Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 12, 2017 | |
Entity Registrant Name | RumbleON, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Entity Central Index Key | 1,596,961 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Class A Common Stock | ||
Entity Common Stock, Shares Outstanding | 1,000,000 | |
Class B Common Stock | ||
Entity Common Stock, Shares Outstanding | 8,981,041 |
Balance Sheets
Balance Sheets - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 4,024,315 | $ 1,350,580 |
Accounts receivable | 16,187 | 0 |
Prepaid expenses | 40,119 | 1,667 |
Total current assets | 4,080,621 | 1,352,247 |
Property and Equipment, net | 1,521,298 | 0 |
Goodwill | 3,240,000 | 0 |
Intangible assets, net | 144,265 | 45,515 |
Total assets | 8,986,184 | 1,397,762 |
Current liabilities: | ||
Accounts payable | 738,574 | 219,101 |
Other current liabilities | 12,110 | 0 |
Total current liabilities | 750,684 | 219,101 |
Long term liabilities: | ||
Note payable | 1,333,334 | 1,282 |
Accrued interest payable - related party | 0 | 5,508 |
Deferred tax liability | 260,130 | 78,430 |
Total long term liabilities | 1,593,464 | 85,220 |
Total liabilities | 2,344,148 | 304,321 |
Commitments and Contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2017 and December 31, 2016 | 0 | 0 |
Additional Paid in Capital | 8,051,924 | 1,534,015 |
Subscriptions receivable | (51,000) | (1,000) |
Accumulated deficit | (1,368,869) | (445,974) |
Total stockholders' equity | 6,642,036 | 1,093,441 |
Total liabilities and stockholders' equity | 8,986,184 | 1,397,762 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common stock | 1,000 | 0 |
Class B Common Stock | ||
Stockholders' equity: | ||
Common stock | $ 8,981 | $ 6,400 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A Common Stock | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,000,000 | 0 |
Common stock, shares issued | 1,000,000 | 0 |
Common stock, shares outstanding | 1,000,000 | 0 |
Class B Common Stock | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 99,000,000 | 100,000,000 |
Common stock, shares issued | 8,981,041 | 6,400,000 |
Common stock, shares outstanding | 8,981,041 | 6,400,000 |
Statements of Operations
Statements of Operations - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Revenue | $ 38,889 | $ 0 |
Costs and Expenses: | ||
Cost of Sales | 34,688 | 0 |
General and administrative | 230,942 | 3,831 |
Technology development | 78,009 | 0 |
Professional fees | 346,257 | 6,773 |
Depreciation and amortization | 60,085 | 475 |
Total costs and operating expenses | 749,981 | 11,079 |
Other expense: | ||
Interest expense | 211,803 | 2,209 |
Total other expense | 211,803 | 2,209 |
Net loss before provision for income taxes | (922,895) | (13,288) |
Benefit for income taxes | 0 | 0 |
Net loss | $ (922,895) | $ (13,288) |
Weighted-average common shares used in the computation of loss per share - basic and diluted | 7,263,492 | 5,500,000 |
Net loss per share - basic and diluted | $ (0.13) | $ 0 |
Statement of Stockholders_ Equi
Statement of Stockholders’ Equity - 3 months ended Mar. 31, 2017 - USD ($) | Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Subscription Receivable | Accumulated Deficit | Total |
Beginning Balance, shares at Dec. 31, 2016 | 0 | 0 | 6,400,000 | ||||
Beginning Balance, amount at Dec. 31, 2016 | $ 0 | $ 0 | $ 6,400 | $ 1,534,015 | $ (1,000) | $ (445,974) | $ 1,093,441 |
Exchange of common stock, shares | 1,000,000 | (1,000,000) | |||||
Exchange of common stock, amount | $ 1,000 | $ (1,000) | 0 | ||||
Issuance of common stock in connection with acquisition, shares | 1,523,809 | ||||||
Issuance of common stock in connection with acquisition, amount | $ 1,524 | 2,665,142 | 2,666,666 | ||||
Issuance of stock in private placements, shares | 620,000 | ||||||
Issuance of stock in private placements, amount | $ 620 | 2,479,380 | (50,000) | 2,430,000 | |||
Issuance of common stock in connection with loan agreement, shares | 1,161,920 | ||||||
Issuance of common stock in connection with loan agreement, amount | $ 1,162 | 1,088,748 | 1,089,910 | ||||
Issuance of common stock in connection with conversion of Note Payable-related party, net of debt discount and deferred taxes, shares | 275,312 | ||||||
Issuance of common stock in connection with conversion of Note Payable-related party, net of debt discount and deferred taxes, amount | $ 275 | 284,639 | 284,914 | ||||
Net loss | (922,895) | (922,895) | |||||
Ending Balance, shares at Mar. 31, 2017 | 0 | 1,000,000 | 8,981,041 | ||||
Ending Balance, amount at Mar. 31, 2017 | $ 0 | $ 1,000 | $ 8,981 | $ 8,051,924 | $ (51,000) | $ (1,368,869) | $ 6,642,036 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 3 Months Ended | 41 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net loss | $ (922,895) | $ (13,288) | $ (1,368,869) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 60,085 | 475 | |
Interest expense on conversion of debt | 196,076 | 0 | |
Changes in operating assets and liabilities: | |||
(Increase) in prepaid expenses | (38,452) | (9,167) | |
(Increase) in accounts receivable | (16,187) | 0 | |
Increase in accounts payable and accrued liabilities | 535,201 | 3,209 | |
Cash used in operating activities | (186,172) | (18,771) | |
CASH FLOWS USED IN INVESTING ACTIVITIES | |||
Acquisition of assets | (750,000) | 0 | |
Technology development | (127,358) | 0 | |
Purchase of property and equipment | (42,775) | 0 | |
Cash used in investing activities | (920,133) | 0 | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from note payable | 667,000 | 0 | |
Borrowings for note payable - related party | 0 | 15,000 | |
Proceeds from sale of common stock | 3,113,040 | 5,000 | |
Cash provided from financing activities | 3,780,040 | 20,000 | |
NET CHANGE IN CASH | 2,673,735 | 1,229 | |
CASH AT BEGINNING OF PERIOD | 1,350,580 | 3,713 | |
CASH AT END OF PERIOD | $ 4,024,315 | $ 4,942 | $ 4,024,315 |
Business Description
Business Description | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Business Description | Organization RumbleON, Inc. (along with its consolidated subsidiaries, the “Company”) was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. (“Smart Server”). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleON, Inc. Nature of Operations Smart Server was originally formed to engage in the business of designing and developing mobile application payment software for smart phones and tablet computers. After Smart Server ceased its software development activities in 2014, it had no operations and nominal assets, meeting the definition of a “shell company” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and regulations thereunder. In July 2016, Berrard Holdings Limited Partnership (“Berrard Holdings”) acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned recreation vehicles in one online location. The Company’s goal is for the platform to be widely recognized as the leading online solution for the sale, acquisition, and distribution of recreation vehicles by providing users with the most efficient, timely and transparent experience. The Company’s initial focus is the market for 650cc and larger on road motorcycles, particularly those concentrated in the “Harley-Davidson” brand. The Company will look to extend to other brands and additional vehicle types and products as the platform matures. The Company’s business plan is currently driven by a technology platform that it acquired on February 8, 2017 from NextGen Dealer Solutions, LLC (“NextGen”), which the Company owns and operates through its wholly-owned subsidiary NextGen Pro, LLC (“NextGen Pro”). The NextGen's platform provides appraisal, inventory management, customer relationship management (“CRM”), lead management, equity mining, and other key services necessary to drive the online marketplace. For additional information, see Note 4 - “Acquisitions.” With its new online platform, the Company intends to both (1) offer consumers or dealers cash for the purchase of their vehicles and (2) provide the flexibility for consumers or dealers to trade, list, consign, or auction their vehicle through the Company and its dealer partners. In addition, the Company will offer a large inventory of vehicles for sale on its website as well as financing and associated products. The Company will earn fees and transaction income, while its dealer partners earn incremental revenue and enhance profitability through increased sales leads as well as income from inspection, reconditioning and distribution programs. On March 31, 2017, the Company completed the sale of 620,000 shares of Class B Common Stock, par value $0.001, at a price of $4.00 per share for aggregate proceeds of $2,480,000 in the private placement (the “2017 Private Placement”). Officers and directors of the Company acquired 175,000 shares of Class B common stock in the 2017 Private Placement. Proceeds from the 2017 Private Placement will be used to complete the launch of the Company’s website, www.rumbleON.com |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Summary of Significant Accounting Policies | Basis of Presentation The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the SEC and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company’s Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of their financial condition, results of operations, and cash flows for the periods presented. The information at December 31, 2016 in the Company’s Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets included in the Company’s 2016 Annual Report on Form 10-K filed with the SEC on February 14, 2017. The Company’s 2016 Annual Report on Form 10-K, together with the information incorporated by reference into such report, is referred to in this quarterly report as the “2016 Annual Report.” This quarterly report should be read in conjunction with the 2016 Annual Report. Year-end In October 2016, the Company changed its fiscal year-end from November 30 to December 31. Use of Estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, depreciable lives, carrying value of intangible assets, sales returns, receivables valuation, restructuring-related liabilities, taxes, and contingencies. Actual results could differ materially from those estimates. Earnings (Loss) Per Share The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings per share Revenue Recognition The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided to the customer; (3) the amount to be paid by the customer is fixed or determinable; and (4) the collection of the Company’s payment is probable. Purchase Accounting for Business Combinations The Company accounts for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period. Goodwill Goodwill is not amortized but rather tested for impairment at least annually. The Company tests goodwill for impairment annually during the fourth quarter of each year. Goodwill will also be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Impairment testing for goodwill is done at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available, and segment management regularly reviews the operating results of that component. The Company has concluded that currently it has one reporting unit. Determining fair value includes the use of significant estimates and assumptions. Management utilizes an income approach, specifically the discounted cash flow technique as a means for estimating fair value. This discounted cash flow analysis requires various assumptions including those about future cash flows, transactional and customer growth rates and discount rates. Expected cash flows are based on historical customer growth and the growth in transactions, including attrition, future strategic initiatives and continued long-term growth of the business. The discount rates used for the analysis reflect a weighted average cost of capital based on industry and capital structure adjusted for equity risk and size risk premiums. These estimates can be affected by factors such as customer and transaction growth, pricing, and economic conditions that can be difficult to predict. Intangible Assets Included in “Intangible Assets” on the Company’s Condensed Consolidated Balance Sheet are identifiable intangible assets including customer relationships, non-compete agreements, trademarks, trade names and internet domain names. The estimated fair value of these intangible assets at the time of acquisition are based upon various valuation techniques including replacement cost and discounted future cash flow projections. Trademarks, trade names and internet domain names are not amortized. Customer relationships are amortized on a straight-line basis over the expected average life of the acquired accounts, which are based upon several factors, including historical longevity of customers and contracts acquired and historical retention rates. Non-compete agreements are amortized on a straight-line basis over the term of the agreement, which will generally not exceed three years. The Company reviews the recoverability of these assets if events or circumstances indicate that the assets may be impaired and periodically reevaluates the estimated remaining lives of these assets. Trademarks, trade names and internet domain names are considered to be indefinite lived intangible assets unless specific evidence exists that a shorter life is more appropriate. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. Long-Lived Assets Property and Equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. Technology Development Costs Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. Inventories Inventories are accounted for pursuant to ASC 330, Inventory Valuation Allowance for Accounts Receivable The Company estimates the allowance for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the outstanding balances. Ultimately, actual results could differ from these assumptions. Cash and Cash Equivalents For the statements of cash flows, all highly liquid investments with an original maturity of three-months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value. Marketing and Advertising Costs Marketing and advertising costs are expensed as incurred and are included in General and administrative expenses on the accompanying Condensed Consolidated Statements of Operations. Marketing and advertising expense was $26,130 for the three-months ended March 31, 2017. There was no marketing and advertising costs incurred for the three-month period ended March 31, 2016. Property and Equipment, Net Property and equipment is stated at cost less accumulated depreciation and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. Fair Value of Financial Instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. ASC Topic 820, Fair Value Measurement, Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs. Level 3: If inputs from Levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. Beneficial Conversion Feature From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20, Debt with Conversion and Other Options The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the conversion feature, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation. Stock-Based Compensation On January 9, 2017, the Company’s Board of Directors approved the RumbleON, Inc. 2017 Stock Incentive Plan (the “Plan”) under which restricted stock units (“RSUs”) and other equity awards may be granted to employees and non-employee members of the Board of Directors. The Company estimates the fair value of such awards on the date of grant. The fair value of an RSU is based on the average of the high and low market prices of the Company’s common stock on the date of grant and is recognized as an expense over its vesting period; to date, the Company has only issued RSUs that vest over a three-year period utilizing the following vesting schedule: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. There was no compensation expense associated with RSU grants for the three-month periods ended March 31, 2017 or 2016. The Plan is subject to stockholder approval at the next annual meeting of stockholders. The Company records share-based compensation expense in general and administrative expenses in the Condensed Consolidated Statements of Operations. Income Taxes The Company follows ASC Topic 740, Income Taxes, The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of March 31, 2017, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. The Company classifies tax-related penalties and net interest as income tax expense. As of March 31, 2017, no income tax expense has been incurred. Recent Pronouncements The Company will adopt Accounting Standards Update 2015-11 Inventory (Topic 330), Simplifying the Measurement of Inventory, |
Going Concern
Going Concern | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Going Concern | The accompanying Condensed Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet generated significant revenue from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its business plans and incurring start-up costs and expenses, resulting in accumulated net losses from October 24, 2013 (inception) through the period ended March 31, 2017 of $1,368,869. As of March 31, 2017, the Company had a total of $4,024,315 The ability of the Company to continue as a going concern is dependent upon its continued ability to raise additional capital from the sale of common stock and debt financing, and ultimately, the achievement of significant operating revenue and positive cash flow. If the Company were to not raise additional funds, it may be unable to continue in business for the next 12 months with its currently available capital. These Condensed Consolidated Financial Statements do not include any material adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Acquisitions | On February 8, 2017, the Company acquired substantially all of the assets of NextGen in exchange for $750,000 in cash, plus 1,523,809 unregistered shares of Class B common stock of the Company, which were issued at a negotiated fair value of $1.75 per share and a subordinated secured promissory note issued by the Company in favor of NextGen in the amount of $1,333,334 (the “NextGen Note”). The NextGen Note matures on the third anniversary of the closing date (the “Maturity Date”). Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date. For additional information, see Note 7 - “Notes Payable.” In connection with the closing of the acquisition, certain investors of the Company accelerated their commitment to fund the second tranche of their investment totaling $1,350,000 (the “2016 Private Placement”). The investors in the 2016 Private Placement were issued 1,161,920 shares of Class B common stock and promissory notes in the amount of $667,000. The second tranche financing was completed on March 31, 2017. For additional information, see Note 7 - “Notes Payable” and Note 8 - “Stockholders’ Equity.” The following table presents the purchase price consideration as of March 31, 2017: Issuance of shares $ 2,666,666 Debt 1,333,334 Cash paid 750,000 $ 4,750,000 The preliminary allocation of the purchase price is based on the best information available to management. This allocation is provisional, as the Company is required to recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of March 31, 2017 that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The Company may adjust the preliminary purchase price allocation after obtaining additional information regarding asset valuation, liabilities assumed and revisions of previous estimates. The following table summarizes the preliminary allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities of NextGen as of March 31, 2017 as follows: Net tangible assets acquired: Technology development $ 1,400,000 Customer contracts 10,000 Non-compete agreements 100,000 Tangible assets acquired 1,510,000 Goodwill 3,240,000 Total purchase price 4,750,000 Less: Issuance of shares 2,666,666 Less: Debt issued 1,333,334 Cash paid $ 750,000 Supplemental pro forma information The results of operations of NextGen since the acquisition date are included in the accompanying Condensed Consolidated Financial Statements. The following supplemental pro forma information presents the financial results as if the acquisition of NextGen was made as of January 1, 2017 for the three-months ended March 31, 2017 and on January 1, 2016 for the three-months ended March 31, 2016. Pro forma adjustments for the three-months ended March 31, 2017 and 2016 primarily include adjustments to reflect additional depreciation and amortization of $29,866 and $24,394, respectively, related to technology development and identifiable intangible assets recorded as part of the acquisition, and interest expense related to the NextGen Note of $27,353 and $21,443, respectively. Three-Months Ended March 31, 2017 2016 Pro forma revenue $ 45,415 $ 30,951 Pro forma net loss $ (1,028,084 ) $ (459,834 ) |
Property and Equipment, Net
Property and Equipment, Net | 3 Months Ended |
Mar. 31, 2017 | |
Property And Equipment Net | |
Property and Equipment, Net | The following table summarizes property and equipment, net as of March 31, 2017 and December 31, 2016: March 31, 2017 December 31, 2016 Furniture and equipment $ 42,775 $ — Technology development 1,527,358 Total property and equipment 1,570,133 — Less: accumulated depreciation and amortization 48,835 — Property and equipment, net $ 1,521,298 $ — At March 31, 2017, capitalized technology development costs were $1,527,358, which includes $1,400,000 of software acquired in the NextGen transaction. For additional information, see Note 4 - “Acquisitions”. Total technology development costs incurred for the three-months ended March 31, 2017 were $205,367, of which $127,358 was capitalized and $78,009 was charged to expense in the accompanying Condensed Consolidated Statements of Operations. The amortization of capitalized technology development costs for the three-months ended March 31, 2017 was $48,248. There were no technology development costs incurred and no amortization of capitalized development costs for the three-months ended March 31, 2016. Depreciation on furniture and equipment was $587 for the three-months ended March 31, 2017. There was no depreciation expense on furniture and fixtures for the three-months ended March 31, 2016. |
Intangible Assets, Net
Intangible Assets, Net | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets Net | |
Intangible Assets, net | Intangible assets, net consist of the following at March 31, 2017 and December 31, 2016: March 31, 2017 Amortized Identifiable Intangible Assets: Customer agreements Balance at December 31, 2016 $ — Customers acquired 10,000 Amortization (1,250 ) Balance at March 31, 2017 $ 8,750 Non-compete agreements Balance at December 31, 2016 — Agreements 100,000 Amortization (10,000 ) Balance at March 31, 2017 $ 90,000 Unamortized Identifiable Intangible Assets: Domain names Balance at December 31, 2016 45,515 Domain names acquired — Impairment or write down — Balance at March 31, 2017 $ 45,515 Intangible assets, net at March 31, 2017 $ 144,265 Total amortization expense related to intangible assets was $11,250 for the three-months ended March 31, 2017. As of March 31, 2017, estimated future amortization expenses related to identifiable intangible assets were as follows: Remainder through December 31, 2017 $ 33,750 2018 45,000 2019 20,000 $ 98,750 |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Notes Payable | Notes payable consisted of the following as of March 31, 2017 and December 31, 2016: March 31, 2017 December 31, 2016 Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is February 8, 2020. $ 1,333,334 $ — Notes payable-private placement dated March 31, 2017. Interest is payable at maturity and accrues at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020. 667,000 — Convertible note payable-related party, dated July 13, 2016 Interest rate of 6.0% which is accrued and paid at maturity. Note matures on July 26, 2026. Note is convertible into common stock, in whole at any time before maturity at the option of the holder at $.75 per share. — 197,358 Less: Debt discount (667,000 ) (196,076 ) Current portion — — Long-term portion $ 1,333,334 $ 1,282 Convertible Note Payable-Related Party On July 13, 2016, the Company entered into an unsecured convertible note (the “BHLP Note”) with Berrard Holdings, an entity owned and controlled by a current officer and director, Mr. Berrard, pursuant to which the Company was required to repay $191,858 on or before July 13, 2026 plus interest at 6% per annum. The BHLP Note was also convertible into common stock, in whole, at any time before maturity at the option of the holder at the greater of $0.06 per share or 50% of the price per share of the next qualified financing which is defined as $500,000 or greater. Effective August 31, 2016, the principal amount of the BHLP Note was amended to include an additional $5,000 loaned to the Company, on the same terms. On November 28, 2016, the Company completed its qualified financing at $1.50 per share which established the conversion price per share for the BHLP Note of $0.75 per share, resulting in the principal amount of the BHLP Note being convertible into 263,144 shares of common stock. As such, November 28, 2016 became the “commitment date” for determining the value of the BHLP Note conversion feature. Because there had been no trading in the Company’s common stock since July 2014, other than the purchase by Berrard Holdings of 99.5% of the outstanding shares in a single transaction, the Company used the Monte Carlo simulation to determine the intrinsic value of the conversion feature of the BHLP Note, which resulted in a value in excess of the principal amount of the BHLP Note. Thus, the Company recorded a note discount of $197,358 with the corresponding amount as an addition to paid in capital. This note discount will be amortized to interest expense until the scheduled maturity of the BHLP Note in July 2026 or is converted using the effective interest method. The effective interest rate at March 31, 2017 was 7.4%. Interest expense on the BHLP Note for the three-months ended March 31, 2017 was $2,920 and the amortization of the beneficial conversion feature was $3,558. On March 31, 2017, the Company issued 275,312 shares of Class B common stock upon full conversion of the BHLP Note, having an aggregate principal amount, including accrued interest, of $206,484 and a conversion price of $0.75 per share. In connection with the conversion of the BHLP Note, the remaining debt discount of $196,076 was charged to interest expense in the Condensed Consolidated Statements of Operations and the related deferred tax liability was credited to additional paid in capital in the Condensed Consolidated Balance Sheets. Notes Payable-NextGen On February 8, 2017, in connection with the acquisition of NextGen, the Company issued a subordinated secured promissory note in favor of NextGen in the amount of $1,333,334. The NextGen Note matures on the third anniversary of the Maturity Date. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date. Upon the occurrence of any event of default, the outstanding balance under the NextGen Note shall become immediately due and payable upon election of the holder. The Company’s obligations under the NextGen Note are secured by substantially all the assets of NextGen Pro, pursuant to an Unconditional Guaranty Agreement (the “Guaranty Agreement”), by and among NextGen and NextGen Pro, and a related Security Agreement between the parties, each dated as of February 8, 2017. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guarantee the performance of all of the Company’s obligations under the NextGen Note. Notes Payable-Private Placement On March 31, 2017, the Company completed funding of the second tranche of the 2016 Private Placement. The investors were issued 1,161,920 shares of Class B common stock of the Company’s and promissory notes (the “Private Placement Notes”) in the amount of $667,000, in consideration of cancellation of loan agreements having an aggregate principal amounts committed by the purchasers of $1,350,000. Under the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amount until paid in full. The Private Placement Notes mature on March 31, 2020. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date and at a rate of 8.5% annually from the second anniversary of the closing date through the maturity date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holders. Based on the relative fair values attributed to the Class B common stock and promissory notes issued in the 2016 Private Placement the Company recorded a debt discount on the promissory notes of $667,000 with the corresponding amounts as addition to paid in capital, net of deferred taxes. The debt discount will be amortized to interest expense over the life of the notes using the effective interest method. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Stockholders' Equity | On January 9, 2017, the Company’s board of directors approved the adoption of the Plan. The purposes of the Plan are to attract, retain, reward and motivate talented, motivated and loyal employees and other service providers (“Eligible Individuals”) by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such persons and the stockholders of the Company. The Plan will allow the Company to grant a variety of stock-based and cash-based awards to Eligible Individuals. Twelve percent (12%) of the Company’s issued and outstanding shares of common stock from time to time are reserved for issuance under the Plan. As of the date of this report, 9,981,041 shares are issued and outstanding, resulting in up to 1,197,725 shares available for issuance under the Plan. On March 31, 2017, the Company granted 475,000 RSUs under the Plan to certain officers and employees of the Company. The aggregate fair value of the RSUs was $1,662,500. The RSUs vest over a three-year period as follows: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. The fair value of the grant is amortized over the period from the grant date through the vesting dates. There was no compensation expense recognized for these grants as of March 31, 2017. The Company has approximately $1,662,500 in unrecognized stock based compensation, with an average remaining vesting period of three years. On January 9, 2017, the Company’s board of directors and stockholders holding 6,375,000 of the Company’s issued and outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation (the “Certificate of Amendment”), to change the name of the Company to RumbleON, Inc. and to create an additional class of common stock of the Company, which was effective on February 13, 2017 (the “Effective Date”). Immediately before approving the Certificate of Amendment, the Company had authorized 100,000,000 shares of common stock, $0.001 par value (the “Authorized Common Stock”), including 6,400,000 issued and outstanding shares of common stock (the “Outstanding Common Stock, and together with the Authorized Common Stock, the “Common Stock”). Pursuant to the Certificate of Amendment, the Company designated 1,000,000 shares of Authorized Common Stock as Class A Common Stock (the “Class A Common Stock”), which Class A Common Stock ranks pari passu with all of the rights and privileges of the Common Stock, except that holders of the Class A Common Stock are entitled to ten votes per share of Class A Common Stock issued and outstanding, and (ii) all other shares of Common Stock, including all shares of Outstanding Common Stock shall be deemed Class B Common Stock (the “Class B Common Stock”), which Class B Common Stock is identical to the Class A Common Stock in all respects, except that holders of the Class B Common Stock are entitled to one vote per share of Class B Common Stock issued and outstanding. Also on January 9, 2017, the Company’s board of directors and stockholders holding 6,375,000 of the Company’s issued and outstanding shares of common stock approved the issuance to (i) Marshall Chesrown of 875,000 shares of Class A Common Stock in exchange for an equal number of shares of Class B Common Stock held by Mr. Chesrown, and (ii) Steven R. Berrard of 125,000 shares of Class A Common Stock in exchange for an equal number of shares of Class B Common Stock held by Mr. Berrard, effective at the time the Certificate of Amendment was filed with the Secretary of State of Nevada. On the Effective Date, the Company filed the Certificate of Amendment with the Secretary of State of the State of Nevada changing the Company’s name to RumbleON, Inc. and creating the Class A and Class B Common Stock. Also on the Effective Date, the Company issued an aggregate of 1,000,000 shares of Class A Common Stock to Messrs. Chesrown and Berrard in exchange for an aggregate of 1,000,000 shares of Class B Common Stock held by them. Also on the Effective Date, the Company amended its bylaws to reflect the name change to RumbleON, Inc. and to reflect the Company’s primary place of business as Charlotte, North Carolina. On March 31, 2017, the Company completed the 2017 Private Placement and the second tranche of the 2016 Private Placement. For additional information, see Note 1 - “Business Description,” Note 4 - “Acquisitions,” and Note 7 - “Notes Payable.” |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 3 Months Ended |
Mar. 31, 2017 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | The following table includes supplemental cash flow information, including noncash investing and financing activity for the three-months ended March 31, 2017 and 2016. March 31, 2017 March 31, 2016 Cash paid for interest $ - $ - Note payable issued on acquisition $ 1,333,334 $ - Conversion of notes payable-related party $ 206,209 $ - Issuance of shares for acquisition $ 2,666,666 $ - |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes | |
Income Taxes | In projecting the Company’s income tax expense for the year ended December 31, 2107 management has concluded it is not likely to recognize the benefit of its deferred tax asset and as a result a full valuation allowance will be required. As such, no income tax benefit has been recorded for the three-months ended March 31, 2017 or 2016. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Related Party Transactions | As of December 31, 2016, the Company had the BHLP Note payable of $197,358 and accrued interest totaling $5,508 due to an entity that is owned and controlled by a current officer and director of the Company. On March 31, 2017, the Company issued 275,312 shares of Class B Common Stock upon full conversion of the BHLP Note. For additional information, see Note 7 - “Notes Payable.” As of December 31, 2015, the Company had loans of $141,000 and accrued interest of $13,002 due to an entity that is owned and controlled by a family member of an officer and director of the Company. For the three-months ended March 31, 2016, the interest expense was $2,209. In March 2015, there was a new officer and director appointed and the lender was then considered a related party. All convertible notes and related party notes outstanding as of July 13, 2016 were paid in full in July 2016. On March 31, 2017, the Company completed the sale of 620,000 shares of Class B Common Stock in the 2017 Private Placement. Officers and directors of the Company acquired 175,000 shares of Class B Common Stock in the 2017 Private Placement. Since March 31, 2017 the Company has completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. For additional information, see Note 1 - “Business Description.” A key component of the Company’s business model is to use dealer partners in the acquisition of motorcycles as well as utilize these dealer partners to provide inspection, reconditioning and distribution services. Correspondingly, the Company will earn fees and transaction income, and the dealer partner will earn incremental revenue and enhance profitability through increased sales, leads, and fees from inspection, reconditioning and distribution programs. These dealer partners will be designated by the Company as Select Dealers. In connection with the development of the Select Dealer program the Company has already been testing various aspects of the program by utilizing a dealership (the “Test Dealer”) to which a current officer and director of the Company has provided financing in the form of a $400,000 convertible promissory note. The note matures on May 1, 2019, interest is payable monthly at 5% per annum and can be converted into a 25% ownership interest in the Test Dealer at any time. The Test Dealer is expected to be named a Select Dealer by an agreement with the same material terms as the Company’s other Select Dealer agreements. In addition, the Company presently intends to sublease warehouse space from the Test Dealer that is separate and distinct from the location of the Test Dealer, on the same terms as paid by the Test Dealer. This subleased facility would then serve as the northwestern regional distribution center for the Company. In connection with the NextGen acquisition the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Kartik Kakarala, who formerly served as the Chief Executive Officer of NextGen and now serves as a director of the Company. Pursuant to the Consulting Agreement, Mr. Kakarala will serve as a consultant to the Company. The Consulting Agreement may be cancelled by either party, effective upon delivery of a written notice to the other party. Mr. Kakarala’s compensation pursuant to the Consulting Agreement will be $5,000 per month. For additional information, see Note 4 -“Acquisitions.” In connection with the NextGen acquisition, the Company entered into a Services Agreement (the “Services Agreement”) with Halcyon Consulting, LLC (“Halcyon”), to provide development and support services to the Company. Mr. Kakarala currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company will pay Halcyon hourly fees for specific services, set forth in the Services Agreement, and such fees may increase on an annual basis, provided that the rates may not be higher than 110% of the immediately preceding year’s rates. The Company will reimburse Halcyon for any reasonable travel and pre-approved out-of-pocket expenses in connection with its services to the Company. During the first quarter of 2017, the Company paid a total of $184,470 under the Services Agreement. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments And Contingencies | |
Commitments and Contingencies | The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions (or settlements) may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Subsequent Events | In April and May 2017 the Company granted 40,000 RSUs under the Plan to certain officers and employees of the Company. The aggregate fair value of the RSUs was $136,000. The RSUs vest over a three-year period as follows: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. The fair value of the grant is amortized over the period from the grant date through the vesting dates. In May 2017, the Company completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation | The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the SEC and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company’s Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of their financial condition, results of operations, and cash flows for the periods presented. The information at December 31, 2016 in the Company’s Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets included in the Company’s 2016 Annual Report on Form 10-K filed with the SEC on February 14, 2017. The Company’s 2016 Annual Report on Form 10-K, together with the information incorporated by reference into such report, is referred to in this quarterly report as the “2016 Annual Report.” This quarterly report should be read in conjunction with the 2016 Annual Report. |
Year End | In October 2016, the Company changed its fiscal year-end from November 30 to December 31. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, depreciable lives, carrying value of intangible assets, sales returns, receivables valuation, restructuring-related liabilities, taxes, and contingencies. Actual results could differ materially from those estimates. |
Earnings (Loss) Per Share | The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings per share |
Revenue Recognition | The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided to the customer; (3) the amount to be paid by the customer is fixed or determinable; and (4) the collection of the Company’s payment is probable. |
Purchase Accounting for Business Combinations | The Company accounts for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period. |
Goodwill | Goodwill is not amortized but rather tested for impairment at least annually. The Company tests goodwill for impairment annually during the fourth quarter of each year. Goodwill will also be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Impairment testing for goodwill is done at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available, and segment management regularly reviews the operating results of that component. The Company has concluded that currently it has one reporting unit. Determining fair value includes the use of significant estimates and assumptions. Management utilizes an income approach, specifically the discounted cash flow technique as a means for estimating fair value. This discounted cash flow analysis requires various assumptions including those about future cash flows, transactional and customer growth rates and discount rates. Expected cash flows are based on historical customer growth and the growth in transactions, including attrition, future strategic initiatives and continued long-term growth of the business. The discount rates used for the analysis reflect a weighted average cost of capital based on industry and capital structure adjusted for equity risk and size risk premiums. These estimates can be affected by factors such as customer and transaction growth, pricing, and economic conditions that can be difficult to predict. |
Intangible Assets | Included in “Intangible Assets” on the Company’s Condensed Consolidated Balance Sheet are identifiable intangible assets including customer relationships, non-compete agreements, trademarks, trade names and internet domain names. The estimated fair value of these intangible assets at the time of acquisition are based upon various valuation techniques including replacement cost and discounted future cash flow projections. Trademarks, trade names and internet domain names are not amortized. Customer relationships are amortized on a straight-line basis over the expected average life of the acquired accounts, which are based upon several factors, including historical longevity of customers and contracts acquired and historical retention rates. Non-compete agreements are amortized on a straight-line basis over the term of the agreement, which will generally not exceed three years. The Company reviews the recoverability of these assets if events or circumstances indicate that the assets may be impaired and periodically reevaluates the estimated remaining lives of these assets. Trademarks, trade names and internet domain names are considered to be indefinite lived intangible assets unless specific evidence exists that a shorter life is more appropriate. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. |
Long-Lived Assets | Property and Equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. |
Technology Development Costs | Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. |
Inventories | Inventories are accounted for pursuant to ASC 330, Inventory |
Valuation Allowance for Accounts Receivable | The Company estimates the allowance for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the outstanding balances. Ultimately, actual results could differ from these assumptions. |
Cash and Cash Equivalents | For the statements of cash flows, all highly liquid investments with an original maturity of three-months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value. |
Marketing and Advertising Costs | Marketing and advertising costs are expensed as incurred and are included in General and administrative expenses on the accompanying Condensed Consolidated Statements of Operations. Marketing and advertising expense was $26,130 for the three-months ended March 31, 2017. There was no marketing and advertising costs incurred for the three-month period ended March 31, 2016. |
Property and Equipment, Net | Property and equipment is stated at cost less accumulated depreciation and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. |
Fair Value of Financial Instruments | Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. ASC Topic 820, Fair Value Measurement, Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs. Level 3: If inputs from Levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. |
Beneficial Conversion Feature | From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20, Debt with Conversion and Other Options The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the conversion feature, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation. |
Stock-based Compensation | On January 30, 2012, the Company’s Board of Directors approved the RumbleON, Inc. 2017 Stock Incentive Plan (” Plan”) under which restricted stock units (“RSUs”) and other equity awards may be granted to employees and non-employee members of the Board of Directors. The Company estimates the fair value of such awards on the date of grant. The fair value of an RSU is based on the average of the high and low market prices of the Company’s common stock on the date of grant and is recognized as an expense over a three-year period utilizing the following vesting schedule: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. There was no compensation expense associated with RSU grants for the three-month periods ended March 31, 2017 or 2016. The Plan is subject to stockholder approval at the next annual meeting of stockholders. The Company records share-based compensation expense in general and administrative expenses in the Condensed Consolidated Statements of Operations. |
Income Taxes | The Company follows ASC Topic 740, Income Taxes, The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of March 31, 2017, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. The Company classifies tax-related penalties and net interest as income tax expense. As of March 31, 2017, no income tax expense has been incurred. |
Recent Pronouncements | The Company will adopt Accounting Standards Update 2015-11 Inventory (Topic 330), Simplifying the Measurement of Inventory, |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions Tables | |
Purchase price consideration | Issuance of shares $ 2,666,666 Debt 1,333,334 Cash paid 750,000 $ 4,750,000 |
Acquired assets and assumed liabilities | Net tangible assets acquired: Technology development $ 1,400,000 Customer contracts 10,000 Non-compete agreements 100,000 Tangible assets acquired 1,510,000 Goodwill 3,240,000 Total purchase price 4,750,000 Less: Issuance of shares 2,666,666 Less: Debt issued 1,333,334 Cash paid $ 750,000 |
Supplemental pro forma information | Three-Months Ended March 31, 2017 2016 Pro forma revenue $ 45,415 $ 30,951 Pro forma net loss $ (1,028,084 ) $ (459,834 ) |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Property And Equipment Net Tables | |
Property and equipment | March 31, 2017 December 31, 2016 Furniture and equipment $ 42,775 $ — Technology development 1,527,358 Total property and equipment 1,570,133 — Less: accumulated depreciation and amortization 48,835 — Property and equipment, net $ 1,521,298 $ — |
Intangible Assets, net (Tables)
Intangible Assets, net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets Net Tables | |
Intangible assets | March 31, 2017 Amortized Identifiable Intangible Assets: Customer agreements Balance at December 31, 2016 $ — Customers acquired 10,000 Amortization (1,250 ) Balance at March 31, 2017 $ 8,750 Non-compete agreements Balance at December 31, 2016 — Agreements 100,000 Amortization (10,000 ) Balance at March 31, 2017 $ 90,000 Unamortized Identifiable Intangible Assets: Domain names Balance at December 31, 2016 45,515 Domain names acquired — Impairment or write down — Balance at March 31, 2017 $ 45,515 Intangible assets, net at March 31, 2017 $ 144,265 |
Estimated future amortization | Remainder through December 31, 2017 $ 33,750 2018 45,000 2019 20,000 $ 98,750 |
Notes Payable (Tables)
Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Notes Payable Tables | |
Notes payable | March 31, 2017 December 31, 2016 Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is February 8, 2020. $ 1,333,334 $ — Notes payable-private placement dated March 31, 2017. Interest is payable at maturity and accrues at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020. 667,000 — Convertible note payable-related party. dated July 13, 2016. Interest rate of 6.0% which is accrued and paid at maturity. Note matures on July 26, 2026. Note is convertible into common stock, in whole at any time before maturity at the option of the holder at $.75 per share. — 197,358 Less: Debt discount (667,000 ) (196,076 ) Current portion — — Long-term portion $ 1,333,334 $ 1,282 |
Supplemental Cash Flow Inform25
Supplemental Cash Flow Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Supplemental Cash Flow Information Tables | |
Supplemental cash flow information | March 31, 2017 March 31, 2016 Cash paid for interest $ - $ - Note payable issued on acquisition $ 1,333,334 $ - Conversion of notes payable-related party $ 206,209 $ - Issuance of shares for acquisition $ 2,666,666 $ - |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Summary Of Significant Accounting Policies Details Narrative | ||
Advertising expense | $ 26,130 | $ 26,130 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | 3 Months Ended | 41 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Dec. 31, 2016 | |
Text Block [Abstract] | ||||
Net loss | $ (922,895) | $ (13,288) | $ (1,368,869) | |
Cash | $ 4,024,315 | $ 4,024,315 | $ 1,350,580 |
Acquisitions (Details)
Acquisitions (Details) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Acquisitions Details | |
Issuance of shares | $ 2,666,666 |
Debt | 1,333,334 |
Cash paid | 750,000 |
Total | $ 4,750,000 |
Acquisitions (Details 1)
Acquisitions (Details 1) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Net tangible assets acquired: | |
Tangible assets acquired | $ 1,510,000 |
Goodwill | 3,240,000 |
Total purchase price | 4,750,000 |
Less: Issuance of shares | 2,666,666 |
Less: Debt issued | 1,333,334 |
Cash paid | 750,000 |
Technology development | |
Net tangible assets acquired: | |
Tangible assets acquired | 1,400,000 |
Customer Contracts | |
Net tangible assets acquired: | |
Tangible assets acquired | 10,000 |
Non-Compete Agreements | |
Net tangible assets acquired: | |
Tangible assets acquired | $ 100,000 |
Acquisitions (Details 2)
Acquisitions (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Acquisitions Details 2 | ||
Pro forma revenue | $ 45,415 | $ 30,951 |
Pro forma net loss | $ (1,028,084) | $ (459,834) |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Property And Equipment Net Details | ||
Furniture and equipment | $ 42,775 | $ 0 |
Technology development | 1,527,358 | 0 |
Total property and equipment | 1,570,133 | 0 |
Less: accumulated depreciation and amortization | 48,835 | 0 |
Property and equipment, net | $ 1,521,298 | $ 0 |
Intangible Assets, net (Details
Intangible Assets, net (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Intangible assets, net | $ 144,265 | $ 45,515 |
Customer Agreements | ||
Balance at December 31, 2016 | 0 | |
Additions | 10,000 | |
Amortization | (1,250) | |
Balance at March 31, 2017 | 8,750 | |
Non-Compete Agreements | ||
Balance at December 31, 2016 | 0 | |
Additions | 100,000 | |
Amortization | (10,000) | |
Balance at March 31, 2017 | 90,000 | |
Domain names | ||
Balance at December 31, 2016 | 45,515 | |
Additions | 0 | |
Impairment or write down | 0 | |
Balance at March 31, 2017 | $ 45,515 |
Intangible Assets, net (Detai33
Intangible Assets, net (Details 1) | Mar. 31, 2017USD ($) |
Intangible Assets Net Details 1 | |
Remainder through December 31, 2017 | $ 33,750 |
2,018 | 45,000 |
2,019 | 20,000 |
Total | $ 98,750 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Less: Debt discount | $ (667,000) | $ (196,076) |
Current portion | 0 | 0 |
Long-term portion | 1,333,334 | 1,282 |
Notes Payable 1 | ||
Notes payable | 1,333,334 | 0 |
Notes Payable 2 | ||
Notes payable | 667,000 | 0 |
Notes Payable 3 | ||
Notes payable | $ 0 | $ 197,358 |
Supplemental Cash Flow Inform35
Supplemental Cash Flow Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Supplemental Cash Flow Information Details | ||
Cash paid for interest | $ 0 | $ 0 |
Note payable issued on acquisition | 1,333,334 | 0 |
Conversion of notes payable-related party | 206,209 | 0 |
Issuance of shares for acquisition | $ 2,666,666 | $ 0 |