0001213900-17-005707.txt : 20170522 0001213900-17-005707.hdr.sgml : 20170522 20170522165944 ACCESSION NUMBER: 0001213900-17-005707 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 42 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170522 DATE AS OF CHANGE: 20170522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: InCapta, Inc. CENTRAL INDEX KEY: 0001099234 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-VIDEO TAPE RENTAL [7841] IRS NUMBER: 541838089 STATE OF INCORPORATION: NV FISCAL YEAR END: 1209 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29113 FILM NUMBER: 17861640 BUSINESS ADDRESS: STREET 1: 819 D AVENUE CITY: NATIONAL CITY STATE: CA ZIP: 91950 BUSINESS PHONE: 6193869185 MAIL ADDRESS: STREET 1: 819 D AVENUE CITY: NATIONAL CITY STATE: CA ZIP: 91950 FORMER COMPANY: FORMER CONFORMED NAME: TBC GLOBAL NEWS NETWORK, INC. DATE OF NAME CHANGE: 20090702 FORMER COMPANY: FORMER CONFORMED NAME: GAMEZNFLIX INC DATE OF NAME CHANGE: 20040409 FORMER COMPANY: FORMER CONFORMED NAME: POINT GROUP HOLDINGS INCORP DATE OF NAME CHANGE: 20030224 10-Q 1 f10q0317_incaptainc.htm QUARTERLY REPORT

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

 

OR

 

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

 

COMMISSION FILE NUMBER: 000-29113

 

INCAPTA INC.

(Exact Name of Company as Specified in its Charter)

 

Nevada   47-3903460
 (State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)

 

1950 Fifth Avenue, Suite 100, San Diego, California   92101
 (Address of Principal Executive Offices)   (Zip Code)

 

(619) 798-9284

(Company’s Telephone Number)

 

 

 

(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) been subject to such filing requirements for the past 90 days: Yes ☒   No ☐.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐  No ☒.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer     Accelerated filer  
Non-accelerated filer (Do no check if a smaller reporting company) Smaller reporting company
      Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial reporting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act: Yes ☐  No ☒.

 

As of March 31, 2017, the Company had 127,500,445 shares of common stock issued and outstanding.

 

 

 

 

 

  

TABLE OF CONTENTS

 

PAGE
PART I – FINANCIAL INFORMATION  
       
  ITEM 1. FINANCIAL STATEMENTS 1
       
    CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2017 (UNAUDITED) AND DECEMBER 31, 2016 1
       
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND MARCH 31, 2016 3
       
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND MARCH 31, 2016 4
       
    NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6
       
  ITEM 2. MANAGEMIENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17
       
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 21
       
  ITEM 4. CONTROLS AND PROCEDURES 21
       
PART II – OTHER INFORMATION  
       
  ITEM 1. LEGAL PROCEEDINGS 22
       
  ITEM 1A. RISK FACTORS 22
       
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 22
       
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES 22
       
  ITEM 4. MINE SAFETY DISCLOSURES 22
       
  ITEM 5. OTHER INFORMATION 22
       
  ITEM 6. EXHIBITS 22
       
SIGNATURE 23

  

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

INCAPTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2017   2016 
   (unaudited)     
ASSETS   
Current Assets:    
Cash  $29,690   $1,587 
Accounts receivable   --    7,590 
Prepaid expenses   36,000    -- 
Total current assets   65,690    9,087 
           
Other assets:          
Furniture and equipment   2,080    2,538 
Total assets  $67,770   $11,715 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT   
           
 Current Liabilities:          
Accounts payable  $226,062   $209,650 
Accrued interest   54,511    41,683 
Due to officer   19,624    40,320 
Convertible notes payable - related party   59,599    59,599 
Convertible notes payable, net of discount of $249,437 and $80,796   112,558    34,699 

 

 1 
 

 

INCAPTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(continued)

 

   March 31,   December 31, 
   2017   2016 
   (unaudited)     
Loan payable   25,000    25,000 
Derivative liability   768,987    1,559,428 
Total current liabilities   1,266,341    1,970,379 
           
Stockholders’ deficit          
Common stock, $0.001 par value; 890,000,000 shares authorized, 127,500,445 and 111,916,194 shares issued and outstanding (1)   127,500    111,916 
Series B common stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding   --    -- 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 1 and 1 shares issued and outstanding (2)   --    -- 
Additional paid-in capital   135,474,229    134,459,981 
Stock subscription receivable   --    (848,760)
Accumulated deficit   (136,800,300)   (135,681,801)
Total stockholders’ deficit   (1,198,571)   (1,958,664)
Total liabilities and stockholders’ deficit  $67,770   $11,715 

 

(1) Reflects the amounts after a 3,000 to 1 reverse split of the Company’s common stock that was effective on April 27, 2015 and a 19,000 to 1 reverse split of the Company’s common stock effective on August 8, 2016.

 

(2) Reflects the amounts after a 4,700 to 1 reverse split of the Company’s preferred stock that was effective on August 8, 2016.

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

 

 2 
 

 

INCAPTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended
March 31,
 
   2017   2016 
         
Net sales   $17   $20,206 
           
Costs and expenses:          
General and administrative   1,993,177    5,533,275 
Acquisition contingency   --    2,280,331 
Total costs and expenses   1,993,177    7,813,606 
           
Loss from operations   (1,993,160)   (7,793,400)
           
Other income (expense)          
Interest and financing costs   (567,286)   (141,296)
Change in value of derivative liability   1,441,947    57,722 
Total other income (expense)   874,661    (83,574)
           
Loss before provision for income taxes   (1,118,499)   (7,876,974)
           
Provision for income taxes   --    -- 
           
Net loss    (1,118,499)   (7,876,974)
           
Preferred stock dividend   --    (47,700)
           
Net loss attributed to common stockholders  $(1,118,499)  $(7,924,674)
           
Basic and diluted loss per share  $(0.01)  $(1,592.89)
           
Weighted average number of shares outstanding (1)   124,956,753    4,975 

 

(1) Reflects the amounts after a 3,000 to 1 reverse split of the Company’s common stock that was effective on April 27, 2015 and a 19,000 to 1 reverse split of the Company’s common stock effective on August 8, 2016.

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

 

 3 
 

 

INCAPTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Three Months Ended
March 31,
 
   2017   2016 
Cash flows from operating activities:        
Net loss  $(1,118,499)  $(7,876,974)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   458    458 
Common stock issued for services   1,800,000    3,975,653 
Common stock issued for acquisition contingency   --    2,280,331 
Financing costs   450,348    104,593 
Amortization of debt discounts   104,109    30,390 
Change in value of derivative liability   (1,441,947)   (57,722)
Change in current assets and liabilities:          
Accounts receivable   7,590    (16,500)
Prepaid consulting fees   (36,000)   1,384,137 
Accounts payable   16,502    78,255 
Accrued interest   12,828    6,249 
Due to officer   (20,696)   -- 
Net cash used in operating activities   (225,307)   (91,130)
           
Cash flows from financing activities:          
Proceeds from convertible notes payable   253,500    91,377 
Net cash provided by financing activities   253,500    91,377 
           
Net increase in cash   28,193    247 
           
Cash at beginning of period   1,497    1,790 
           
Cash at end of period  $29,690   $2,037 
           
Supplemental disclosure of non-cash financing activities:          
Beneficial conversion feature  $703,848   $100,155 
Common stock issued for debt  $26,250   $-- 

 

 4 
 

 

INCAPTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued)

(Unaudited)

 

   Three Months Ended
March 31,
 
 
   2017   2016 
Cash paid for:          
Interest paid  $--   $-- 
Taxes paid  $--   $-- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements


 5 
 

 

INCAPTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – NATURE OF BUSINESS

 

The accompanying unaudited condensed consolidated interim financial statements of InCapta, Inc. a Nevada corporation (“Company”), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) that are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC. The results for the three months ended March 31, 2017, are not necessarily indicative of the results to be expected for the year ending December 31, 2017.

 

The Company has redirected its efforts toward the cloud television market and has launched two cloud television networks, World Drone Recreation Aviators (wdra.tv and wdra.club) and Leading Edge Radio Network (leadingedgeradio.tv). Each network develops its own channel(s) content and works with the Company to ensure that their viewers receive it. The Company continues development of its online movie channel which will feature video on demand and a 24 hour a day streaming internet TV station providing limited free content and a subscriber based business model along with potential revenue generating video on demand programming. The online news and video news bureau in association with Leading Edge Radio Network is advancing on schedule and completion is expected by year-end. Leading Edge Radio TV continues developing a venue for new and experienced radio and TV broadcasters to host their own programs via Internet TV and radio through Mancuso Martin Productions. Leading Edge Radio Network and Mancuso Martin Productions continue strategic partnership opportunities involving radio, Internet TV and movies with the Company. The Company has also entered into discussions with Mancuso Martin Productions for screenplay properties through its production division that include seven screenplays featuring suspense thrillers, horror, comedy, romance and sports themed movies. The Company has entered into preliminary discussions for the creation of a professional line of golf balls and golf equipment in order to facilitate long term objectives of the design of a professional line of golf balls, gloves, golf shoes and apparel which will be sold direct to consumer through a proprietary marketing program, eliminating the need for brick and mortar retailing and keeping the Company overhead low.

  

All common stock share numbers reflect a 3,000 to 1 reverse split of the common stock effective on April 27, 2015, and a 19,000 to 1 reverse split of the common stock effective on August 8, 2016.

 

On September 3, 2015, the Company completed an acquisition agreement (“Acquisition Agreement”) under which the Company acquired all of the equity interests of Stimulating Software, LLC, a Florida limited liability company, the acquisition of all the common stock of Inner Four, Inc., a Florida corporation, and all of the common and preferred stock of Play Celebrity Games, Inc., a Delaware corporation.

 

Effective on October 21, 2015, the Company filed a Certificate of Amendment with the Nevada Secretary of State to change its name from “TBC Global News Network, Inc.” to “InCapta, Inc.”

 

 6 
 

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

The summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

 

Revenue Recognition.

 

The Company recognizes revenue using four sources: Media consulting, to online television clients, monthly fees for online cloud television networks, website store revenue sharing and revenue sharing of membership fees with clients.

 

Cash and Cash Equivalents.

 

The Company maintains cash balances in non-interest-bearing accounts that currently do not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of year or less are considered to be cash equivalents. As of March 31, 2017 and December 31, 2016, there were no cash equivalents except cash of $29,690 and $1,497, respectively.

 

Prepaid Expenses.

 

Prepaid expenses consist of payment for consulting fees in advance.

 

Stock Subscription Receivable.

 

During the year ended December 31, 2016, the holder of 6,500,000 stock options exercised those options and the Company recorded a receivable in the amount of $975,000. The remaining balance of $848,760 is recorded as a stock subscription receivable and is presented in the accompanying financial statements as a contra-equity account. During the three months ended March 31, 2017, the Company determined that the remaining balance of $848,670 was not collectible and wrote off the entire balance to additional paid in capital as this is deemed to be a capital transaction.

  

 7 
 

 

Income Taxes.

 

The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” ASC Topic 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC Topic 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

  

Impairment of Long-Lived Assets.

 

In accordance with ASC Topic 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. No impairment charge was taken during the three months ended March 31, 2017 or 2016.

 

Net Loss Per Share.

 

Basic net loss per share is computed by dividing net loss by the weighted-average number of outstanding shares of common stock during the period. Diluted net loss per share is computed by dividing the weighted-average number of outstanding shares of common stock, including any potential common shares outstanding during the period, when the potential shares are dilutive. Potential common shares consist primarily of incremental shares issuable upon the assumed exercise of stock options and warrants to purchase common stock using the treasury stock method. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. During the three months ended March 31, 2017 and 2016, there were $421,594 and $151,367, respectively, of convertible debentures that were convertible into 9,842,118 and 862 shares of common shares that excluded since to their effect is anti-dilutive as a result of the net losses incurred during the periods.

 

 8 
 

 

Stock-Based Compensation.

 

Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by ASC Topic 718, “Share-Based Payment.”

 

Derivative Financial Instruments.

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of March 31, 2017 and December 31, 2016, the Company’s only derivative financial instrument were embedded conversion feature associated with convertible debentures due to certain provisions that allow for a change in the conversion price and a warrant that to contains certain provisions that allow for a change in the exercise price if securities are issued at a price per share below the exercise price.

  

Fair Value Measurements.

 

ASC Topic 820, “Fair Value Measurements and Disclosure,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
   
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
   
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

 9 
 

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2017 and December 31, 2016.

 

The Company uses Level 2 inputs for its valuation methodology for its derivative liability as its fair value was determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

At March 31, 2017 and December 31, 2016, the Company identified the following liability that is required to be presented on the balance sheet at fair value:

 

   Fair Value   Fair Value Measurements at 
   As of   March 31, 2017 
Description  March 31, 2017  

Using Fair

Value Hierarchy

 
       Level 1   Level 2   Level 3 
Derivative liability - conversion feature  $768,987    --    768,987    -- 
                     
Total  $768,987    --    768,987    -- 

 

   Fair Value   Fair Value Measurements at 
   As of   December 31, 2016 
Description  December 31, 2016  

Using Fair

Value Hierarchy

 
       Level 1   Level 2   Level 3 
Derivative liability - conversion feature  $1,559,428    --    1,559,428    -- 
                     
Total  $1,559,428    --    1,559,428    -- 

 

 10 
 

 

Recent Pronouncements.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business.” The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU No. 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory,” which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU No. 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments.” ASU No. 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU No. 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.

 

In March 2016, the FASB issued ASU No. 2016-09, “Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU No. 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

 11 
 

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” ASU No. 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements.  ASU No. 2014-15 requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern.  ASU No. 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter.  Early adoption is permitted.  The Company is currently evaluating the impact of the adoption of ASU No. 2014-15 on the Company's financial statements and disclosures.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.”  ASU No. 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU No. 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  This ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU No. 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company is in the process of evaluating the impact of ASU No. 2014-09 on the Company's financial statements and disclosures.

 

 12 
 

 

NOTE 3 – CONVERTIBLE NOTES PAYABLE, INCLUDING RELATED PARTY

 

Convertible notes payable at March 31, 2017 and December 31, 2016 consist of the following:

 

   March 31,   December 31, 
   2017   2016 
Convertible notes to stockholder due on various dates through August 24, 2016; interest at 4%; convertible in shares of common stock at 90% of the Company’s stock price at date of conversion. (in default at December 31, 2016)  $59,599   $59,599 
           
Convertible note to investor due on September 22, 2017; interest at 10%; included an original issue discount of $7,245; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.   30,500    56,750 
           
Convertible note to investor due on July 3, 2017; interest at 10%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.   58,745    58,745 
           
Convertible note to investor due on January 11, 2017; interest at 12%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.   65,000    -- 
           
Convertible note to investor due on January 11, 2017; interest at 8%; convertible in shares of common stock at 58% of the Company’s stock price at date of conversion.   58,000    -- 
           
Convertible note to investor due on January 12, 2017; interest at 6%; convertible in shares of common stock at 55% of the Company’s stock price at date of conversion.   50,000    -- 
           
Convertible note to investor due on February 15, 2017; interest at 12%; convertible in shares of common stock at 58% of the Company’s stock price at date of conversion.   43,000    -- 
           
Convertible note to investor due on February 20, 2017; interest at 10%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.   56,750    -- 
    421,594    175,094 
Less debt discount   (249,437)   (80,796)
Convertible notes, net of discount  $172,157   $94,298 

 

 13 
 

 

   March 31,   December 31, 
   2017   2016 
Convertible notes payable - related party  $59,599   $59,599 
Less debt discount   --    -- 
Convertible notes - related party, net of discount  $59,599   $59,599 
           
Convertible notes payable - unrelated parties  $361,995   $115,495 
Less debt discount   (249,437)   (80,796)
Convertible notes - unrelated parties, net of discount  $112,558   $34,699 

 

During the three months ended March 31, 2017, the Company issued convertible notes in the aggregate principal amount of $272,750, with original issue discounts of $19,250. Due to the variable conversion price associated with these convertible notes, the Company has determined that the conversion feature is considered derivative liabilities. The embedded conversion feature was initially calculated to be $703,848, which is recorded as a derivative liability as of the date of issuance. The derivative liability was first recorded as a debt discount up to the face amount of the convertible notes of $272,750, with the remainder being charge as a financing cost during the period. The debt discount is being amortized over the terms of the convertible notes. The Company recognized interest expense of $104,109 during the three months ended March 31, 2017 related to the amortization of the debt discount.

 

NOTE 4 – SHORT TERM NOTE

 

On March 17, 2015, the Company entered into a promissory note with Peter Lambert for a loan of $25,000 that became due on June 15, 2015. The loan carries an interest at the rate of $55 per day. On June 12, 2015, the parties amended this promissory note so that the loan was extended and will accrue interest at $55 per day until this note is paid in full. As of March 31, 2017 and December 31, 2016, there was $41,134 and $36,184 interest accrued on the loan respectively.

 

NOTE 5 – DERIVATIVE LIABILITY

 

The convertible notes discussed in Note 3 have a conversion price that is variable based on a percentage of the Company’s stock price which results in this embedded conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

 

 14 
 

 

The Company uses a weighted average Black-Scholes-Merton option-pricing model with the following assumptions to measure the fair value of derivative liability at March 31, 2017:

 

Stock price       $0.085 
Risk free rate        0.85%
Volatility        670%
Conversion price      $0.038–0.077 
Dividend rate        0%
Term (years)        0.01 to 0.89 

 

The following table represents the Company’s derivative liability activity for the period ended March 31, 2017:

 

Derivative liability balance, December 31, 2016  $1,559,428 
      
Issuance of derivative liability during the period ended March 31, 2017   703,848 
      
Underlying security converted into common stock   (52,342)
      
Change in derivative liability during the period ended March 31, 2017   (1,441,947)
      
Derivative liability balance, March 31, 2017  $768,987 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

At March 31, 2017 and December 31, 2016, the Company’s CEO, Mr. Fleming, has a balance of $19,624 and $40,320, respectively, owed to him under “due to officers” for the transfer of assets, consulting fees and various out of pocket expenses.

 

On February 5, 2016, the Company issued 1,184 restricted shares of common stock in connection with the September 3, 2015 acquisition agreement to Team AJ, LLC.

 

As various times between August 5, 2015 and December 31, 2016, Mr. Acunto loaned the Company a total of $64,589 (which is set forth in convertible note payable). These notes bear interest at the rate of 4% per annum; $2,510 in interest has been accrued on these notes as of December 31, 2016. During the year ended December 31, 2016, $4,990 of these loans were repaid. The principal amount outstanding at March 31, 2017 and December 31, 2016 was $59,559.

 

On August 9, 2016, the Company issued 100,000,000 restricted shares of common stock to Mr. Fleming, the Company’s President, for services rendered and to be rendered to the Company.

 

Starting January1, 2017, Mr. Fleming is accruing a consulting fee of $10,000 a month under a written agreement with the Company

 

 15 
 

 

NOTE 7 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s liabilities significantly exceed its assets, certain notes payable are in default and the Company has generated minimal revenue. This raises substantial doubt about the Company's ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.

 

The Company’s activities to date have been supported by debt and equity financing. It has sustained losses in all previous reporting periods with an accumulated deficit of $136,800,300 as of March 31, 2017. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan. In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders.

 

NOTE 8 – COMMON STOCK

 

Anne Morrison was granted an option from the Company on August 8, 2016 under the Company’s 2016 Stock and Option Plan in payment for consulting services rendered by her to the Company. The Company’s board of directors approved this compensation (by unanimous written consent) on August 8, 2016. This option was exercised at $0.15 per share. The Company received $126,240 over a period of eight months as result of the exercise of this option. During the three months ended March 31, 2017, the Company determined that the remaining balance of $848,670 was not collectible and wrote off the entire balance to additional paid in capital as this is deemed to be a capital transaction.

 

On April 27, 2015, the Company completed a 3,000 to 1 reverse split of its issued and outstanding shares of common stock and on August 8, 2016 completed a 19,000 to 1 reverse split of its issued and outstanding shares of common stock. All shares and per share information in the accompanying financial statements has been retroactively restated to reflect these two reverse stock splits.

 

During the three months ended March 31, 2017, the Company issued restricted shares of its common stock as follows: 584,251 (net of 415,749 shares canceled due to excess shares issued in 2016 related to a debt conversion) shares of common stock for the conversion of $26,250 in debt.

 

During the three months ended March 31, 2017, the Company issued shares of its common stock as follows:

 

15,000,000 shares of common stock to consultants as compensation for services valued at $1,800,000. The value was based on the market price of the Company’s common stock at the date of issuance; and

 

584,251 (net of 415,749 shares canceled due to excess shares issued in 2016 related to a debt conversion) shares of common stock for the conversion of $26,250 in debt.

 

 16 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following management’s discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with, our unaudited financial statements and related notes included elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Overview.

 

On September 3, 2015, the Company completed an Acquisition Agreement under which the Company acquired all of the equity interests of Stimulating Software, the acquisition of all the common stock of Inner Four, Inc., and all of the common and preferred stock of Play Celebrity Games, Inc.

 

On June 30, 2016, the Company closed these subsidiaries as the business model did not prove out as projected under the acquisition agreement.

 

The Company continues development of its online movie channel which will feature video on demand and a 24 hour a day streaming internet TV station providing limited free content and a subscriber based business model along with potential revenue generating video on demand programming.

 

The online news and video news bureau in association with Leading Edge Radio Network is advancing on schedule and completion is expected during 2017. Leading Edge Radio TV continues developing a venue for new and experienced radio and TV broadcasters to host their own programs via Internet TV and radio through Mancuso Martin Productions. Leading Edge Radio Network and Mancuso Martin Productions continue strategic partnership opportunities involving radio, Internet TV and movies with the Company. The Company has also entered into discussions with Mancuso Martin Productions for screenplay properties through its production division that include seven screenplays featuring suspense thrillers, horror, comedy, romance and sports themed movies.

 

The Company currently is developing a weekly television show, “The Car Flip Guys” and two of seven online full-length movies mentioned above. We expect to first air “The Car Flip Guys” during the end of the second quarter or beginning of the third quarter of 2017.

 

Results of Operations.

 

(a) Total Revenue.

 

The Company had revenue of $17 for the three months ended March 31, 2017 compared to $20,206 for the three months ended March 31, 2016. This decrease was due to the refocusing of the Company towards Cloud Television, television production and movie production.

 

 17 
 

 

(b) General and Administrative Expenses.

 

The Company had general and administrative expenses of $1,993,177 for the three months ended March 31, 2017 compared to $5,533,275 for the three months ended March 31, 2016, a decrease of $3,540,098 or approximately 64%. This principal reason for the decrease was due to the lower consulting fees in 2017 compared to 2016. The Company normally pays its consultants in shares of Company common stock.

 

(c) Interest and Financing Costs.

 

The Company had interest and financing costs of $567,286 for the three months ended March 31, 2017 compared to $141,296 for the three months ended March 31, 2016, an increase of $425,990 or approximately 302%. This increase was due to the financing costs associated with the new convertible debentures entered into in 2017.

 

(d) Net Loss.

 

The Company had a net loss of $1,118,499 for the three months ended March 31, 2017 compared to $7,876,974 for the three months ended March 31, 2016, a decrease of $6,758,475 or approximately 86%. This decrease was due to factors described above.

 

Operating Activities.

 

The net cash used in operating activities was $225,307 for the three months ended March 31, 2017 compared to $91,130 for the three months ended March 31, 2016, an increase of $134,177 or approximately 147%.  This increase is attributed to many changes from period to period in our current assets and liabilities..

 

Liquidity and Capital Resources.

 

As of March 31, 2017, the Company had total current assets of $65,690 and total current liabilities of $1,266,341, resulting in a working capital deficit of $1,200,651.  The cash and cash equivalents was $29,690 as of March 31, 2017.

 

 Net cash provided by financing activities was $253,500 for the three months ended March 31, 2017 compared to $91,377 for the three months ended March 31, 2016, an increase of $162,123 or approximately 177%. This increase resulted primarily from obtaining new loans during the period.

 

Whereas the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to it and/or that demand for equity/debt instruments will be sufficient to meet its capital needs, or that financing will be available on terms favorable to the Company. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 18 
 

 

If funding is insufficient at any time in the future, the Company may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of planned product development and marketing efforts, any of which could have a negative impact on business and operating results. In addition, insufficient funding may have a material adverse effect on the Company’s financial condition, which could require it to:

 

curtail operations significantly;
  
sell significant assets;
  
seek arrangements with strategic partners or other parties that may require the Company to relinquish significant rights to products, technologies or markets; or
  
explore other strategic alternatives including a merger or sale of the Company.

 

To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Company’s operations. Regardless of whether cash assets prove to be inadequate to meet the Company’s operational needs, the Company may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing stockholders.

 

Inflation.

 

The impact of inflation on costs and the ability to pass on cost increases to the Company’s customers over time is dependent upon market conditions. The Company is not aware of any inflationary pressures that have had any significant impact on operations over the past quarter, and the Company does not anticipate that inflationary factors will have a significant impact on future operations.

 

Off-Balance Sheet Arrangements.

 

The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.

 

Critical Accounting Policies.

 

The SEC has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include: (a) use of estimates; (b) impairment of long-lived assets; and (c) derivative financial instruments. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financial statements.

 

 19 
 

 

(a) Use of Estimates.

 

The preparation of financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

(b) Impairment of Long-Lived Assets.

 

In accordance with Accounting Standards Codification Topic 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. At December 31, 2015, the Company evaluated its long-lived assets and determined that they had been impaired and took a charge to earnings of $4,478,142. At December 31, 2016, the Company evaluated its long-lived assets and determined that no impairment was necessary.

 

(c) Derivative Financial Instruments

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company’s only derivative financial instrument were embedded conversion feature associated with convertible debentures due to certain provisions that allow for a change in the conversion price and a warrant that to contains certain provisions that allow for a change in the exercise price if securities are issued at a price per share below the exercise price.

 

Forward Looking Statements.

 

Information in this Form 10-Q contains “forward looking statements” within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of wq1934, as amended. When used in this Form 10-Q, the words “expects,” “anticipates,” “believes,” “plans,” “will” and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements regarding the adequacy of cash, expectations regarding net losses and cash flow, statements regarding growth, the need for future financing, dependence on personnel, and operating expenses.

 

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above as well as the risks set forth above under “Factors That May Affect Operating Results.” These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

 20 
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures.

 

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this report, the Company’s management carried out an evaluation, under the supervision and with the participation of the principal executive officer/principal financial officer, of disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon the evaluation, the principal executive officer/principal financial officer concluded that the Company’s disclosure controls and procedures were not effective at a reasonable assurance level to ensure that information required to be disclosed by it in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. In addition, the principal executive officer/principal financial officer concluded that the Company’s disclosure controls and procedures were not effective at a reasonable assurance level to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.

 

Inherent Limitations of Control Systems.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be or have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control Over Financial Reporting.

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 21 
 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

From time to time, the Company may become party to litigation or other legal proceedings that the Company considers to be a part of the ordinary course of the business. There are no material legal proceedings to report, except as outlined in the last Form 10-K. There are no changes to those legal proceedings as reported in that Form 10-K.

 

ITEM 1A. RISK FACTORS.

 

There have been no material changes in the risk factors as previously disclosed in response to Item 1A.of Part I of the Company’s latest Form 10-K.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2017 that were not previously reported

 

There were no purchases of the Company’s common stock by the Company or its affiliates during the three months ended March 31, 2017.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

Exhibits included or incorporated by reference herein are set forth in the Exhibit Index.

 

 22 
 

 

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  InCapta, Inc.
     
Dated: May 22, 2017 By: /s/ John Fleming
    John Fleming, President

 

 23 
 

 

EXHIBIT INDEX

 

Number  Description
    
2.1  Agreement and Plan of Merger between the Company and Syconet.com, Inc., a Delaware corporation, dated December 1, 2001 (incorporated by reference to Exhibit 2.1 of the Form 10 filed on October 7, 2015).
2.2  Purchase and Sale Agreement between the Company, on the one hand, and Sterling Yacht Sales, Inc., Glenn W. McMachen, Sr., and Arlene McMachen, on the other hand, dated March 19, 2010 (incorporated by reference to Exhibit 2.2 of the Form 10 filed on October 7, 2015).
2.3  Acquisition Agreement between the Company, on the one hand, and John Fleming, John Swartz, Team AJ, LLC, and Chasin, LLC, on the other hand, dated September 3, 2015 (including Exhibit A (Option); Exhibit B-1 (Stock Option Agreement); Exhibit B-2 (Stock Option Agreement); Exhibit C (Amended Certificate of Designation); Exhibit D (Design and License Agreement); Exhibit E (Registration Rights Agreement); Schedule 1.3 (Excluded Assets); Schedule 2.1 (Excluded Applications); Schedule 4.6 (Capitalization of GameCo. Companies); Schedule 4.10 (Assets of GameCo. Companies); Schedule 4.13 (Material Contracts of GameCo. Companies); Schedule 4.16 (Employees and Compensation Plans); Schedule 5.6 (Capitalization of Play Celebrity); Schedule 5.10 (All Assets, Tangible and Intangible, of Play Celebrity); Schedule 5.13 (Material Contracts); Schedule 5.16 (Employees and Compensation Plans); Schedule 6.8(a); Schedule 6.8(b); Schedule 6.8(c); Schedule 6.11 (All Assets, Tangible and Intangible, of InCapta); Schedule 6.13 (Material Contracts); Schedule 6.16 (Employees and Compensation Plans) (incorporated by reference to Exhibit 2.3 of the Form 10 filed on October 7, 2015).
3.1  Articles of Incorporation, dated December 19, 2001 (incorporated by reference to Exhibit 3.1 of the Form 10 filed on October 7, 2015).
3.2  Certificate of Amendment to Articles of Incorporation, dated November 21, 2002 (incorporated by reference to Exhibit 3.2 of the Form 10 filed on October 7, 2015).
3.3  Certificate of Amendment to Articles of Incorporation, dated March 5, 2003 (incorporated by reference to Exhibit 3.3 of the Form 10 filed on October 7, 2015).
3.4  Certificate of Amendment to Articles of Incorporation, dated July 11, 2003 (incorporated by reference to Exhibit 3.4 of the Form 10 filed on October 7, 2015).
3.5  Certificate of Amendment to Articles of Incorporation, dated January 26, 2004 (incorporated by reference to Exhibit 3.5 of the Form 10 filed on October 7, 2015).
3.6  Certificate of Amendment to Articles of Incorporation, dated December 16, 2004 (incorporated by reference to Exhibit 3.6 of the Form 10 filed on October 7, 2015).
3.7  Certificate of Amendment to Articles of Incorporation, dated July 19, 2005 (incorporated by reference to Exhibit 3.7 of the Form 10 filed on October 7, 2015).
3.8  Certificate of Amendment to Articles of Incorporation, dated March 21, 2006 (incorporated by reference to Exhibit 3.8 of the Form 10 filed on October 7, 2015).
3.9  Certificate of Amendment to Articles of Incorporation, dated December 10, 2007 (incorporated by reference to Exhibit 3.9 of the Form 10 filed on October 7, 2015).
3.10  Certificate of Amendment to Articles of Incorporation, dated May 7, 2009 (incorporated by reference to Exhibit 3.10 of the Form 10 filed on October 7, 2015).
3.11  Certificate of Amendment to Articles of Incorporation, dated October 21, 2015 (incorporated by reference to Exhibit 3.11 of the Form 10/A filed on November 4, 2015).
3.12  Certificate of Amendment to Articles of Incorporation, dated December 21, 2015 (incorporated by reference to Exhibit 3.12 of the Form 10-K filed on June 8, 2016).
3.13  Bylaws (incorporated by reference to Exhibit 3.11 of the Form 10 filed on October 7, 2015).
4.1  Certificate of Designation (Series A Convertible Preferred Stock), dated April 23, 2008 (incorporated by reference to Exhibit 4.1 of the Form 10 filed on October 7, 2015).
4.2  Amended Certificate of Designation (Series A Convertible Preferred Stock), dated September 9, 2015 (incorporated by reference to Exhibit C of Exhibit 2.3 of the Form 10 filed on October 7, 2015).

 

 24 
 

 

Number  Description
10.1  Promissory Note issued by the Company to Peter Lambert, dated March 17, 2015 (incorporated by reference to Exhibit 10.1 of the Form 10 filed on October 7, 2015).
10.2  First Amendment to Promissory Note issued by the Company to Peter Lambert, dated June 12, 2015 (incorporated by reference to Exhibit 10.2 of the Form 10 filed on October 7, 2015).
10.3  Developer Agreement between Inner Four, Inc., Stimulating Software, LLC and Play Celebrity, Inc., and Apple, Inc., dated December 15, 2008 (Inner Four), November 7, 2014 (Stimulating Software), and October 12, 2015 (Play Celebrity) (incorporated by reference to Exhibit 10.3 of the Form 10/A filed on November 4, 2015).
10.4  Developer Distribution Agreement between Inner Four, Inc. and Stimulating Software, LLC, and Google, Inc., dated December 15, 2008 (Inner Four) and November 7, 2014 (Stimulating Software) (incorporated by reference to Exhibit 10.4 of the Form 10/A filed on November 4, 2015).
10.5  App Distribution and Services Agreement between Inner Four, Inc. and Stimulating Software, LLC, and Amazon Digital Services, Inc., Amazon Media EU S.a.r.l., Amazon Services International, Inc., Amazon Servicos de Varejo do Brasil Ltda., Amazon.com Int’l Sales, Inc., and Amazon Australia Services, Inc., dated December 15, 2008 (Inner Four) and November 7, 2014 (Stimulating Software) (incorporated by reference to Exhibit 10.5 of the Form 10/A filed on November 4, 2015).
10.6  Consulting Services Agreement between the Company and John Swartz, dated September 1, 2015 (incorporated by reference to Exhibit 10.6 of the Form 10/A filed on December 4, 2015).
10.7  Consulting Services Agreement between the Company and Chad Antonson, dated November 1, 2015 (incorporated by reference to Exhibit 10.7 of the Form 10/A filed on December 4, 2015).
10.8  Blanket Marketing and Artists Participation Agreement between Celebrity Games Corp. (now known as Play Celebrity Games, Inc.), and Celebrity Games Software, LLC (now known as Stimulating Software, LLC), and TopFan, dated April 30, 2015 (incorporated by reference to Exhibit 10.8 of the Form 10/A filed on December 4, 2015).
10.9  Artist Participation Agreement between Play Celebrity Games, Inc. and Stimulating Software, LLC, and Marcus Cooper, dated July 28, 2015 (incorporated by reference to Exhibit 10.9 of the Form 10/A filed on December 4, 2015).
10.10  Securities Purchase Agreement between the Company and JMJ Financial, dated February 24, 2016 (incorporated by reference to Exhibit 10.10 of the Form 10-K filed on June 8, 2016).
10.11  Convertible Promissory Note issued by the Company to JMJ Financial, dated February 23, 2016 (incorporated by reference to Exhibit 10.11 of the Form 10-K filed on June 8, 2016).
10.12  Common Stock Purchase Warrant issued to JMJ Financial by the Company, dated February 24, 2016 (incorporated by reference to Exhibit 10.12 of the Form 10-K filed on June 8, 2016).
10.13  Securities Purchase Agreement between the Company and EMA Financial, LLC, dated February 11, 2016 (incorporated by reference to Exhibit 10.13 of the Form 10-K filed on June 8, 2016).
10.14  10% Convertible Note issued by the Company to EMA Financial, LLC, dated February 11, 2016 (incorporated by reference to Exhibit 10.14 of the Form 10-K filed on June 8, 2016).
10.15  Settlement Agreement and Stipulation between the Company and Rockwell Capital Partners, Inc., dated May 31, 2016 (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on June 9, 2016).
10.16  Form of Claim Purchase Agreement between the Company and Rockwell Capital Partners, Inc., dated May 31, 2016 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed on June 9, 2016)
31  Rule 13a-14(a)/15d-14(a) Certification of John Fleming (filed herewith).
32  Section 1350 Certification of John Fleming (filed herewith).

 

 

 25

 
EX-31 2 f10q0317ex31_incaptainc.htm CERTIFICATION

Exhibit 31

 

RULE 13a-14(a)/15d-14(a) CERTIFICATION

 

I, John Fleming, certify that:

 

1.       I have reviewed this quarterly report on Form 10-Q of InCapta, Inc.;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.       I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s independent registered public accounting firm and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: May 22, 2017 /s/ John Fleming
  John Fleming, President/Chief Executive Officer/
  Secretary/Treasurer (principal executive, financial and accounting officer)

  

EX-32 3 f10q0317ex32_incaptainc.htm CERTIFICATION

Exhibit 32

 

SECTION 1350 CERTIFICATION

 

In connection with the quarterly report of InCapta, Inc. (“Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission (“Report”), the undersigned, in the capacities and on the dates indicated below, hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to their knowledge:

 

1.       The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: May 22, 2017 /s/ John Fleming
 

John Fleming, President/Chief Executive Officer/

Secretary/Treasurer (principal executive, financial and accounting officer)

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Document and Entity Information
3 Months Ended
Mar. 31, 2017
shares
Document and Entity Information [Abstract]  
Entity Registrant Name InCapta, Inc.
Entity Central Index Key 0001099234
Trading Symbol INCT
Amendment Flag false
Current Fiscal Year End Date --12-31
Document Type 10-Q
Document Period End Date Mar. 31, 2017
Document Fiscal Year Focus 2017
Document Fiscal Period Focus Q1
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 127,500,445
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Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Current Assets:    
Cash $ 29,690 $ 1,587
Accounts receivable 7,590
Prepaid expenses 36,000
Total current assets 65,690 9,087
Other assets:    
Furniture and equipment 2,080 2,538
Total assets 67,770 11,715
Current Liabilities:    
Accounts payable 226,062 209,650
Accrued interest 54,511 41,683
Due to officer 19,624 40,320
Convertible notes payable - related party 59,599 59,599
Convertible notes payable, net of discount of $249,437 and $80,796 112,558 34,699
Loan payable 25,000 25,000
Derivative liability 768,987 1,559,428
Total current liabilities 1,266,341 1,970,379
Stockholders' deficit    
Common stock value [1] 127,500 111,916
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 1 and 1 shares issued and outstanding (2) [2]
Additional paid-in capital 135,474,229 134,459,981
Stock subscription receivable (848,760)
Accumulated deficit (136,800,300) (135,681,801)
Total stockholders' deficit (1,198,571) (1,958,664)
Total liabilities and stockholders' deficit 67,770 11,715
Series B common stock    
Stockholders' deficit    
Common stock value
[1] Reflects the amounts after a 3,000 to 1 reverse split of the Company's common stock that was effective on April 27, 2015 and a 19,000 to 1 reverse split of the Company's common stock effective on August 8, 2016.
[2] Reflects the amounts after a 4,700 to 1 reverse split of the Company's preferred stock that was effective on August 8, 2016.
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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Convertible notes payable, net of discount $ 249,437 $ 80,796
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 890,000,000 890,000,000
Common stock, shares issued 127,500,445 111,916,194
Common stock, shares outstanding 127,500,445 111,916,194
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 1 1
Preferred stock, shares outstanding 1 1
Series B common stock    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued
Common stock, shares outstanding
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]    
Net sales $ 17 $ 20,206
Costs and expenses:    
General and administrative 1,993,177 5,533,275
Acquisition contingency 2,280,331
Total costs and expenses 1,993,177 7,813,606
Loss from operations (1,993,160) (7,793,400)
Other income (expense)    
Interest and financing costs (567,286) (141,296)
Change in value of derivative liability 1,441,947 57,722
Total other income (expense) 874,661 (83,574)
Loss before provision for income taxes (1,118,499) (7,876,974)
Provision for income taxes
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Preferred stock dividend (47,700)
Net loss attributed to common stockholders $ (1,118,499) $ (7,924,674)
Basic and diluted loss per share $ (0.01) $ (1,592.89)
Weighted average number of shares outstanding [1] 124,956,753 4,975
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3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities:    
Net loss $ (1,118,499) $ (7,876,974)
Adjustments to reconcile net loss to net cash used in operating activities:    
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Financing costs 450,348 104,593
Amortization of debt discounts 104,109 30,390
Change in value of derivative liability (1,441,947) (57,722)
Change in current assets and liabilities:    
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Prepaid consulting fees (36,000) 1,384,137
Accounts payable 16,502 78,255
Accrued interest 12,828 6,249
Due to officer (20,696)
Net cash used in operating activities (225,307) (91,130)
Cash flows from financing activities:    
Proceeds from convertible notes payable 253,500 91,377
Net cash provided by financing activities 253,500 91,377
Net increase in cash 28,193 247
Cash at beginning of period 1,587 1,790
Cash at end of period 29,690 2,037
Supplemental disclosure of non-cash financing activities:    
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Common stock issued for debt 26,250
Cash paid for:    
Interest paid
Taxes paid
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Nature of Business
3 Months Ended
Mar. 31, 2017
Nature of Business [Abstract]  
NATURE OF BUSINESS

NOTE 1 – NATURE OF BUSINESS

 

The accompanying unaudited condensed consolidated interim financial statements of InCapta, Inc. a Nevada corporation (“Company”), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) that are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC. The results for the three months ended March 31, 2017, are not necessarily indicative of the results to be expected for the year ending December 31, 2017.

 

The Company has redirected its efforts toward the cloud television market and has launched two cloud television networks, World Drone Recreation Aviators (wdra.tv and wdra.club) and Leading Edge Radio Network (leadingedgeradio.tv). Each network develops its own channel(s) content and works with the Company to ensure that their viewers receive it. The Company continues development of its online movie channel which will feature video on demand and a 24 hour a day streaming internet TV station providing limited free content and a subscriber based business model along with potential revenue generating video on demand programming. The online news and video news bureau in association with Leading Edge Radio Network is advancing on schedule and completion is expected by year-end. Leading Edge Radio TV continues developing a venue for new and experienced radio and TV broadcasters to host their own programs via Internet TV and radio through Mancuso Martin Productions. Leading Edge Radio Network and Mancuso Martin Productions continue strategic partnership opportunities involving radio, Internet TV and movies with the Company. The Company has also entered into discussions with Mancuso Martin Productions for screenplay properties through its production division that include seven screenplays featuring suspense thrillers, horror, comedy, romance and sports themed movies. The Company has entered into preliminary discussions for the creation of a professional line of golf balls and golf equipment in order to facilitate long term objectives of the design of a professional line of golf balls, gloves, golf shoes and apparel which will be sold direct to consumer through a proprietary marketing program, eliminating the need for brick and mortar retailing and keeping the Company overhead low.

  

All common stock share numbers reflect a 3,000 to 1 reverse split of the common stock effective on April 27, 2015, and a 19,000 to 1 reverse split of the common stock effective on August 8, 2016.

 

On September 3, 2015, the Company completed an acquisition agreement (“Acquisition Agreement”) under which the Company acquired all of the equity interests of Stimulating Software, LLC, a Florida limited liability company, the acquisition of all the common stock of Inner Four, Inc., a Florida corporation, and all of the common and preferred stock of Play Celebrity Games, Inc., a Delaware corporation.

 

Effective on October 21, 2015, the Company filed a Certificate of Amendment with the Nevada Secretary of State to change its name from “TBC Global News Network, Inc.” to “InCapta, Inc.”

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Significant Accounting Policies
3 Months Ended
Mar. 31, 2017
Significant Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

The summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

 

Revenue Recognition.

 

The Company recognizes revenue using four sources: Media consulting, to online television clients, monthly fees for online cloud television networks, website store revenue sharing and revenue sharing of membership fees with clients.

 

Cash and Cash Equivalents.

 

The Company maintains cash balances in non-interest-bearing accounts that currently do not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of year or less are considered to be cash equivalents. As of March 31, 2017 and December 31, 2016, there were no cash equivalents except cash of $29,690 and $1,497, respectively.

 

Prepaid Expenses.

 

Prepaid expenses consist of payment for consulting fees in advance.

 

Stock Subscription Receivable.

 

During the year ended December 31, 2016, the holder of 6,500,000 stock options exercised those options and the Company recorded a receivable in the amount of $975,000. The remaining balance of $848,760 is recorded as a stock subscription receivable and is presented in the accompanying financial statements as a contra-equity account. During the three months ended March 31, 2017, the Company determined that the remaining balance of $848,670 was not collectible and wrote off the entire balance to additional paid in capital as this is deemed to be a capital transaction.

 

Income Taxes.

 

The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” ASC Topic 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC Topic 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

  

Impairment of Long-Lived Assets.

 

In accordance with ASC Topic 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. No impairment charge was taken during the three months ended March 31, 2017 or 2016.

 

Net Loss Per Share.

 

Basic net loss per share is computed by dividing net loss by the weighted-average number of outstanding shares of common stock during the period. Diluted net loss per share is computed by dividing the weighted-average number of outstanding shares of common stock, including any potential common shares outstanding during the period, when the potential shares are dilutive. Potential common shares consist primarily of incremental shares issuable upon the assumed exercise of stock options and warrants to purchase common stock using the treasury stock method. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. During the three months ended March 31, 2017 and 2016, there were $421,594 and $151,367, respectively, of convertible debentures that were convertible into 9,842,118 and 862 shares of common shares that excluded since to their effect is anti-dilutive as a result of the net losses incurred during the periods.

  

Stock-Based Compensation.

 

Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by ASC Topic 718, “Share-Based Payment.”

 

Derivative Financial Instruments.

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of March 31, 2017 and December 31, 2016, the Company’s only derivative financial instrument were embedded conversion feature associated with convertible debentures due to certain provisions that allow for a change in the conversion price and a warrant that to contains certain provisions that allow for a change in the exercise price if securities are issued at a price per share below the exercise price.

  

Fair Value Measurements.

 

ASC Topic 820, “Fair Value Measurements and Disclosure,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
   
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
   
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2017 and December 31, 2016.

 

The Company uses Level 2 inputs for its valuation methodology for its derivative liability as its fair value was determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

At March 31, 2017 and December 31, 2016, the Company identified the following liability that is required to be presented on the balance sheet at fair value:

 

    Fair Value     Fair Value Measurements at  
    As of     March 31, 2017  
Description   March 31, 2017    

Using Fair

Value Hierarchy

 
          Level 1     Level 2     Level 3  
Derivative liability - conversion feature   $ 768,987       --       768,987       --  
                                 
Total   $ 768,987       --       768,987       --  

 

    Fair Value     Fair Value Measurements at  
    As of     December 31, 2016  
Description   December 31, 2016    

Using Fair

Value Hierarchy

 
          Level 1     Level 2     Level 3  
Derivative liability - conversion feature   $ 1,559,428       --       1,559,428       --  
                                 
Total   $ 1,559,428       --       1,559,428       --  

 

Recent Pronouncements.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business.” The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU No. 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory,” which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU No. 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments.” ASU No. 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU No. 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.

 

In March 2016, the FASB issued ASU No. 2016-09, “Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU No. 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” ASU No. 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements.  ASU No. 2014-15 requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern.  ASU No. 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter.  Early adoption is permitted.  The Company is currently evaluating the impact of the adoption of ASU No. 2014-15 on the Company's financial statements and disclosures.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.”  ASU No. 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU No. 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  This ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU No. 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company is in the process of evaluating the impact of ASU No. 2014-09 on the Company's financial statements and disclosures.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Convertible Notes Payable, Including Related Party
3 Months Ended
Mar. 31, 2017
Convertible Notes Payable Related Party [Abstract]  
CONVERTIBLE NOTES PAYABLE, INCLUDING RELATED PARTY

NOTE 3 – CONVERTIBLE NOTES PAYABLE, INCLUDING RELATED PARTY

 

Convertible notes payable at March 31, 2017 and December 31, 2016 consist of the following:

 

  March 31,  December 31, 
  2017  2016 
Convertible notes to stockholder due on various dates through August 24, 2016; interest at 4%; convertible in shares of common stock at 90% of the Company’s stock price at date of conversion. (in default at December 31, 2016) $59,599  $59,599 
         
Convertible note to investor due on September 22, 2017; interest at 10%; included an original issue discount of $7,245; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  30,500   56,750 
         
Convertible note to investor due on July 3, 2017; interest at 10%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  58,745   58,745 
         
Convertible note to investor due on January 11, 2017; interest at 12%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  65,000   -- 
         
Convertible note to investor due on January 11, 2017; interest at 8%; convertible in shares of common stock at 58% of the Company’s stock price at date of conversion.  58,000   -- 
         
Convertible note to investor due on January 12, 2017; interest at 6%; convertible in shares of common stock at 55% of the Company’s stock price at date of conversion.  50,000   -- 
         
Convertible note to investor due on February 15, 2017; interest at 12%; convertible in shares of common stock at 58% of the Company’s stock price at date of conversion.  43,000   -- 
         
Convertible note to investor due on February 20, 2017; interest at 10%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  56,750   -- 
   421,594   175,094 
Less debt discount  (249,437)  (80,796)
Convertible notes, net of discount $172,157  $94,298 

  

  March 31,  December 31, 
  2017  2016 
Convertible notes payable - related party $59,599  $59,599 
Less debt discount  --   -- 
Convertible notes - related party, net of discount $59,599  $59,599 
         
Convertible notes payable - unrelated parties $361,995  $115,495 
Less debt discount  (249,437)  (80,796)
Convertible notes - unrelated parties, net of discount $112,558  $34,699 

 

During the three months ended March 31, 2017, the Company issued convertible notes in the aggregate principal amount of $272,750, with original issue discounts of $19,250. Due to the variable conversion price associated with these convertible notes, the Company has determined that the conversion feature is considered derivative liabilities. The embedded conversion feature was initially calculated to be $703,848, which is recorded as a derivative liability as of the date of issuance. The derivative liability was first recorded as a debt discount up to the face amount of the convertible notes of $272,750, with the remainder being charge as a financing cost during the period. The debt discount is being amortized over the terms of the convertible notes. The Company recognized interest expense of $104,109 during the three months ended March 31, 2017 related to the amortization of the debt discount.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Short Term Note
3 Months Ended
Mar. 31, 2017
Short Term Note [Abstract]  
SHORT TERM NOTE

NOTE 4 – SHORT TERM NOTE

 

On March 17, 2015, the Company entered into a promissory note with Peter Lambert for a loan of $25,000 that became due on June 15, 2015. The loan carries an interest at the rate of $55 per day. On June 12, 2015, the parties amended this promissory note so that the loan was extended and will accrue interest at $55 per day until this note is paid in full. As of March 31, 2017 and December 31, 2016, there was $41,134 and $36,184 interest accrued on the loan respectively.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Liability
3 Months Ended
Mar. 31, 2017
Derivative Liability [Abstract]  
DERIVATIVE LIABILITY

NOTE 5 – DERIVATIVE LIABILITY

 

The convertible notes discussed in Note 3 have a conversion price that is variable based on a percentage of the Company’s stock price which results in this embedded conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

 

The Company uses a weighted average Black-Scholes-Merton option-pricing model with the following assumptions to measure the fair value of derivative liability at March 31, 2017:

 

Stock price     $0.085 
Risk free rate      0.85%
Volatility      670%
Conversion price    $0.038–0.077 
Dividend rate      0%
Term (years)      0.01 to 0.89 

 

The following table represents the Company’s derivative liability activity for the period ended March 31, 2017:

 

Derivative liability balance, December 31, 2016 $1,559,428 
     
Issuance of derivative liability during the period ended March 31, 2017  703,848 
     
Underlying security converted into common stock  (52,342)
     
Change in derivative liability during the period ended March 31, 2017  (1,441,947)
     
Derivative liability balance, March 31, 2017 $768,987 
XML 20 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Transactions
3 Months Ended
Mar. 31, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS

 

At March 31, 2017 and December 31, 2016, the Company’s CEO, Mr. Fleming, has a balance of $19,624 and $40,320, respectively, owed to him under “due to officers” for the transfer of assets, consulting fees and various out of pocket expenses.

 

On February 5, 2016, the Company issued 1,184 restricted shares of common stock in connection with the September 3, 2015 acquisition agreement to Team AJ, LLC.

 

As various times between August 5, 2015 and December 31, 2016, Mr. Acunto loaned the Company a total of $64,589 (which is set forth in convertible note payable). These notes bear interest at the rate of 4% per annum; $2,510 in interest has been accrued on these notes as of December 31, 2016. During the year ended December 31, 2016, $4,990 of these loans were repaid. The principal amount outstanding at March 31, 2017 and December 31, 2016 was $59,559.

 

On August 9, 2016, the Company issued 100,000,000 restricted shares of common stock to Mr. Fleming, the Company’s President, for services rendered and to be rendered to the Company.

 

Starting January1, 2017, Mr. Fleming is accruing a consulting fee of $10,000 a month under a written agreement with the Company

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
Going Concern
3 Months Ended
Mar. 31, 2017
Going Concern [Abstract]  
GOING CONCERN

NOTE 7 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s liabilities significantly exceed its assets, certain notes payable are in default and the Company has generated minimal revenue. This raises substantial doubt about the Company's ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.

 

The Company’s activities to date have been supported by debt and equity financing. It has sustained losses in all previous reporting periods with an accumulated deficit of $136,800,300 as of March 31, 2017. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan. In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Common Stock
3 Months Ended
Mar. 31, 2017
Common Stock [Abstract]  
COMMON STOCK

NOTE 8 – COMMON STOCK

 

Anne Morrison was granted an option from the Company on August 8, 2016 under the Company’s 2016 Stock and Option Plan in payment for consulting services rendered by her to the Company. The Company’s board of directors approved this compensation (by unanimous written consent) on August 8, 2016. This option was exercised at $0.15 per share. The Company received $126,240 over a period of eight months as result of the exercise of this option. During the three months ended March 31, 2017, the Company determined that the remaining balance of $848,670 was not collectible and wrote off the entire balance to additional paid in capital as this is deemed to be a capital transaction.

 

On April 27, 2015, the Company completed a 3,000 to 1 reverse split of its issued and outstanding shares of common stock and on August 8, 2016 completed a 19,000 to 1 reverse split of its issued and outstanding shares of common stock. All shares and per share information in the accompanying financial statements has been retroactively restated to reflect these two reverse stock splits.

 

During the three months ended March 31, 2017, the Company issued restricted shares of its common stock as follows: 584,251 (net of 415,749 shares canceled due to excess shares issued in 2016 related to a debt conversion) shares of common stock for the conversion of $26,250 in debt.

 

During the three months ended March 31, 2017, the Company issued shares of its common stock as follows:

 

15,000,000 shares of common stock to consultants as compensation for services valued at $1,800,000. The value was based on the market price of the Company’s common stock at the date of issuance; and

 

584,251 (net of 415,749 shares canceled due to excess shares issued in 2016 related to a debt conversion) shares of common stock for the conversion of $26,250 in debt.
XML 23 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2017
Significant Accounting Policies [Abstract]  
Use of Estimates

Use of Estimates.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

Revenue Recognition

Revenue Recognition.

 

The Company recognizes revenue using four sources: Media consulting, to online television clients, monthly fees for online cloud television networks, website store revenue sharing and revenue sharing of membership fees with clients.

Cash and Cash Equivalents

Cash and Cash Equivalents.

 

The Company maintains cash balances in non-interest-bearing accounts that currently do not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of year or less are considered to be cash equivalents. As of March 31, 2017 and December 31, 2016, there were no cash equivalents except cash of $29,690 and $1,497, respectively.

Prepaid Expenses

Prepaid Expenses.

 

Prepaid expenses consist of payment for consulting fees in advance.

Stock Subscription Receivable

Stock Subscription Receivable.

 

During the year ended December 31, 2016, the holder of 6,500,000 stock options exercised those options and the Company recorded a receivable in the amount of $975,000. The remaining balance of $848,760 is recorded as a stock subscription receivable and is presented in the accompanying financial statements as a contra-equity account. During the three months ended March 31, 2017, the Company determined that the remaining balance of $848,670 was not collectible and wrote off the entire balance to additional paid in capital as this is deemed to be a capital transaction.

Income Taxes

Income Taxes.

 

The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” ASC Topic 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC Topic 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets.

 

In accordance with ASC Topic 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. No impairment charge was taken during the three months ended March 31, 2017 or 2016.

Net Loss Per Share

Net Loss Per Share.

 

Basic net loss per share is computed by dividing net loss by the weighted-average number of outstanding shares of common stock during the period. Diluted net loss per share is computed by dividing the weighted-average number of outstanding shares of common stock, including any potential common shares outstanding during the period, when the potential shares are dilutive. Potential common shares consist primarily of incremental shares issuable upon the assumed exercise of stock options and warrants to purchase common stock using the treasury stock method. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. During the three months ended March 31, 2017 and 2016, there were $421,594 and $151,367, respectively, of convertible debentures that were convertible into 9,842,118 and 862 shares of common shares that excluded since to their effect is anti-dilutive as a result of the net losses incurred during the periods.

Stock-Based Compensation

Stock-Based Compensation.

 

Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by ASC Topic 718, “Share-Based Payment.”

Derivative Financial Instruments

Derivative Financial Instruments.

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of March 31, 2017 and December 31, 2016, the Company’s only derivative financial instrument were embedded conversion feature associated with convertible debentures due to certain provisions that allow for a change in the conversion price and a warrant that to contains certain provisions that allow for a change in the exercise price if securities are issued at a price per share below the exercise price.

Fair Value Measurements

Fair Value Measurements.

 

ASC Topic 820, “Fair Value Measurements and Disclosure,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
  
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
  
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2017 and December 31, 2016.

 

The Company uses Level 2 inputs for its valuation methodology for its derivative liability as its fair value was determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

At March 31, 2017 and December 31, 2016, the Company identified the following liability that is required to be presented on the balance sheet at fair value:

 

  Fair Value  Fair Value Measurements at 
  As of  March 31, 2017 
Description March 31, 2017  

Using Fair

Value Hierarchy

 
     Level 1  Level 2  Level 3 
Derivative liability - conversion feature $768,987   --   768,987   -- 
                 
Total $768,987   --   768,987   -- 

 

  Fair Value  Fair Value Measurements at 
  As of  December 31, 2016 
Description December 31, 2016  

Using Fair

Value Hierarchy

 
     Level 1  Level 2  Level 3 
Derivative liability - conversion feature $1,559,428   --   1,559,428   -- 
                 
Total $1,559,428   --   1,559,428   -- 
Recent Pronouncements

Recent Pronouncements.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business.” The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU No. 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory,” which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU No. 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments.” ASU No. 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU No. 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.

 

In March 2016, the FASB issued ASU No. 2016-09, “Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU No. 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” ASU No. 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements.  ASU No. 2014-15 requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern.  ASU No. 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter.  Early adoption is permitted.  The Company is currently evaluating the impact of the adoption of ASU No. 2014-15 on the Company's financial statements and disclosures.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.”  ASU No. 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU No. 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  This ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU No. 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company is in the process of evaluating the impact of ASU No. 2014-09 on the Company's financial statements and disclosures.

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2017
Significant Accounting Policies [Abstract]  
Schedule of liability that is required to be presented on the balance sheet at fair value
  Fair Value  Fair Value Measurements at 
  As of  March 31, 2017 
Description March 31, 2017  

Using Fair

Value Hierarchy

 
     Level 1  Level 2  Level 3 
Derivative liability - conversion feature $768,987   --   768,987   -- 
                 
Total $768,987   --   768,987   -- 

 

  Fair Value  Fair Value Measurements at 
  As of  December 31, 2016 
Description December 31, 2016  

Using Fair

Value Hierarchy

 
     Level 1  Level 2  Level 3 
Derivative liability - conversion feature $1,559,428   --   1,559,428   -- 
                 
Total $1,559,428   --   1,559,428   --
XML 25 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Convertible Notes Payable, Including Related Party (Tables)
3 Months Ended
Mar. 31, 2017
Convertible Notes Payable Related Party [Abstract]  
Schedule of convertible notes payable
  March 31,  December 31, 
  2017  2016 
Convertible notes to stockholder due on various dates through August 24, 2016; interest at 4%; convertible in shares of common stock at 90% of the Company’s stock price at date of conversion. (in default at December 31, 2016) $59,599  $59,599 
         
Convertible note to investor due on September 22, 2017; interest at 10%; included an original issue discount of $7,245; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  30,500   56,750 
         
Convertible note to investor due on July 3, 2017; interest at 10%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  58,745   58,745 
         
Convertible note to investor due on January 11, 2017; interest at 12%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  65,000   -- 
         
Convertible note to investor due on January 11, 2017; interest at 8%; convertible in shares of common stock at 58% of the Company’s stock price at date of conversion.  58,000   -- 
         
Convertible note to investor due on January 12, 2017; interest at 6%; convertible in shares of common stock at 55% of the Company’s stock price at date of conversion.  50,000   -- 
         
Convertible note to investor due on February 15, 2017; interest at 12%; convertible in shares of common stock at 58% of the Company’s stock price at date of conversion.  43,000   -- 
         
Convertible note to investor due on February 20, 2017; interest at 10%; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.  56,750   -- 
   421,594   175,094 
Less debt discount  (249,437)  (80,796)
Convertible notes, net of discount $172,157  $94,298 

  

  March 31,  December 31, 
  2017  2016 
Convertible notes payable - related party $59,599  $59,599 
Less debt discount  --   -- 
Convertible notes - related party, net of discount $59,599  $59,599 
         
Convertible notes payable - unrelated parties $361,995  $115,495 
Less debt discount  (249,437)  (80,796)
Convertible notes - unrelated parties, net of discount $112,558  $34,699 
XML 26 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Liability (Tables)
3 Months Ended
Mar. 31, 2017
Derivative Liability [Abstract]  
Schedule of fair value of derivative liability
Stock price     $0.085 
Risk free rate      0.85%
Volatility      670%
Conversion price    $0.038–0.077 
Dividend rate      0%
Term (years)      0.01 to 0.89
Schedule of derivative liability activity
Derivative liability balance, December 31, 2016 $1,559,428 
     
Issuance of derivative liability during the period ended March 31, 2017  703,848 
     
Underlying security converted into common stock  (52,342)
     
Change in derivative liability during the period ended March 31, 2017  (1,441,947)
     
Derivative liability balance, March 31, 2017 $768,987
XML 27 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Nature of Business (Details)
Aug. 08, 2016
Apr. 27, 2015
Common stock [Member]    
Nature of Business (Textual)    
Reverse stock split, description 19,000 to 1 3,000 to 1
XML 28 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Significant Accounting Policies (Details) - USD ($)
Mar. 31, 2017
Jan. 01, 2017
Dec. 31, 2016
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]      
Derivative liability - conversion feature $ 768,987   $ 1,559,428
Total 768,987 $ 1,559,428 1,559,428
Level 1 [Member]      
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]      
Derivative liability - conversion feature  
Total  
Level 2 [Member]      
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]      
Derivative liability - conversion feature 768,987   1,559,428
Total 768,987   1,559,428
Level 3 [Member]      
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]      
Derivative liability - conversion feature  
Total  
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Significant Accounting Policies (Details Textual) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Jan. 01, 2017
Dec. 31, 2015
Significant Accounting Policies (Textual)          
Cash $ 29,690 $ 2,037 $ 1,587 $ 1,587 $ 1,790
Stock subscription receivable   $ 848,760    
Stock subscription receivable write off $ 848,670        
Exercised        
Diluted weighted-average number of outstanding shares 9,842,118 862      
Convertible debt $ 421,594 $ 151,367      
Amount of receivable recorded     $ 975,000    
Stock Option [Member]          
Significant Accounting Policies (Textual)          
Exercised     6,500,000    
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Convertible Notes Payable, Including Related Party (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Short-term Debt [Line Items]    
Convertible notes $ 421,594 $ 175,094
Less debt discount (249,437) (80,796)
Convertible notes, net of discount 172,157 94,298
Convertible notes payable - related party 59,599 59,599
Less debt discount
Convertible notes - related party, net of discount 59,599 59,599
Convertible notes payable - unrelated parties 361,995 115,495
Less debt discount (249,437) (80,796)
Convertible notes - unrelated parties, net of discount 112,558 34,699
Convertible notes to stockholder [Member]    
Short-term Debt [Line Items]    
Convertible notes 59,599 59,599
Convertible note to investor [Member]    
Short-term Debt [Line Items]    
Convertible notes 30,500 56,750
Convertible note to investor one [Member]    
Short-term Debt [Line Items]    
Convertible notes 58,745 58,745
Convertible note to investor two [Member]    
Short-term Debt [Line Items]    
Convertible notes 65,000
Convertible note to investor three [Member]    
Short-term Debt [Line Items]    
Convertible notes 58,000
Convertible note to investor four [Member]    
Short-term Debt [Line Items]    
Convertible notes 50,000
Convertible note to investor five [Member]    
Short-term Debt [Line Items]    
Convertible notes 43,000
Convertible note to investor six [Member]    
Short-term Debt [Line Items]    
Convertible notes $ 56,750
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Convertible Notes Payable, Including Related Party (Details Textual) - USD ($)
3 Months Ended
Jun. 12, 2015
Mar. 31, 2017
Convertible Notes Payable, Including Related Party (Textual)    
Maturity Date Jun. 15, 2015  
Convertible notes principal amount   $ 272,750
Derivative liability   703,848
Debt face amount   272,750
Interest expense   104,109
Original issue discount   $ 19,250
Convertible notes to stockholder [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   90.00%
Maturity Date   Aug. 24, 2016
Interest rate   4.00%
Convertible note to investor [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   50.00%
Discount issued on shares   $ 7,245
Maturity Date   Sep. 22, 2017
Interest rate   10.00%
Convertible note to investor one [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   50.00%
Maturity Date   Jul. 03, 2017
Interest rate   10.00%
Convertible note to investor two [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   50.00%
Maturity Date   Jan. 11, 2017
Interest rate   12.00%
Convertible note to investor three [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   58.00%
Maturity Date   Jan. 11, 2017
Interest rate   8.00%
Convertible note to investor four [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   6.00%
Maturity Date   Jan. 12, 2017
Interest rate   55.00%
Convertible note to investor five [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   12.00%
Maturity Date   Feb. 15, 2017
Interest rate   58.00%
Convertible note to investor six [Member]    
Convertible Notes Payable, Including Related Party (Textual)    
Stock price, Percentage   50.00%
Maturity Date   Feb. 20, 2017
Interest rate   10.00%
XML 32 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Short Term Note (Details) - USD ($)
Jun. 12, 2015
Mar. 31, 2017
Dec. 31, 2016
Mar. 17, 2015
Short Term Note (Textual)        
Loan       $ 25,000
Loan due date Jun. 15, 2015      
Loan interest rate per day, value       $ 55
Interest for loan, description The parties amended this promissory note so that the loan was extended and will accrue interest at $55 per day until this note is paid in full.      
Accrued interest   $ 41,134 $ 36,184  
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Liability (Details)
3 Months Ended
Mar. 31, 2017
$ / shares
Derivative [Line Items]  
Stock price $ 0.085
Risk free rate 0.85%
Volatility 670.00%
Dividend rate 0.00%
Minimum [Member]  
Derivative [Line Items]  
Conversion price $ 0.038
Term (years) 4 days
Maximum [Member]  
Derivative [Line Items]  
Conversion price $ 0.077
Term (years) 10 months 21 days
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Liability (Details 1) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Derivative Liability [Abstract]    
Derivative liability balance, December 31, 2016 $ 1,559,428  
Issuance of derivative liability during the period ended March 31, 2017 703,848  
Underlying security converted into common stock (52,342)  
Change in derivative liability during the period ended March 31, 2017 (1,441,947) $ (57,722)
Derivative liability balance, March 31, 2017 $ 768,987  
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Transactions (Details) - USD ($)
12 Months Ended
Aug. 09, 2016
Feb. 05, 2016
Dec. 31, 2016
Mar. 31, 2017
Jan. 01, 2017
Related Party Transaction [Line Items]          
Due to officer     $ 40,320 $ 19,624  
Convertible notes payable     115,495 361,995  
Repayments of loans     4,990    
Principal amount of debt     59,559 $ 59,559  
Mr. Fleming [Member]          
Related Party Transaction [Line Items]          
Restricted shares issued for services 100,000,000        
Accruing a consulting fee         $ 10,000
Team AJ, LLC [Member]          
Related Party Transaction [Line Items]          
Restricted shares issued for acquisition   1,184      
Mr. Acunto [Member]          
Related Party Transaction [Line Items]          
Convertible notes payable     $ 64,589    
Interest rate     4.00%    
Accrued interest     $ 2,510    
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Going Concern (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Going Concern (Textual)    
Accumulated deficit $ (136,800,300) $ (135,681,801)
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Common Stock (Details) - USD ($)
3 Months Ended
Aug. 08, 2016
Apr. 27, 2015
Mar. 31, 2017
Common Stock (Textual)      
Remaining balance uncollectible     $ 848,670
Common stock [Member]      
Common Stock (Textual)      
Reverse stock split, description 19,000 to 1 3,000 to 1  
Common stock issued conversion of debt     $ 26,250
Common stock issued conversion of debt, shares     584,251
Options exercised per share $ 0.15    
Stok option exercise $ 126,240    
Canceled shares issued to debt conversion     415,749
Restricted shares [Member]      
Common Stock (Textual)      
Common stock issued conversion of debt     $ 26,250
Common stock issued conversion of debt, shares     584,251
Canceled shares issued to debt conversion     415,749
Consultants [Member]      
Common Stock (Textual)      
Shares issued for services     $ 1,800,000
Shares issued for services, shares     15,000,000
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