Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 06, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | American Brewing Company, Inc. | |
Entity Central Index Key | 1,579,823 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 12,280,454 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
CURRENT ASSETS: | ||
Cash | $ 151,115 | $ 43,856 |
Accounts receivable, net of allowance for doubtful accounts of zero and zero, respectively. | 290,064 | 259,619 |
Inventories | 222,051 | 196,220 |
Prepaid expenses and other current assets | 5,562 | 26,264 |
Total current assets | 668,792 | 525,959 |
Property and equipment, net of accumulated depreciation of $14,074 and $10,215, respectively | 62,477 | 66,336 |
Customer relationships, net of accumulated amortization of $83,333 and $62,500, respectively | 166,667 | 187,500 |
Goodwill | 389,014 | 389,014 |
Total assets | 1,286,950 | 1,168,809 |
CURRENT LIABILITIES: | ||
Accounts payable | 402,100 | 282,845 |
Factoring payable | 112,102 | 110,663 |
Accrued expenses and other current liabilities | 253,401 | 177,589 |
Total current liabilities | 767,603 | $ 571,097 |
Convertible note payable, net of unamortized discounts of $17,987and $0, respectively | 182,013 | |
Note payable, net of unamortized discounts of $113,947 and $121,069, respectively | 86,053 | $ 78,931 |
Related party debt, net of unamortized discounts of $34,194 and $36,331, respectively | 25,806 | 23,669 |
Total liabilities | $ 1,061,475 | $ 673,697 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Common Stock, $0.001 par value; 40,000,000 shares authorized; 15,419,401 shares issued and outstanding | $ 15,436 | $ 15,436 |
Series A preferred stock, $0.001 par value: 250,000 shares authorized, 250,000 shares issued and outstanding | 250 | 250 |
Series B Preferred stock, $0.001 par value: 300,000 shares authorized, 254,807 shares issued and outstanding | 255 | 255 |
Additional paid-in capital | 3,829,203 | 3,811,049 |
Accumulated deficit | (3,619,669) | (3,331,878) |
Total stockholders' equity | 225,475 | 495,112 |
Total liabilities and stockholders' equity | 1,286,950 | $ 1,168,809 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Series A preferred stock, $0.001 par value: 250,000 shares authorized, 250,000 shares issued and outstanding | 250 | |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Series B Preferred stock, $0.001 par value: 300,000 shares authorized, 254,807 shares issued and outstanding | $ 255 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 50,000,000 | 50,000,000 |
Common Stock, shares issued | 15,435,651 | 15,435,651 |
Common Stock, shares outstanding | 15,435,651 | 15,435,651 |
Series A Preferred Stock, par value | $ 0.001 | $ 0.001 |
Series A Preferred Stock, shares authorized | 250,000 | 250,000 |
Series A Preferred Stock, shares issued | 250,000 | 250,000 |
Series A Preferred Stock, shares outstanding | 250,000 | 250,000 |
Series B Preferred Stock, par value | $ 0.001 | $ 0.001 |
Series B Preferred Stock, shares authorized | 300,000 | 300,000 |
Series B Preferred Stock, shares issued | 254,807 | 254,807 |
Series B Preferred Stock, shares outstanding | 254,807 | 254,807 |
Series A Preferred Stock [Member] | ||
Series A Preferred Stock, par value | $ 0.001 | |
Series A Preferred Stock, shares authorized | 250,000 | |
Series A Preferred Stock, shares issued | 250,000 | |
Series A Preferred Stock, shares outstanding | 250,000 | |
Series B Preferred Stock [Member] | ||
Series A Preferred Stock, par value | $ 0.001 | |
Series A Preferred Stock, shares authorized | 300,000 | |
Series A Preferred Stock, shares issued | 254,807 | |
Series A Preferred Stock, shares outstanding | 254,807 |
STATEMENTS OF OPERATIONS (Unaud
STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Successor [Member] | ||
REVENUES | $ 588,800 | |
Less: Cost of Good Sold | 499,481 | |
GROSS PROFIT | 89,319 | |
OPERATING EXPENSES: | ||
Advertising, promotion and selling | 96,221 | |
General and administrative | 169,610 | |
Legal and professional | 81,645 | |
Total operating expenses | 347,476 | |
LOSS FROM OPERATIONS | (258,157) | |
OTHER INCOME (EXPENSE): | ||
Interest expense | (29,634) | |
Total other income (expense) | (29,634) | |
NET LOSS | $ (287,791) | |
NET LOSS PER SHARE - BASIC AND DILUTED: | $ (0.02) | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 15,435,651 | |
Predecessor [Member] | ||
REVENUES | $ 576,863 | |
Less: Cost of Good Sold | 402,235 | |
GROSS PROFIT | 174,628 | |
OPERATING EXPENSES: | ||
Advertising, promotion and selling | 51,516 | |
General and administrative | 145,469 | |
Legal and professional | 47,371 | |
Total operating expenses | 244,356 | |
LOSS FROM OPERATIONS | (69,728) | |
OTHER INCOME (EXPENSE): | ||
Interest expense | (2,294) | |
Total other income (expense) | (2,294) | |
NET LOSS | $ (72,022) |
STATEMENTS OF CASH FLOWS (Unaud
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
CASH AT BEGINNING OF PERIOD | $ 43,856 | |
CASH AT END OF PERIOD | 151,115 | |
Successor [Member] | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | (287,791) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation | 3,859 | |
Amortization of customer relationships | 20,833 | |
Amortization of debt discounts | 9,426 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (30,445) | |
Inventories | (25,831) | |
Prepaid expenses and other current assets | 20,702 | |
Accounts payable | 119,255 | |
Accrued expenses and other current liabilities | $ 75,812 | |
Reserve for legal settlement | ||
Net cash (used in) provided by operating activities | $ (94,180) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | ||
Net cash used in investment activities | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from convertible note payable | $ 200,000 | |
Net factoring advances | $ 1,439 | |
Payments on convertible notes payable to related parties | ||
Repayment of notes payable and capital lease obligations | ||
Net cash provided by (used in) financing activities | $ 201,439 | |
NET CHANGE IN CASH | 107,259 | |
CASH AT BEGINNING OF PERIOD | 43,856 | |
CASH AT END OF PERIOD | $ 151,115 | |
SUPPLEMENTAL INFORMATION: | ||
Cash paid during the period for: Interest | ||
Cash paid during the period for: Income taxes | ||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Warrants issued with convertible debt | $ 18,154 | |
Predecessor [Member] | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (72,022) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation | $ 5,100 | |
Amortization of customer relationships | ||
Amortization of debt discounts | ||
Changes in operating assets and liabilities: | ||
Accounts receivable | $ (23,277) | |
Inventories | 105,419 | |
Prepaid expenses and other current assets | 5,695 | |
Accounts payable | (5,158) | |
Accrued expenses and other current liabilities | 3,473 | |
Reserve for legal settlement | 5,100 | |
Net cash (used in) provided by operating activities | 24,330 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (11,688) | |
Net cash used in investment activities | $ (11,688) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from convertible note payable | ||
Net factoring advances | ||
Payments on convertible notes payable to related parties | $ (69,000) | |
Repayment of notes payable and capital lease obligations | (1,874) | |
Net cash provided by (used in) financing activities | (70,874) | |
NET CHANGE IN CASH | (58,232) | |
CASH AT BEGINNING OF PERIOD | 125,312 | |
CASH AT END OF PERIOD | 67,080 | |
SUPPLEMENTAL INFORMATION: | ||
Cash paid during the period for: Interest | $ 1,861 | |
Cash paid during the period for: Income taxes | ||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Warrants issued with convertible debt |
NOTE 1 - NATURE OF OPERATIONS,
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES American Brewing Company, Inc. (the " Company On October 1, 2015, the Company sold its assets and various liabilities related to its brewery and micro-brewing operations. The assets sold consisted of accounts receivable, inventories, prepaid assets and property and equipment. The liabilities consisted of brewing-related contracts held by the Company, liabilities related to inventory as well as lease obligations. The Company recognized the sale of its brewery and micro-brewing operations as a discontinued operation in the year ended December 31, 2015. Since October 2015, the Company is focusing exclusively on its búcha® Live Kombucha business, which produces a gluten-free, organic certified sparkling kombucha tea. Name change On March 30, 2016, the board of directors recommended that the Company amend its articles of incorporation to change its name from American Brewing Company, Inc. to Búcha, Inc., and to effect a change to its public stock symbol. The majority shareholders acting by majority consent approved the name change. The Company has filed the necessary state and regulatory documents to effect the name change. Basis of Presentation The accompanying unaudited interim financial statements as of March 31, 2016 of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (" U.S. GAAP SEC The ve been presented on a comparative basis. For periods after the acquisition of the (since April 1, 2015), our financial results are referred to as Successor. For periods prior to the acquisition of the our financial results are referred to as Predecessor. Where applicable black line separates the Successor and Predecessor financial information to highlight the lack of comparability between the periods. Concentrations Receivables arising from sales of the Company's products are not collateralized. As of March 31, 2016, three customers represented approximately 58.1% (35.6%, 12.2% and 10.3%) of accounts receivable and as of December 31, 2015, three customers represented approximately 92.8% (59.0%, 22.9% and 10.9%) of accounts receivable. For the three months ended March 31, 2016 (Successor), two customers represented approximately 60.2% (42.4% and 17.8%) of revenue. For the three months ended March 31, 2015 (Predecessor), three customers represented approximately 85.6% (30.2%, 29.4% and 26.0%) of revenue. Accounts Receivable Factoring Arrangement with Recourse In April 2015, the Company entered into a factoring agreement to sell, with recourse, certain receivables to an unrelated third-party financial institution. Under the terms of the factoring agreement, the Company receives an advance of 80% of qualified receivables and maximum amount of outstanding advances at any one time will not exceed $500,000. For the three months ended March 31, 2016 (Successor), the Company received additional net advances from the factoring of accounts receivable of $1,439 and recognized factoring interest and fees of $13,657. The Company pays factoring fees associated with the sale of receivables at the rate of 0.67% of the gross face value of the receivable for every ten-day period or fraction thereof from the date of the advance until the receivable is paid in full. The outstanding factoring payable as of March 31, 2016 and December 31, 2015 was $112,102 and $110,663, respectively. Goodwill Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets Intangible assets are recorded at acquisition cost less accumulated amortization and impairment. Definite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. Long-lived Assets Our long-lived assets consisted of property and equipment and customer relationships and are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360, Property, Plant, and Equipment. We test for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Through March 31, 2016, we had not experienced impairment losses on its long-lived assets as management determined that there were no indicators that a carrying amount of the asset may not be recoverable. |
NOTE 2 - GOING CONCERN AND MANA
NOTE 2 - GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | NOTE 2 GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $3,619,669 and $3,331,878 as of March 31, 2016 and December 31, 2015, respectively, had net losses of $287,791 and $72,022 for the three months ended March 31, 2016 (Successor), and for the three months ended March 31, 2015 (Predecessor), respectively, and had negative working capital of $98,811 as of March 31, 2016. These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern. While the Company is attempting to increase sales and generate additional revenues, the Company's cash position may not be significant enough to support the Company's daily operations. During the three months ended March 31, 2016, the Company borrowed $200,000 in the form of a Convertible Promissory Note, which included warrants (See Note 6), however the Company needs additional financing. If the Company is unable to obtain additional financing through the issuance of debt or equity, the Company may be unable to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. |
NOTE 3 - INVENTORIES
NOTE 3 - INVENTORIES | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 3 INVENTORIES Inventories consist of brewing materials, tea ingredients, bulk packaging and finished goods. The cost elements of work in process and finished goods inventory consist of raw materials and direct labor. Provisions for excess inventory are included in cost of goods sold and have historically been immaterial but adequate to provide for losses on its raw materials. Inventories are stated at the lower of cost, determined on the first-in, first-out basis, or market. Inventories consisted of the following as of: March 31, 2016 December 31, 2015 Raw materials $ 99,105 $ 46,928 Work-in-process 20,192 5,798 Finished goods 102,754 143,494 $ 222,051 $ 196,220 |
NOTE 4 - PROPERTY AND EQUIPMENT
NOTE 4 - PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
NOTE 5 - PROPERTY AND EQUIPMENT | NOTE 4 PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: March 31, 2016 December 31, 2015 Property and equipment $ 76,551 $ 76,551 Less: accumulated depreciation (14,074 ) (10,215 ) $ 62,477 $ 66,336 Depreciation expense is computed on the basis of three to five year useful lives for all property and equipment. Depreciation expense was $3,859 and $5,100 for the three months ended March 31, 2016 (Successor) and the three months ended March 31, 2015 (Predecessor), respectively. |
NOTE 5 - CUSTOMER RELATIONSHIPS
NOTE 5 - CUSTOMER RELATIONSHIPS | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
CUSTOMER RELATIONSHIPS | NOTE 5 CUSTOMER RELATIONSHIPS Customer relationships consisted of the following as of: March 31, 2016 December 31, 2015 Customer relationships $ 250,000 $ 250,000 Less: accumulated amortization (83,333 ) (62,500 ) $ 166,667 $ 187,500 Customer relationships were evaluated as part of the tangible and intangible assets acquired in the acquisition of the búcha® Live Kombucha brand and recorded at their fair market value. Amortization expense is computed on a straight-line basis of three years determined to be the useful life. Amortization expense was $20,833 and $ -0- for the three months ended March 31, 2016 (Successor) and the three months ended March 31, 2015 (Predecessor), respectively. Amortization expense is classified as cost of goods sold in the statements of operations. |
NOTE 6 - NOTES PAYABLE
NOTE 6 - NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
NOTES PAYABLE AND CAPITAL LEASES | NOTE 6 NOTES PAYABLE Notes payable consisted of the following as of: March 31, 2016 December 31, 2015 Notes payable, net of unamortized discounts of $113,947 and $121,069 $ 86,053 $ 78,931 Convertible promissory note, net of unamortized discounts of $17,987 and zero 182,013 - 268,066 78,931 Less: current portion - - Long-term portion, net of unamortized discounts of $131,934 and $121,069 $ 268,066 $ 78,931 In March 2015, the Company borrowed $200,000. The note bears interest at 10% per annum and is due and payable beginning December 31, 2015 maturing on March 31, 2020. Payments of interest are required quarterly. Should the Company be successful in raising $2,000,000 or more in funding, then the entire balance of the note will be due immediately. The note was issued in conjunction with an equity payment totaling 176,734 shares of Series B preferred stock that was issued with the debt. The Company has allocated the loan proceeds among the debt and the stock based upon relative fair value. The relative fair value of the stock was determined to be $142,434 and was recorded as a debt discount. The discount will be amortized over the life of the loan to interest expense. As of March 31, 2016, no payment has been made on this note and the remaining balance of this note is $200,000 ($86,053 net of the unamortized discount.) On March 19, 2016, the Company entered into a Securities Purchase Agreement with an unaffiliated third party, whereby the Company sold a Convertible Promissory Note in an amount of $200,000. The purchaser also received a three-year Warrant to purchase 100,000 shares at an exercise price of $0.40 per share. The Convertible Promissory Note is convertible after 180 days into shares of the Company's common stock at a twenty-five percent (25%) discount to the Volume Weighted Average Price for the five (5) trading days prior to the date of conversion. The Company has allocated the loan proceeds among the debt and the warrant based upon relative fair value. The relative fair value of the warrant was determined to be $18,154 and was recorded as a debt discount. The discount will be amortized over the life of the loan to interest expense. As of March 31, 2016, no payment has been made on this note and the remaining balance of this note is $200,000 ($182,013 net of the unamortized discount.) |
NOTE 7 - RELATED PARTY DEBT
NOTE 7 - RELATED PARTY DEBT | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
NOTE 7 - RELATED PARTY DEBT | NOTE 7 RELATED PARTY DEBT Related party debt consisted of the following as of: March 31, 2016 December 31, 2015 Related party debt, net of unamortized discounts of $34,194 and 36,331 $ 25,806 $ 23,669 Less: current portion - - Long-term portion, net of unamortized discounts of $34,194 and 36,331 $ 25,806 $ 23,669 In March 2015, the Company borrowed $60,000 from a member of management. The note bears interest at 10% per annum and is due and payable beginning June 30, 2015 maturing on March 31, 2020. Payments of interest are required quarterly. Should the Company be successful in raising $2,000,000 or more in funding the entire balance of the note will be due immediately. The note was issued in conjunction with an equity payment totaling 53,073 shares of Series B preferred stock that was issued with the debt. The Company has allocated the loan proceeds among the debt and the stock based upon relative fair value. The relative fair value of the stock was determined to be $42,742 and was recorded as a debt discount. The discount will be amortized over the life of the loan to interest expense. As of March 31, 2016, no payment has been made on this note and the remaining balance of this note is $60,000 ($25,806 net of the unamortized discount.) |
NOTE 8 - COMMITMENTS AND CONTIN
NOTE 8 - COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 8 COMMITMENTS AND CONTINGENCIES Operating Lease Commitments In April 2015, the Company assumed a facilities lease with a third party for the manufacture of its búcha® Live Kombucha tea, which expired February 29, 2016. In September 2015, the Company extended the facilities lease for 39 months effective March 1, 2016 and expiring May 31, 2019. The monthly base rent is $2,795 for first 12 months, $2,879 for next 12 months, $2,965 for next 12 months, and $3.054 for the balance of the term. Monthly rent payments also include common area maintenance charges, taxes, and other charges. Future minimum lease payments under this facilities lease are approximately as follows: 2016 $ 25,155 2017 34,379 2018 35,410 2019 15,093 2020 - $ 110,037 Rent expense was $7,589 and $6,435 for the three months ended March 31, 2016 (Successor) and the three months ended March 31, 2015 (Predecessor), respectively. Legal In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no such matters that are deemed material to the financial statements as of March 31, 2016. |
NOTE 9 - STOCKHOLDERS' EQUITY
NOTE 9 - STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 10 STOCKHOLDERS' EQUITY Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock, each having a par value of $0.001, with voting, distribution, dividend and redemption rights, and liquidation preferences and conversions as designated by the board of directors. The board of directors has designated 250,000 shares as Series A Preferred stock, par value $.001 per share ("Series A Preferred"). Each share of Series A Preferred shall have 500 votes for any election or other vote placed before the shareholders of the Company. As of September 30, 2015, 250,000 shares of Series A Preferred are issued and outstanding. The board of directors has designated 300,000 shares as Series B Preferred stock, par value $.001 per shares ("Series B Preferred"). The Series B Preferred is non-voting, not eligible for dividends and ranks equal to common stock and below Series A preferred stock. Each share of Series B Preferred has a conversion rate into eight shares of common stock. During the nine months ended September 30, 2015, the Company issued 229,807 shares of Series B Preferred in conjunction with two promissory notes (see Notes 7 and 8). In June 2015, the Company sold 25,000 shares of Series B Preferred for $25,000 cash. As of September 30, 2015, 254,807 shares of Series B Preferred are issued and outstanding. Common Stock The Company is authorized to issue 50,000,000 shares of common stock, $0.001 par value. During the six months ended September 30, 2015, new issuances of shares of common stock were as follows: · 1,479,290 shares of common stock were issued pursuant to the Acquisition (see Note 4). The Company estimated the fair market value to be $0.338 per share at the time of issuance. These shares were issued with "Price Protection" for a period of 18 months. If the market value of the common stock issued pursuant to the Acquisition is less than $500,000, the Company shall issue additional shares so the aggregate amount of shares issued in the Acquisition is equal to a market value of $500,000 based on the average closing bid price of the common stock for the five days prior thereto. · 204,000 shares of common stock were sold to three investors for cash proceeds of $61,200, or $.30 per share, under a private placement offering (the "Offering"). The Offering provided for the issuance warrants to purchase 50% of the number of shares subscribed for, at a price of $.50 per share, expiring one year from the investment. A total of 102,000 warrants were issued and expire between April 13 and June 10, 2016 (see Note 11). · 52,000 shares of common stock were issued to employees for services rendered. The Company estimated the fair market value to be $0.44 per share at the time of issuance and recorded an expense of $22,880 during the six months ended September 30, 2015. · 85,714 shares of common stock were issued to employee pursuant to an employment contract whereby the employee would be granted shares of common stock valued at $30,000. The Company estimated the fair market value to be $0.35 per share at the time of issuance and recorded a corresponding expense during the six months ended September 30, 2015. · 48,177 shares of common stock were issued to employee pursuant to an employment contract whereby the employee would be granted shares of common stock equal to $6,500 at the end of each quarter effective with the three months ending March 31, 2015. The Company estimated the fair market value to be $0.35 per share as of March 31, 2015, $0.46 per share as of June 30, 2015 and $0.42 per shares as of September 30, 2015. Accordingly, the employee received 18,571, 14,130 and 15,476 shares of common stock, respectively, and the Company recorded an expense of $19,500 during the six months ended September 30, 2015. · 5,000 shares of common stock were issued to Stonefield Fund for services rendered. The Company estimated the fair market value to be $0.44 per share at the time of issuance and recorded an expense of $2,200 during the six months ended September 30, 2015. · 500,000 shares of common stock were issued to LP Funding, LLC for services rendered. The Company estimated the fair market value to be $0.46 per share at the time of issuance and recorded an expense of $230,000 during the six months ended September 30, 2015. As of September 30, 2015, 15,419,401 shares of common stock are issued and outstanding. |
NOTE 10 - COMMON STOCK WARRANTS
NOTE 10 - COMMON STOCK WARRANTS | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
COMMON STOCK WARRANTS | NOTE 10 COMMON STOCK WARRANTS As of March 31, 2016, the Company had warrants to purchase 1,227,000 shares of common stock outstanding, with exercise prices between $0.40 and $1.00 and expiration dates between April 2016 and October 2019. A summary of common stock warrants activity for the three months ended March 31, 2016 is as follows: Weighted Average Number Exercise Price Warrants outstanding December 31, 2015 1,127,000 $ 0.94 Granted 100,000 0.40 Exercised - - Forfeited - - Warrants outstanding March 31, 2016 1,227,000 $ 0.90 Warrants exercisable as of March 31, 2016 1,227,000 $ 0.90 During the three months ended March 31, 2016, the Company issued a three-year Warrant to purchase 100,000 shares at an exercise price of $0.40 per share in connection with a $200,000 Convertible Promissory Note (see Note 6). |
NOTE 1 - NATURE OF OPERATIONS16
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim financial statements as of March 31, 2016 of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (" U.S. GAAP SEC The ve been presented on a comparative basis. For periods after the acquisition of the (since April 1, 2015), our financial results are referred to as Successor. For periods prior to the acquisition of the our financial results are referred to as Predecessor. Where applicable black line separates the Successor and Predecessor financial information to highlight the lack of comparability between the periods. |
Concentrations | Concentrations Receivables arising from sales of the Company's products are not collateralized. As of March 31, 2016, three customers represented approximately 58.1% (35.6%, 12.2% and 10.3%) of accounts receivable and as of December 31, 2015, three customers represented approximately 92.8% (59.0%, 22.9% and 10.9%) of accounts receivable. For the three months ended March 31, 2016 (Successor), two customers represented approximately 60.2% (42.4% and 17.8%) of revenue. For the three months ended March 31, 2015 (Predecessor), three customers represented approximately 85.6% (30.2%, 29.4% and 26.0%) of revenue. |
Accounts Receivable Factoring Arrangement with Recourse | Accounts Receivable Factoring Arrangement with Recourse In April 2015, the Company entered into a factoring agreement to sell, with recourse, certain receivables to an unrelated third-party financial institution. Under the terms of the factoring agreement, the Company receives an advance of 80% of qualified receivables and maximum amount of outstanding advances at any one time will not exceed $500,000. For the three months ended March 31, 2016 (Successor), the Company received additional net advances from the factoring of accounts receivable of $1,439 and recognized factoring interest and fees of $13,657. The Company pays factoring fees associated with the sale of receivables at the rate of 0.67% of the gross face value of the receivable for every ten-day period or fraction thereof from the date of the advance until the receivable is paid in full. The outstanding factoring payable as of March 31, 2016 and December 31, 2015 was $112,102 and $110,663, respectively. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets Intangible assets are recorded at acquisition cost less accumulated amortization and impairment. Definite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. |
Long-lived Assets | Long-lived Assets Our long-lived assets consisted of property and equipment and customer relationships and are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360, Property, Plant, and Equipment. We test for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Through March 31, 2016, we had not experienced impairment losses on its long-lived assets as management determined that there were no indicators that a carrying amount of the asset may not be recoverable. |
NOTE 3 - INVENTORIES (Tables)
NOTE 3 - INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | March 31, 2016 December 31, 2015 Raw materials $ 99,105 $ 46,928 Work-in-process 20,192 5,798 Finished goods 102,754 143,494 $ 222,051 $ 196,220 |
NOTE 4 - PROPERTY AND EQUIPME18
NOTE 4 - PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | March 31, 2016 December 31, 2015 Property and equipment $ 76,551 $ 76,551 Less: accumulated depreciation (14,074 ) (10,215 ) $ 62,477 $ 66,336 |
NOTE 5 - CUSTOMER RELATIONSHI19
NOTE 5 - CUSTOMER RELATIONSHIPS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Customer relationships | March 31, 2016 December 31, 2015 Customer relationships $ 250,000 $ 250,000 Less: accumulated amortization (83,333 ) (62,500 ) $ 166,667 $ 187,500 |
NOTE 6 - NOTES PAYABLE (Tables)
NOTE 6 - NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Notes Payable and Capital Leases | March 31, 2016 December 31, 2015 Notes payable, net of unamortized discounts of $113,947 and $121,069 $ 86,053 $ 78,931 Convertible promissory note, net of unamortized discounts of $17,987 and zero 182,013 - 268,066 78,931 Less: current portion - - Long-term portion, net of unamortized discounts of $131,934 and $121,069 $ 268,066 $ 78,931 |
NOTE 7 - RELATED PARTY DEBT (Ta
NOTE 7 - RELATED PARTY DEBT (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party debt | March 31, 2016 December 31, 2015 Related party debt, net of unamortized discounts of $34,194 and 36,331 $ 25,806 $ 23,669 Less: current portion - - Long-term portion, net of unamortized discounts of $34,194 and 36,331 $ 25,806 $ 23,669 |
NOTE 8 - COMMITMENTS AND CONT22
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Purchase Commitments for each year | 2016 $ 25,155 2017 34,379 2018 35,410 2019 15,093 2020 - $ 110,037 |
NOTE 10 - COMMON STOCK WARRAN23
NOTE 10 - COMMON STOCK WARRANTS (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
A summary of common stock warrants activity | Weighted Average Number Exercise Price Warrants outstanding December 31, 2015 1,127,000 $ 0.94 Granted 100,000 0.40 Exercised - - Forfeited - - Warrants outstanding March 31, 2016 1,227,000 $ 0.90 Warrants exercisable as of March 31, 2016 1,227,000 $ 0.90 |
NOTE 3 - INVENTORIES (Details)
NOTE 3 - INVENTORIES (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Note 3 - Inventories Details | ||
Raw materials | $ 99,105 | $ 46,928 |
Work in progress | 20,192 | 5,798 |
Finished goods | 102,754 | 143,494 |
Total | $ 222,051 | $ 196,220 |
NOTE 4 - PROPERTY AND EQUIPME25
NOTE 4 - PROPERTY AND EQUIPMENT - Property and equipment (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Abstract] | ||
Property and equipment | $ 76,551 | $ 76,551 |
Less: accumulated depreciation | (14,074) | (10,215) |
Value after accumulated depreciation | $ 62,477 | $ 66,336 |
NOTE 5 - CUSTOMER RELATIONSHI26
NOTE 5 - CUSTOMER RELATIONSHIPS - Customer relationships (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Segment Reporting [Abstract] | ||
Customer relationships | $ 250,000 | $ 250,000 |
Less: accumulated amortization | (83,333) | (62,500) |
Customer relationships, accumulated amortization | $ (166,667) | $ (187,500) |
NOTE 6 - NOTES PAYABLE (Details
NOTE 6 - NOTES PAYABLE (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Note 6 - Notes Payable Details | ||
Notes payable, net of unamortized discounts of $128,191 | $ 86,053 | $ 78,931 |
Capital lease obligations | 182,013 | |
Subtotal | $ 268,066 | $ 78,931 |
Less current portion, net of unamortized discounts of $40,690 and $0, respectively | ||
Long-term portion, net of unamortized discounts of $185,176 and $0, respectively | $ 268,066 | $ 78,931 |
NOTE 7 - RELATED PARTY DEBT - R
NOTE 7 - RELATED PARTY DEBT - Related Party debt (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Related Party Transactions [Abstract] | ||
Related party debt, net of unamortized discounts of $34,194 and 36,331 | $ 25,806 | $ 23,669 |
Less: current portion | ||
Long-term portion, net of unamortized discounts of $34,194 and 36,331 | $ 25,806 | $ 23,669 |
NOTE 2 GOING CONCERN AND MANAGE
NOTE 2 GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Accumulated deficit | $ (3,619,669) | $ (3,331,878) | |
Working Capital | 98,811 | ||
Successor [Member] | |||
Net loss | $ (287,791) | ||
Predecessor [Member] | |||
Net loss | $ (72,022) |
NOTE 4 - PROPERTY AND EQUIPME30
NOTE 4 - PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Successor [Member] | ||
Depreciation expense | $ 3,859 | |
Predecessor [Member] | ||
Depreciation expense | $ 5,100 |
NOTE 7 - RELATED PARTY DEBT (De
NOTE 7 - RELATED PARTY DEBT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2016 | |
Related Party Transactions [Abstract] | ||
Promissory Note for cash amount | $ 60,000 | |
Interest rate on promissory note | 10.00% | |
First payment due date | Mar. 31, 2015 | |
Loan maturity date | Mar. 31, 2020 | |
Amount to be raised that will make the entire balance of the note due immediately | $ 2,000,000 | |
Number of Series B preferred sshares equity payment issued with debt | 53,073 | |
The relative fair value of the Series B preferred stock recorded as debt discount | $ 42,742 | |
Remaining balance of this note | $ 60,000 | |
Net of the unamortized discount | $ 25,806 |
Disclosure - NOTE 8 - COMMITMEN
Disclosure - NOTE 8 - COMMITMENTS AND CONTINGENCIES (Details Narrative) | Dec. 31, 2015USD ($) |
Disclosure - Note 8 - Commitments And Contingencies Details Narrative | |
2,016 | $ 25,155 |
2,017 | 34,379 |
2,018 | 35,410 |
2,019 | $ 15,093 |
2,020 | |
Total | $ 110,037 |
Disclosure - NOTE 8 - COMMITM33
Disclosure - NOTE 8 - COMMITMENTS AND CONTINGENCIES (Details Narrative2) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Successor [Member] | ||
Rent Expense | $ 7,589 | |
Predecessor [Member] | ||
Rent Expense | $ 6,435 |
Disclosure - NOTE 9 - STOCKHOLD
Disclosure - NOTE 9 - STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Preferred stock terms of conversion | Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock, each having a par value of $0.001, with voting, distribution, dividend and redemption rights, and liquidation preferences and conversions as designated by the board of directors. The board of directors has designated 250,000 shares as Series A Preferred stock, par value $.001 per share (" Series A Preferred Series B Preferred | |
Preferred Shares authorized to be Issued | 250,000 | 250,000 |
Par Value | $ 0.001 | $ 0.001 |
Common stock issuance and terms of conversion | Common Stock There were no new issuances of common stock during the three months ended March 31, 2016. As of March 31, 2016, 15,435,651 shares of common stock are issued and outstanding. | |
Number of common shares authorized to issue | 50,000,000 | |
Series A Preferred Stock [Member] | ||
Preferred Shares authorized to be Issued | 250,000 | |
Par Value | $ 0.001 | |
Series B Preferred Stock [Member] | ||
Preferred Shares authorized to be Issued | 300,000 | |
Par Value | $ 0.001 |
NOTE 10 - COMMON STOCK WARRAN35
NOTE 10 - COMMON STOCK WARRANTS (Details Narrative) - $ / shares | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Shares | ||
Outstanding, Beginning Balance | 1,127,000 | 0.94 |
Granted | 100,000 | 0.40 |
Outstanding, Ending Balance | 1,127,000 | 0.90 |
Weighted Average Exercise Price | ||
Outstanding, Ending Balance | $ 1,127,000 | $ 0.90 |