chairman holds a controlling equity interest and holds an executive position.
Related party balances at June 30, 2016 and December 31, 2015 consisted of the following:
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 June 30, 2016 and December 31, 2015, respectively. These loans were not memorialized in writing and accordingly, carry no terms as to repayment, interest or default.
(a) Due from Next Cala 360, Inc. $ 95,266 $ 132,179
(e) Due from Tel3, Inc. 186 -
Total Due from related parties $ 95,452 $ 132,179
(b) Due to Next Communications, Inc. $ 2,986,896 $ 3,025,522
(d) Due to Pleasant Kids, Inc. - 384,060
Total Due from related parties $ 3,082,016 $ 3,504,702
(d) Amount due to Pleasant Kids, Inc. for debt incurred throughout the period from the date of agreement to merger to consummation of merger. The Company was dependent on Pleasant Kids for financing during this time and its former officers later became shareholders of the Company as discussed in Note 1.
(e) Tel3, Inc. is an entity controlled by the Company’s Chief Executive Officer.
During the six months ended June 30, 2016, the Company recorded interest expense of $120,595 using an interest rate equal to that on the outstanding convertible notes payable as discussed in Note 6 – Convertible Notes Payable as imputed interest on the related party payable due to Next Communications. The interest was immediately forgiven by the related party and recorded to additional paid in capital.
During the year ended December 31, 2014, the Company entered into two notes with its President to purchase his interest in Next Cala, Inc. and separately his voting control in Next Cala. Inc. There was $280,000 of total principal and $11,589 of interest due at June 30, 2016.
The Company purchases cellular minutes for wholesale distribution from Next Communication, Inc. Next Communications is a cellular company in which our Chief Executive Officer owns a 50% interest and serves as Chief Executive Officer. Purchases from Next Communications, Inc. represented 100% of the Company’s cost of revenues for the three and six months ended June 30, 2016 and 2015, respectively.
The Company generated revenues from related parties of $41,737 and $85,857 during the three and six months ended June 30, 2015. Of this total, $41,737 and $83,424 was generated from Next Cala 360 during the three and six months ended June 30, 2015, respectively and $2,433 was generated from a separate entity controlled by our CEO during the six months ended June 30, 2015.
The Company generated revenues of $60 from related parties during the three and six months ended June 30, 2016. The full amount was generated from Asiya Communications SAPI de C.V.
Accounts payable and accrued liabilities consisted of the following as of June 30, 2016:
Trade payables $ 368,131
Accrued expenses 59,466
Accrued interest 40,775
Accrued salaries and wages 168,079
Total $ 636,451
During the year ended December 31, 2014, a former employee, Franjose Yglesias-Bertheau of Pleasant Kids (PLKD) filed lawsuit against PLKD claiming unpaid wages of $622,968 and was initially awarded that amount in a judgement. However, the judgement was later reversed and the Company does not expect to pay more than the accrued salary of $35,025 currently recorded and included in accrued salaries and wages.
Effective November 20, 2015 the Company amended its Articles of Incorporation to decrease the common shares authorized from 9,500,000,000 to 360,000,000 with a par value of $0.001.
As discussed in Note 1 – Organization and Description of Business the Company is accounting for the exchange as though it were a reverse recapitalization. Through the recapitalization, the Company assumed total net liabilities of $1,032,616.
During the six months ended June 30, 2016, the Company has issued 2,496,894 shares of commons stock for the conversion of $224,495 of principal of convertible notes payable and 167,625 shares for the conversion of $15,721 of accrued interest. Additionally, the Company issued 450,000 common shares valued at $13,260 as repayment of a non-convertible loan; 8,774,959 common shares valued at $2,092,828 for services; 200,535 common shares for other expenses of $45,000 and rescinded 4,000,000 common shares previously issued in connection with the reverse recapitalization discussed in Note 1 – Organization and Description of Business.
The 8,774,959 common shares issued for services totaling $2,092,828 were done so pursuant to a services agreement whereby a third party would provide certain services on behalf of the Company for a period of six months effective April 7, 2016. The Company valued the common shares using the close price of the stock as listed on the OTCBB on April 7, 2016. The Company recognized the value of the shares over the term of the agreement resulting in $1,046,414 of expense during the three months ended June 30, 2016 and a prepaid expense of $1,046,414 as of June 30, 2016.
The 200,535 common shares issued for other expenses were pursuant to an agreement executed on February 11, 2016 whereby the Company agreed to issue $45,000 of common shares plus a cash payment of $5,000 in exchange for the option to purchase a controlling interest in an Israeli business. The Company determined the number of shares to be issued pursuant to the agreement using the close price of our common stock as quoted by the OTCBB on February 11, 2016 of $0.2244 per share. The Company did not execute its option to purchase a controlling interest in the business and the fair value of the shares totaling $45,000 was expensed.
Summary of common stock activity for the six months ended June 30, 2016 Outstanding shares
Balance, December 31, 2016 177,539,180
Recapitalization 44,784,795
Share rescission (4,000,000 )
Shares issued for services 8,774,959
Shares issued for other expense 45,000
Shares issued as repayment of loan (a) 450,000
Shares issued for conversion of convertible notes payable and accrued interest (b) 2,664,519
Balance, June 30, 2016 221,438,494
(b) Shares issued in connection with outstanding convertible notes payable and convertible accrued interest on convertible notes payable in accordance with contractual terms of noteholders as discussed in Note 6 – Convertible Notes Payable .
For the three months ended June 30, 2015, 93% of revenues were derived from two customers, one of which is a related party representing 56% of the total revenues. The loss of any one of these customers would have a material adverse effect on the Company’s operations. The concentration of revenues during the three months ended June 30, 2016 and 2015 were:
Customer 1 $ 37 1 % $ - 0 %
Customer 2 - 0 % - 0 %
Customer 3 - 0 % - 0 %
Customer 4 - 0 % - 0 %
Customer 5 - 0 % 2,091 3 %
Customer 6 - 0 % - 0 %
Customer 7 - 0 % - 0 %
Customer 8 - 0 % 27,787 37 %
Customer 9, related party - 0 % 41,737 56 %
Customer 10, related party - 0 % - 0 %
Customer 11, related party 60 2 % - 0 %
All Others 2,670 97 % 3,390 4 %
Total $ 2,767 100 % $ 75,005 100 %
During the six months ended June 30, 2016 and 2015, the Company generated 89% and 97% of its revenues from four and five separate customers, respectively. Of the 97% during the six months ended June 30, 2015, 37% was from a related party. The loss of any one of these customers would have a material adverse effect on the Company’s operations. The concentration of revenues during the six months ended June 30, 2016 and 2015 were:
Customer 1 $ 8,536 10 % $ - 0 %
Customer 3 12,301 14 % - 0 %
Customer 4 35,000 41 % - 0 %
Customer 5 - 0 % 32,675 14 %
Customer 6 - 0 % 27,000 12 %
Customer 7 - 0 % 50,000 22 %
Customer 8 - 0 % 27,787 12 %
Customer 9, related party - 0 % 83,424 37 %
Customer 10, related party - 0 % 2,433 1 %
Customer 11, related party 60 0 % - 0 %
All Others 9,173 11 % 4,732 2 %
Total $ 85,070 100 % $ 228,051 100 %
On April 7, 2016, the Company executed an agreement with a third party to provide certain services for the Company. The agreement requires 1% of the outstanding common share equivalent to be issued to the third party when the market capitalization of the Company reaches $500,000,000 and an additional 1% when it reached $750,000,000. The probability of this event is uncertain at present and the Company has not accrued a contingent loss as of June 30, 2016 as a result.
On July 8, 2016, the Company issued 953,969 shares of common stock to Noteholder 3 for the conversion of $56,945 of principal and $5,063 of accrued interest due on an existing convertible note payable.
On July 13, 2016, the Company issued 547,640 shares of common stock to Noteholder 6 for the conversion of $25,000 of principal and $2,382 of accrued interest due on an existing convertible note payable.
On July 14, 2016, the Company issued 1,557,534 shares of common stock to Noteholder 1 for the conversion of $82,500 of principal and $3,164 of accrued interest due on an existing convertible note payable.
On July 22, 2016, the Company issued 792,515 shares of common stock to Noteholder 5 for the conversion of $30,000 of principal and $9,626 of accrued interest due on an existing convertible note payable.
Common Shares Issued Pursuant to Other Agreements
On August 9, 2016, NextCala, Inc., a subsidiary of the Company in which the Company holds a 96% interest, executed an addendum to its Joint Venture agreement with Glocal Payment Solutions, Inc. as it pertains to NextGlocal, Inc. Under the terms of the addendum, NextCala, Inc, was granted 60% control of the Board of Directors of NextGlocal and shall cause Next Group Holdings to issue both common shares and options to purchase additional shares of Next Group Holdings common stock. Of the total 2,500,000 common shares to be issued under the addendum, 500,000 were issued upon execution with the remaining 2,000,000 to be issued upon achievement of certain milestones. Next Group Holdings will also cancel the previously issued 1,000,000 options with an exercise price of $1.00 per share as discussed in Footnote 8 – Stock Options and issue 1,000,000 options to purchase common shares at an exercise price of $0.50 per share. The options vest at the determination of the Board of Directors of the Joint Venture of which NextCala has control and have a life of the latter of three years or the dissolution of the Joint Venture.
On July 22, 2016 the Company entered into a $50,000 convertible note payable with Noteholder 3. The note accrues interest at a rate of 8% per annum and is due on July 22, 2017. The note may be converted at the option of the noteholder into shares of common stock of the Company at a rate of 50% of the lowest trading price in the twenty prior trading days of the conversion with a floor of $0.05 per share at any time after six months from issuance.
On July 22, 2016 the Company entered into a $50,000 convertible note payable with Noteholder 1. The note accrues interest at a rate of 8% per annum and is due on July 22, 2017. The note may be converted at the option of the noteholder into shares of common stock of the Company at a rate of 50% of the lowest trading price in the twenty prior trading days of the conversion with a floor of $0.05 per share at any time after six months from issuance.
On August 2, 2016 the Company entered into a $50,000 convertible note payable with Noteholder 1. The note accrues interest at a rate of 8% per annum and is due on August 2, 2017. The note may be converted at the option of the noteholder into shares of common stock of the Company at a rate of 50% of the lowest trading price in the twenty prior trading days of the conversion with a floor of $0.05 per share at any time after six months from issuance.
On July 22, 2016, the Company entered into four separate agreements with convertible note holders agreed not to convert any amount of outstanding principal or accrued interest to shares of common stock for a period of 60 days. Under the terms of the agreement, the Company may prepay the outstanding principal and accrued interest of the notes for 130% of the then outstanding amounts. The amount of principal agreed to freeze by each convertible note holder is as follows:
Holder Principal
Noteholder 1 $ 357,000
Noteholder 3 125,000
Noteholder 4 131,250
Noteholder 5 70,000
Total $ 683,250
On July 27, 2016, the Company issued 10,000,000 shares of common stock pursuant to a debt purchase agreement entered into on July 10, 2016. Under the debt purchase agreement, the Company agreed to purchase the debt of Accent InterMedia (“AIM”) along with 64% of the outstanding ownership of AIM . AIM operates as a leading gift card provider and in business activities very synergistic with those the Company is currently engaged in. Under the terms of the agreement, the Company agreed to purchase an outstanding debt of $5,188,107 in exchange for 10,000,000 shares of common stock and options to purchase up to 7,500,000 additional shares of common stock at an exercise price of $0.18 per share. The common shares issued were valued using the close price of our common stock on the date of issuance of $0.095 per share representing a total value of $950,000.
On August 10, 2016, M&M, a wholly owned subsidiary of the Company, closed the acquisition of Tel3, a prepaid international long distance telephone company, for a purchase price of $10. The ownership of Tel3 was purchased from the Company Chief Executive Officer Arik Maimon and as such is a related party transaction.
On May 27, 2016, the Cala entered into a Joint Venture Agreement (the “Agreement”) with Glocal Payments Solutions, Inc (“Glocal”) to form a joint venture in which Cala would have a 60% interest and Glocal would have a 40% interest. The Joint Venture will seek to launch and activate up to 45,000 prepaid debit cards under the Cala brand by December 31, 2016 and 360,000 additional cards during the 2017 calendar year. Either party may terminate the agreement at December 31, 2016 if certain objectives are not met.
On January 12, 2016, and effective as of January 1, 2016, the Company issued 177,539,180 shares of its restricted common stock and 10,000,000 shares of its Series B preferred stock for 100% of the issued and outstanding shares of Next Group Holdings, Inc. (NEXT). Based on the completion of the agreement NEXT became a wholly-owned subsidiary of the Company.
On December 31, 2015, we signed our merger with Next Group Holdings, Inc. a Florida Corporation but the transaction was not completed until January 12, 2016, when the document was filed with the State of Florida. The accounting effective date of the transaction in January 1, 2016. The Company filed for a change of name is Next Group Holdings, Inc. and its symbol is NXGH.
As a result of this merger, we adopted Next Group’s corporate structure and began a transition into its business model. Through our subsidiaries, we engage in use of certain licensed technology to provide innovative telecommunications, mobility, and remittance solutions to unserved, unbanked, and emerging markets.
Our subsidiaries are Next Mobile 360 LLC (100%), a limited liability company formed under the laws of Florida (“Next Mobile”), Meimoun & Mammon, LLC (100%), a limited liability company formed under the laws of Florida (“M&M”), NxtGn, Inc. (65%), a corporation formed under the laws of Florida (“NxtGn”), and Next CALA, Inc. (94%), a corporation formed under the laws of Florida (“Next CALA”).
This corporate structure is illustrated below.
Prior to the reverse recapitalization, we operated primarily as a manufacturing, marketing and distribution company focused on juice based beverages. These operations were phased out following the reverse recapitalization.
Total revenue for the three months ended June 30, 2016, were $2,767, compared to revenue of $75,005 for the three month period ended June 30, 2015. During the three months ended June 30, 2016, revenues from nonrelated parties totaled $2,707 and revenues from related parties totaled $60 compared to $33,268 from nonrelated parties and $41,737 from related parties during the three months ended June 30, 2015. The decrease in revenue was due to the discontinuation of telecommunication services due to the gross loss incurred on the service.
The Company incurred total cost of goods sold of $42,193 for the three months ended June 30, 2016, compared to $168,356 for the three months ended June 30, 2015 resulting in gross margins of negative $39,426 and negative $93,351. The increase in gross margins was due to the elimination of variable costs of revenue from the decline in services being provided during the three months ended June 30, 2016 as compared to the same period in 2015. These services have been discontinued given the losses incurred on the service.
Operating expenses for the three months ended June 30, 2016, were $2,708,782 compared to $138,699 for the three months ended June 30, 2015. Operating expenses were greater in the three months ended June 30, 2016 due mainly to an increase in professional services of $1,225,040 due to common shares valued at $1,123,735 being issued for professional fees and the reverse recapitalization transaction and incremental costs associated with operating as a public company. Additionally, officer and director compensation increased $1,307,135 during the three months ended June 30, 2016 as compared to the three months ended June 30, 2015 due to increased management and board costs associated with operating as a public company and stock based compensation to directors totaling $1,123,735 during the three months ended June 30, 2016.
Loss from operations was $2,748,208 for the three months ended June 30, 2016, compared to $232,050 for the three months ended June 30, 2015. The increase in losses from operations is the result of decreased revenue, higher cost of revenue and higher operating expenses as discussed previously.
Total other expense during the three months ended June 30, 2016 were $246,379 compared to $0 for the same period in 2015. Interest expense for the three months ended June 30, 2016, was $613,282, and is the result of the recognition of debt discounts associated with convertible notes payable, excess fair market value of derivative liabilities being charged to interest upon initial measurement, imputed interest on related party loans and interest accruals on outstanding debt. The Company did not incur interest expense during the three months ended June 30, 2015 as there was not outstanding debt at that time. Additionally, the Company recorded a gain on the change in fair market values of derivative liabilities of $407,463 during the three months ended June 30, 2016 compared to $0 during the three months ended June 30, 2015 as the liabilities did not exist during the 2015 calendar year.
Net loss from operations for the three months ended June 30, 2016, was $2,994,587 compared to a loss of $232,050 for the three months ended June 30, 2015. The increase in loss for the three months ended June 30, 2016 is due mainly to an increase in operating costs of $2,570,083 and an increase in interest expense of $246,379.
Total revenue for the six months ended June 30, 2016, were $85,070, compared to revenue of $228,051 for the six month period ended June 30, 2015. During the six months ended June 30, 2016, revenues from nonrelated parties totaled $85,010 and revenues from related parties totaled $60 compared to $142,194 from nonrelated parties and $85,857 from related parties during the six months ended June 30, 2015. The decrease in revenue was due to the discontinuation of telecommunication services due to the gross loss incurred on the service.
The Company incurred total cost of goods sold of $149,354 for the six months ended June 30, 2016, compared to $179,618 for the six months ended June 30, 2015 resulting in gross margins of negative $64,284 and positive $48,433. The decrease in gross margins was due to the decline in services being provided during the six months ended June 30, 2016 as compared to the same period in 2015. These services have been discontinued given the losses incurred on the service.
Operating expenses for the six months ended June 30, 2016, were $3,135,013 compared to $327,979 for the six months ended June 30, 2015. Operating expenses were greater in the six months ended June 30, 2016 due mainly to an increase in professional services of $1,455,846 due to common shares valued at $1,046,414 being issued for professional fees and the reverse recapitalization transaction and incremental costs associated with operating as a public company. Additionally, officer and director compensation increased $1,251,621 during the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 due to increased management and board costs associated with operating as a public company and stock based compensation to directors totaling $1,123,735 during the six months ended June 30, 2016.
Loss from operations was $3,199,297 for the six months ended June 30, 2016, compared to $279,546 for the six months ended June 30, 2015. The increase in losses from operations is the result of decreased revenue, higher cost of revenue and higher operating expenses as discussed previously.
Total other expense during the six months ended June 30, 2016 were $550,167 compared to $0 for the same period in 2015. Interest expense for the six months ended June 30, 2016, was $890,182, and is the result of the recognition of debt discounts associated with convertible notes payable, the excess fair market value of derivatives being charged to interest expense, imputed interest on related party loans and interest accruals on outstanding debt. The Company did not incur interest expense during the six months ended June 30, 2015 as there was not outstanding debt at that time. Additionally, the Company recorded a gain on the change in fair market values of derivative liabilities of $392,186 during the six months ended June 30, 2016 compared to $0 during the six months ended June 30, 2015 as the liabilities did not exist during the 2015 calendar year.
Net loss from operations for the six months ended June 30, 2016, was $3,749,464 compared to a loss of $279,546 for the six months ended June 30, 2015. The increase in loss for the six months ended June 30, 2016 is due mainly to an increase in operating costs of $2,807,034 and an increase in interest expense of $890,182.
As of June 30, 2016, the Company had net current assets of $1,341,342 and current liabilities of $5,849,794 compared to $205,781 and $4,114,104 as of December 31, 2015 creating a working capital deficit of $4,508,452 and $3,908,323 as of June 30, 2016 and December 31, 2015. The Company had cash on hand of $109,792 and $18,047 as of June 30, 2016 and December 31, 2015 as well as a bank overdraft of $7 and $0 as of June 30, 2016 and December 31, 2015.
The Company used $716,339 of cash in operations during the six months ended June 30, 2016, and $264,840 during the six months ended June 30, 2015. The Company’s primary uses of cash have been for professional support, marketing expenses and working capital. Net cash used in operating activities during the six months ended June 30, 2016 consisted of a net loss of $3,749,464, non-cash losses and gains totaling $2,678,486 and changes in working capital of $354,639. All cash received has been expended in the furtherance of growing future operations.
The Company generated $36,727 of cash from investing activities during the six months ended June 30, 2016 compared to $68,018 used during the six months ended June 30, 2015. The net cash provided by and used in investing activities during each period were the results of changes in related party receivables.
The Company had net cash proceeds of $771,357 from financing activities during the six months ended June 30, 2016 compared to $305,483 during the six months ended June 30, 2015. The net cash provided by financing activities during the six months ended June 30, 2016 included $812,380 of proceeds from convertible notes payable, repayments of related party loans of $38,626, repayments of loans payable of $2,500, repayment of bank overdrafts of $1,081 and cash acquired through the reverse recapitalization of $1,184. Net cash provided by financing activities during the six months ended June 30, 2015 consisted of proceeds from related party loans of $305,483.
The Company has a working capital deficiency of $5,367,948 and accumulated deficit of $4,463,047 as of June 30, 2016. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the company is unable to continue as a going concern.
During the six months ended June 30, 2016, the Company has issued 2,496,894 shares of commons stock for the conversion of $224,495 of principal of convertible notes payable and 167,625 shares for the conversion of $15,721 of accrued interest. Additionally, the Company issued 450,000 common shares valued at $13,260 as repayment of a non-convertible loan; 8,774,959 common shares valued at 8,774,959 for services; 200,535 common shares for other expenses of $45,000 and rescinded 4,000,000 common shares previously issued common shares. There were 230,413,988 shares of common stock issued and outstanding as of June 30, 2016.
3.11 Joint Venture Agreement between NextCala, Inc. and Glocal Payment Solutions, Inc. dated May 27, 2016 Filed herewith
3.12 Addendum to joint venture agreement between NextCala, Inc. and Glocal Payment Solutions, Inc. dated August 9, 2016 Filed herewith
101.CAL XBRL Taxonomy Extension Calculation Link base Document Filed herewith
101.DEF XBRL Taxonomy Extension Definition Link base Document Filed herewith
101.LAB XBRL Extension Labels Link base Document Filed herewith
101.PRE XBRL Taxonomy Extension Presentation Link base Document Filed herewith
Date: August 19, 2016 By: /s/ Arik Maimoun
By: /s/ Christian Carnell
I, Christian Carnell, certify that:
In connection with the Quarterly Report of Next Group Holdings, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2016, as filed with the Securities and Exchange Commission (the “Report”), Arik Maimoun, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
In connection with the Quarterly Report of Next Group Holdings, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, Christian Carnell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: