UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2017

 

¨   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: 333-204011

 

BANG HOLDINGS CORP.
(Name of registrant as specified in its charter)

 

Colorado   46-5707130
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)

 

1400 NE Miami Gardens Drive, Suite 202

North Miami Beach, FL 33179

(Address of principal executive offices) (Zip Code)

 

(305) 600-2417

(Registrant’s telephone number, including area code)

 

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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

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

 

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

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨
  Emerging growth company x

 

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 accounting 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 Exchange Act). Yes ¨ No x

 

As of May 19, 2017, there were 23,389,572 shares of common stock issued and outstanding.

 

 

 

 

TABLE OF CONTENTS

 

  Page
PART I – FINANCIAL INFORMATION  
   
Item 1. Financial Statements. 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 22
Item 4. Controls and Procedures. 22
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings. 23
Item 1A. Risk Factors. 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 23
Item 3. Defaults Upon Senior Securities. 23
Item 4. Mine Safety Disclosures. 23
Item 5. Other Information. 23
Item 6. Exhibits. 24

 

  2  

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

  3  

 

 

BANG HOLDINGS, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    March 31,     December 31,  
    2017     2016  
    (Unaudited)        
             
ASSETS                
                 
CURRENT ASSETS                
Cash   $ 106,214     $ 244,968  
Prepaid expenses     14,696       10,789  
Inventory, net of allowance of $72,332     -       -  
                 
TOTAL CURRENT ASSETS     120,910       255,757  
                 
FURNITURE AND EQUIPMENT, Net     4,761       4,056  
                 
TOTAL ASSETS   $ 125,671     $ 259,813  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY                
                 
CURRENT LIABILITIES                
Accounts payable   $ 56,017     $ 63,957  
Accrued expenses     152,714       136,230  
Accrued payroll and related expenses     241,670       211,599  
Loan payable     6,500       6,500  
Due to related party     55,000       65,507  
Convertible notes payable     85,000       85,000  
Convertible notes payable - related party     500,000       500,000  
                 
TOTAL CURRENT LIABILITIES     1,096,901       1,068,793  
                 
COMMITMENTS AND CONTINGENCIES     -       -  
                 
STOCKHOLDERS’ DEFICIENCY                
Preferred stock, $0.0001 par value, 50,000,000 shares authorized,  no  shares issued and outstanding     -       -  
Common stock, $0.0001 par value, 500,000,000 shares authorized,  23,389,572 and 23,342,572 shares issued and outstanding, respectively     2,340       2,336  
Additional paid in capital     2,928,917       2,836,375  
Accumulated deficit     (3,902,487 )     (3,647,691 )
TOTAL STOCKHOLDERS' DEFICIENCY     (971,230 )     (808,980 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY   $ 125,671     $ 259,813  

 

See accompanying notes to condensed consolidated financial statements.

 

  4  

 

   

BANG HOLDINGS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

    For the Three Months Ended  
    March 31,
2017 		    March 31,
2016 		 
             
REVENUE                
Sales   $ -     $ 60  
                 
COST OF GOODS SOLD                
Product costs     -       56  
Total Cost of Goods Sold     -       56  
                 
Gross Profit     -       4  
                 
OPERATING EXPENSES                
Sales and marketing     19,892       10,829  
Professional fees     20,936       10,416  
General and administrative     199,287       195,815  
Total Operating Expenses     240,115       217,060  
                 
NET LOSS FROM OPERATIONS     (240,115 )     (217,056 )
                 
OTHER EXPENSES                
Interest expense     (14,681 )     (14,759 )
Total Other Expenses     (14,681 )     (14,759 )
                 
Net loss before provision for income taxes     (254,796 )     (231,815 )
                 
Provision for Income Taxes     -       -  
                 
NET LOSS   $ (254,796 )   $ (231,815 )
                 
Net loss per share - basic and diluted   $ (0.01 )   $ (0.01 )
                 
Weighted average number of shares outstanding during the year - basic and diluted     23,357,625       22,586,691  

 

See accompanying notes to condensed consolidated financial statements.

 

  5  

 

   

BANG HOLDINGS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    For the Three Months Ended  
    March 31,
2017 		    March 31,
2016 		 
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (254,796 )   $ (231,815 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation     92,546       84,223  
Amortization of debt discount     -       1,784  
Depreciation expense     342       342  
Changes in operating assets and liabilities:                
Inventory     -       55  
Prepaid expenses     (3,907 )     -  
Accounts payable, accrued expenses and accrued payroll and related expenses     38,615       49,102  
Due to related party - accrued rent     (10,507 )     -  
Net Cash Used In Operating Activities     (137,707 )     (96,309 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Cash paid for purchase of fixed assets     (1,047 )     -  
Net Cash Used In Investing Activities     (1,047 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Advances from related party     -       7,500  
Repayments of related party advances     -     (7,500 )
Proceeds from loan payable     -       8,000  
Proceeds from convertible note - related party     -       30,000  
Proceeds from exercise of warrants     -       110,000  
Net Cash Provided By Financing Activities             148,000  
                 
NET INCREASE / (DECREASE)  IN CASH     (138,754 )     51,691  
                 
CASH AT BEGINNING OF PERIOD     244,968       17,264  
                 
CASH AT END OF PERIOD   $ 106,214     $ 68,955  
                 
Supplemental cash flow information:                
Cash paid for income taxes   $ -     $ -  
Cash paid for interest expense   $ -     $ -  
                 
Supplemental disclosure of non-cash investing & financing activities:                
Debt discount on convertible notes issued in the form of warrants   $ -     $ 10,500  
Accrued stock-based compensation   $ -     $ 55,260  
Prepaid stock based compensation   $ -     $ 19,753  
Stock issued for settlement of loan   $ -     $ 1,500  

 

See accompanying notes to condensed consolidated financial statements.

 

  6  

 

 

BANG HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2017

 

NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN

 

(A) Organization

 

Bang Holdings Corp. was incorporated in the State of Colorado on May 13, 2014. The Company was organized to develop and sell E-Cigarette products.

 

Bang Vapor, Inc. was incorporated in the State of Florida on October 27, 2014. The Company was organized to develop and sell E-Cigarette products.

 

Bang Digital Media, Inc. was incorporated in the State of Florida on November 23, 2015. The Company was organized to develop digital and electronic media.

 

(B) Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2017 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2017.

 

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2016 and for the year then ended, which were filed with the Securities and Exchange Commission ("SEC") on Form 10-K on April 10, 2017.

 

(C) Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of Bang Holdings Corp. and its wholly owned subsidiaries Bang Vapor, Inc. (from October 27, 2014) and Bang Digital Media, Inc. (from November 23, 2015) and are hereafter referred to as (the “Company’). All intercompany accounts have been eliminated in the consolidation.

 

(D) Going Concern

 

For the three months ended March 31, 2017, the Company has incurred net operating losses and used cash in operations. As of March 31, 2017, the Company has an accumulated deficit of $3,902,487 and used cash in operations of $137,707. The company is also in default on the repayment of its convertible note payable of $500,000. Losses have principally occurred as a result of the substantial resources required for marketing of the Company’s products and services which included the general and administrative expenses associated with its organization and product development.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

 

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(A) Cash and Cash Equivalents

 

The Company considers all highly liquid temporary cash instruments with a maturity of three months or less to be cash equivalents.

  

(B) Use of Estimates in Financial Statements

 

The presentation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the period covered by these condensed consolidated financial statements include the valuation of website costs, valuation of deferred tax asset, stock based compensation and beneficial conversion features on convertible debt.

 

(C) Fair value measurements and Fair value of Financial Instruments

 

The Company adopted FASB ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.

 

(D) Computer and Equipment and Website Costs

 

Computer Equipment and Website Costs are capitalized at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is three to five years for all categories. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of computer equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded in operations.

 

Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized.

 

  8  

 

 

The Company has adopted the provisions of ASC 350-50-15, “Accounting for Web Site Development Costs.” Costs incured in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years.

 

    Depreciation/
    Amortization
Asset Category   Period
Furniture and fixtures   5 Years
Computer equipment   3 Years
Website costs   3 Years

  

Computer and equipment and website costs consisted of the following:

 

    March 31,
2017 		    December 31,
2016 		 
             
Computer equipment   $ 7,892     $ 6,845  
Website development     -       -  
Total     7,892       6,845  
Impairments     -       -  
Accumulated depreciation     (3,131 )     (2,789 )
Balance   $ 4,761     $ 4,056  

 

Depreciation expense for the three months ended March 31, 2017 and 2016 was $342 and $342, respectively.

 

(E) Inventories

 

The Company’s inventories consist entirely of purchased finished goods. Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis. The Company wrote down inventory to net realizable value as of December 31, 2016 and recorded an inventory valuation allowance of $72,332.

 

(F) Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with FASB ASC Topic. 605 “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue when the products are shipped to the customers and collectability is reasonable assured.

 

The Company recognizes revenue from advertising transactions when there is persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

 

(G) Advertising, Marketing and Promotion Costs

 

Advertising, marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying statement of operations. For the three months ended March 31, 2017 and 2016, advertising, marketing and promotion expense was $7,645 and $5,094, respectively.

 

(H) Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

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(I) Loss Per Share

 

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted loss per share is calculated by dividing the Company’s net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. The Company had 2,029,107 shares issuable upon the exercise of options and warrants and 1,863,029 shares issuable upon conversion of convertible notes payable that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for three months ended March 31, 2017. The Company had 1,529,991 shares issuable upon the exercise of options and warrants and 1,448,571 shares issuable upon conversion of convertible notes payable that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for three months ended March 31, 2016. 

 

(J) Stock-Based Compensation

 

The Company recognizes compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC Topic 505, Equity Based Payments to Non-Employees. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

 

(K) Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

 

(L) Shipping and Handling Costs

 

The Company includes shipping and handling fees billed to customers as revenue and shipping and handling costs to customers as cost of revenue.

 

(M) Reclassifications

 

Certain items in the prior year financial statements have been reclassified to conform to the current year presentation.

 

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(N) Recent Accounting Pronouncements

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15,  Presentation of Financial Statements-Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We adopted the provisions of ASU 2014-15 on January 1, 2017. The adoption of ASU 2014-15 did not materially impact our condensed consolidated financial position, results of operations or cash flows.

 

 In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging” (topic 815). The FASB issued this update to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. We adopted the provisions of ASU 2016-06 on January 1, 2017. The adoption of ASU 2016-06 did not materially impact our condensed consolidated financial position, results of operations or cash flows.

 

 In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. We adopted the provisions of ASU 2016-09 on January 1, 2017. The adoption of ASU 2016-06 did not materially impact our condensed consolidated financial position, results of operations or cash flows.

 

 In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 addresses specific cash flow classification issues where there is currently diversity in practice including debt prepayment and proceeds from the settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the new standard on its condensed consolidated financial statements.

 

 Other recent accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or are not believed by the Company management, to have a material impact on the Company’s present or future condensed consolidated financial statements. 

 

NOTE 3 – CONVERTIBLE NOTES PAYABLE

 

On July 25, 2016, the Company entered into an agreement for the issuance of a convertible note to a third party lender for $50,000. The note accrues interest at 10% per annum maturing on July 25, 2017 and is convertible into common stock at the discretion of the holder at a conversion price of $1.50 per share, subject to adjustment. The outstanding principal balance on the note at March 31, 2017 and December 31, 2016 was $50,000. Accrued and unpaid interest on the note at March 31, 2017 and December 31, 2016 was $3,425 and $2,192, respectively. 

 

On July 29, 2016, the Company entered in an agreement with a third party for a convertible promissory note for gross proceeds of $10,000. The note bears interest at 10% per annum, is due on July 29, 2017 and is convertible into common stock at the discretion of the holder at a conversion price of $1.50 per share, subject to adjustment. The outstanding principal balance on the note at March 31, 2017 and December 31, 2016 was $10,000. Accrued and unpaid interest on the note at March 31, 2017 and December 31, 2016 was $674 and $427, respectively.  

 

  11  

 

 

On October 10, 2016, the Company entered in an agreement with a third party for a convertible promissory note for gross proceeds of $25,000. The note bears interest at 10% per annum, is due on October 10, 2017 and is convertible into common stock at the discretion of the holder at a conversion price of $1.50 per share, subject to adjustment. The outstanding principal balance on the note at March 31, 2017 and December 31, 2016 was $25,000. Accrued and unpaid interest on the note at March 31, 2017 and December 31, 2016 was $1,186 and $569, respectively.  The Company may prepay the note in cash in full according to the following schedule:

 

0-180 days: 117.5% of principal amount

180-270 days: 115.0% of principal amount

270-360 days: 112.5% of principal amount

 

NOTE 4 – CONVERTIBLE NOTES PAYABLE – RELATED PARTIES

 

On August 22, 2014, the Company entered into an agreement to issue an unsecured convertible promissory note for $500,000 and security purchase agreement for 1,000,000 shares of common stock for $350,000 ($0.35 per share), respectively with a related party. The note bears interest at an annual rate of 10% and is payable on or before 12 months from the date of issuance. The Company issued the holder a total of 1,500,000 warrants exercisable at a cashless conversion price of $.35 for a period of 5 years. In addition, the note may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $0.35 per share, subject to adjustment.

 

The outstanding principal balance on the note at March 31, 2017 and December 31, 2016 was $500,000. Accrued and unpaid interest on the note at March 31, 2017 and December 31, 2016 was $130,548 and $118,219, respectively. The Company is currently in default of the note, making the entire unpaid principal and interest due and payable. 

 

NOTE 5 – STOCKHOLDERS’ EQUITY

 

During the three months ended March 31, 2017, the Company issued 47,000 shares of common stock and recorded stock-based compensation with a fair value of $56,334 which is included in total stock-based compensation.

 

NOTE 6 – OPTIONS AND WARRANTS  

 

The following tables summarize all options grants to employees during the three months ended March 31, 2017 and the related change during the period is presented below.

 

    Number of
Options 		    Weighted Average
Exercise Price 		 
Stock Options                
Balance at December 31, 2016     1,360,000     $ 0.18  
Granted     —       —  
Exercised     —       —  
Cancelled/Forfeited     —       —  
Balance at March 31, 2017     1,360,000     $ 0.18  

 

      Options  Outstanding     Options Exercisable  
Price Range     Number
Outstanding at
March 31,
2017 		    Weighted
Average
Remaining
Contractual Life 		    Weighted
Average
Exercise
Price 		    Number
Exercisable at
March 31,
2017 		    Weighted
Average
Exercise
Price 		 
  $.001 - $0.50       1,360,000       1.38     $ 0.18       870,000     $ 0.20  

 

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During the three months ended March 31, 2017 and 2016, the Company recorded total option expense of $36,212 and $9,210, respectively. As of March 31, 2017, the Company has $43,773 in stock-based compensation related to stock options that is yet to be vested. The intrinsic value of the vested stock options at March 31, 2017 and December 31, 2016 was $1,129,840 and $1,004,530, respectively.

 

The following tables summarize all warrant grants during the three months ended March 31, 2017 and the related change during the period is presented below. 

 

    Number of Warrants     Weighted Average
Exercise Price 		 
Stock Warrants                
Balance at December 31, 2016     669,107     $ 0.37  
Granted     —       —  
Exercised     —       —  
Expired     —       —  
Balance at March 31, 2017     669,107     $ 0.37  

 

NOTE 7 – RELATED PARTIES

 

On October 1, 2015, the Company entered into a property lease agreement with a Director of the Company and father of the President. The term of the lease is for one year with an annual rent of $30,000 per year. The Company at it option has the right to extend for 9 additional years. On July 1, 2016, the lease was cancelled and the Company entered into a new lease agreement (see below). As of March 31, 2017 and December 31, 2016, the Company accrued rent of $22,500 and $22,500, respectively under the lease agreement and is included in due to related party at March 31, 2017 and December 31, 2016. Rent expense under the lease for the three months ended March 31, 2017 and 2016 was $0 and $7,500, respectively.

 

On July 1, 2016, the Company entered into a property lease agreement with a Director of the Company and father of the President. The term of the lease is for one year with an annual rent of $30,000 per year. The Company at it option has the right to extend for 10 additional years. As of March 31, 2017 and December 31, 2016, the Company accrued rent of $22,500 and $15,000, respectively, under the lease agreement and is included in due to related party at March 31, 2017 and December 31, 2016. Rent expense under the lease for three months ended March 31, 2017 was $7,500.

  

Prior to July 1, 2016, the Company leased office space on a month to month basis from the Company president. The monthly rental payment was $2,000 per month. No formal lease existed under the agreement. For the three months ended March 31, 2017 and 2016, the Company recorded rent expense of $0 and $6,000, respectively. During the three months ended March 31, 2017, $18,007 was repaid. As of March 31, 2017 and December 31, 2016, the Company accrued rent of $10,000 and $28,000, respectively due to the Company’s president and is included in due to related party at March 31, 2017 and December 31, 2016.

 

As of March 31, 2017 and December 31, 2016, the Company owed its President accrued salary of $227,000 and $188,000, respectively.

 

On December 6, 2016, the Company made a pre-payment of $10,000 to a non-profit church (the “Church”), for usage of the Church’s facilities at a later date in April 2017. An employee of the Company is a member of the board of directors and a founding member of the Church.

 

On March 20, 2017, the Company entered into an agreement with the Church to provide social media services. The agreement is for two years, starting April 1, 2017, and the Company will be compensated $10,000 monthly along with compensation based on online views and impressions calculated at a cost per thousand (“CPM”) of $10, to be calculated and paid by the Church on a monthly basis. The CPM rate can be modified by the Company, at its sole discretion, every ninety days to reflect prevailing market rates.

  

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS

 

The following discussion and analysis of the results of operations and financial condition of Bang Holdings Corp. (the “Company”, “we”, “us” or “our”) should be read in conjunction with the financial statements of Bang Holdings Corp. and the notes to those financial statements that are included elsewhere in this Form 10-Q. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Business sections in the financial statements and footnotes included in the Company’s Form 10-K filed on April 10, 2017 for the year ended December 31, 2016 Words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

 

Bang Holdings Corp. was incorporated in the state of Colorado on May 13, 2014. It is a brand management and digital advertising company that provides content and an influencer-based marketing network to the cannabis industry. We are a development-stage company and since our inception we have generated only minimal revenues from business operations.

 

Our independent registered public accounting firm has issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going business unless we obtain additional capital to pay our ongoing operational costs. Accordingly, we must locate sources of capital to pay our operational costs.

 

Our operational expenditures are primarily related to development of Bang’s multi-channel advertising network, marketing costs associated with attracting and retaining users, and the costs related to being a fully reporting company with the Securities and Exchange Commission.

 

Business Overview

  

Overview

 

Bang Holdings Corp wholly owns two subsidiaries, Bang Digital Media, a cannabis focused digital media company, and Bang Vapor, an e-juice company.

 

Bang Digital Media is the hub for all ‘cannabusiness’ related advertising, content creation, technology and marketing. It consists of two divisions, the multi-platform 4TTnetwork, and a network of social media influencers that we call the Green Monkey Network.

 

The 4TTnetwork is comprised primarily of specifically targeted audiences. These are 4TwentyToday, VaporBang, and 4TT/V which cross the social media platforms of Facebook, Twitter, Massroots, Instagram, SnapChat and YouTube.

 

4TwentyToday is a digital, multi-platform channel that enables us to target advertising for Bang Holdings products and services across social media platforms. We currently have in excess of 625,000 users of our network, with a steady growth rate of around three thousand subscribers per week. By continuing to create targeted, quality content for this community on a daily basis 4TwentyToday has, for example, created one of the most actively engaged marijuana pages on Facebook. This has built high levels of trust and goodwill in the community, which will be convertible to revenues once we have reached a critical mass of users.

 

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Using the same skillset, we are developing VaporBang – a digital, multi-platform community for vaping enthusiasts. At more than 88,000 strong, ours is the largest vaping community on Facebook. This enabled us to carry out beta testing of product to this targeted audience and to develop strong recognition for the Bang brand.

 

Our most successful post on Facebook in 2016 had 15.6 million views, leading to 1,832,507 “reactions,” 610,000 “shares,” and 164,000 “comments.” The post was created to build upon our social media footprint related to our business, not specifically towards our products.

 

The ‘Green Monkey Network’ is a network of social media influencers who are open to working as ambassadors in the marijuana industry. These influencers expand the Bang network by more than 12 million users.

 

Ultimately, the KPI (Key Performance Indicator) of Bang Digital Media is in the direct and expanded growth of our networks. By continuing to grow 4TwentyToday and the ‘Green Monkey Network’ to 100 million users we will have the digital reach to propel marijuana-friendly brands into the spotlight.

  

Bang Vapor is a marketer of vaporizer pens and E-liquid for the vaporizer industry, through the use of a razor and razor blade model. “Electronic cigarettes” or “e-cigs” and “vaporizers” are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash or carbon monoxide.

 

Bang Vapor completed its soft launch in the first quarter of 2016. Due to costs involved in meeting the new deeming regulations imposed by the FDA on E-liquid Bang Vapor will not be sustainable or profitable moving forward. During the first quarter of 2017, all Bang Vapor digital property - i.e. Facebook and other social media pages, created content, subscriber lists, etc. have been transferred to Bang Digital Media. 

 

Trademarks

  

On April 15, 2015, the Company applied for trademarks for “BANG,” (Ser. No. 86598258 “BANG VAPOR,” (Ser. No. 86598261) and “BANG VAPOR CLUB.” (Ser. No. 86598264). Those trademarks were granted and became officially registered on March 29, 2016.

 

On January 25 th , 2017, the Company applied for trademarks for “American Toker,” (Ser. No. 87312970, Ser. No. 87312927, Ser. No. 87312838, Ser. No. 87312795). Those trademarks were granted and became officially registered on January 25 th , 2017.

 

Marketing and Sales

 

The Company’s marketing strategy is a multi-pronged approach that includes viral marketing strategies, celebrity & social influencer endorsements, affiliate marketing, conventional online advertising and attending tradeshows. During 2016, we spent approximately $100,000 on the creation and growth of Bang Digital Media, the primary social media footprint of Bang Holdings Corp.  We employ only one full-time employee who handles all of the Company's social media accounts, which currently has approximately 1,600,000 subscribers across various social media platforms, including, but not limited to, Facebook, YouTube, Instagram, and MassRoots.

 

Viral Marketing:  The marketing team aims to produce “hits” through the release of content developed by the company on 4TwentyToday’s “YouTube” and “Facebook” pages, other social media, and our website. A portion of our marketing budget will be allocated to developing viral videos produced by our CEO, Steve Berke. Mr. Berke has had significant successes popularizing YouTube videos in the past, including, “Pot Shop,” which generated around 14.5 million views. In addition to Mr. Berke’s YouTube successes, his two campaigns for mayor of Miami Beach received national coverage, including the cover of the New York Times, the cover of the Huffington Post and a 6-page spread in Maxim magazine. Mr. Berke was named one of the top eight comedians to ever run for office by ABC News. We intend to capitalize on his popularity, and reputation as a leading advocate for medical marijuana, through 4TwentyToday, a channel on YouTube and Facebook to promote the Company.   Our research has shown there are three distinct user groups in the vapor space; the hardcore vapor, ex-smokers/smokers wanting to replace their nicotine addiction, and marijuana users.  Marijuana enthusiasts are familiar with vaping technology and are a niche market that is easy for us to reach and promote our flavors and products to with limited competition from other competitors in the vaporizer and e-liquid space.

 

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Celebrity and Social Influencer Endorsements:  We will build partnerships with influential social media personalities and celebrities in several key genres to serve as brand ambassadors. Each brand ambassador will have their own affiliate website to sell Bang products and make commissions off of each sale. By giving a unique platform to social media influencers to monetize their followings, Bang Vapor will be able to build brand awareness and employ an army of influencers to sell product in order to become a leading brand in the e-cig/vaporizer space.

 

Size of Market

 

According to the Tobacco Vapor Electronic Cigarette Association, there are approximately 3.5 million e-cigarette users. And while, according to Wells Fargo Securities, the total tobacco volume is decreasing by around 2% per year, the smokeless tobacco volume increased by around 5%. Additionally, Wells Fargo analysts expect the e-cigarette annual growth to be over 20%. (Source: www.ecigarette-politics.com/files/WF-DallasMarch2014.ppt)

 

According to research carried out by the Pew Research Center, 49 percent of Americans admit to having used marijuana, and some 18.9 million have done so within the last calendar month. (Source: http://www.pewresearch.org/fact-tank/2015/04/14/6-facts-about-marijuana/) 

 

According to industry research the annual legal marijuana market is expected to grow to $22 billion within four years. (Source: The State of Legal Marijuna Markets, 3 rd Edition by Arcview Market Research)

 

There is significant market crossover within the communities Bang has built online, as many marijuana users are vaporizing their pot.

 

Competition

  

In the marijuana related digital media space, there is only one reasonable comparable that is publicly traded, Massroots. However, as opposed to their model, which resides on a platform that serves a more narrow demographic, Bang Digital Media creates multi-platform channels that directly serve the marijuana user, but can also be served to a far greater number of marijuana-friendly users. This allows for a far greater and more sustainable growth rate.

 

Plan of Operations

 

In the twelve month period, we intend to develop our business in the following areas:

 

· Bang Vapor intends to liquidate inventory and cease all operations in 2017. Bang’s future in the vapor industry will be entirely managed by Bang Digital Media and focused on content creation, social media and digital marketing.

 

· Bang Digital Media entered into an agreement with Elevation Ministries to run their digital marketing, social media, and to manage exploitation rights of their ‘Church of Cannabis’ launching in Q2 2017. The two-year contract signed and announced in Q1 2017, will be worth a minimum of $250K and potentially more than a $1 million with bonuses.

 

Bang Digital Media will continue to pursue new clients to coordinate digital strategy, social media management, video production, web development, and other online marketing services.

 

· Bang Digital Media is building out a fully automated digital advertising platform, with a projected Q4 2017 launch. The platform allows publishers to always receive the highest price for their advertising space, while advertisers can reach the maximum number of targeted customers, including cannabis customers, at the best price.

 

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If we are unable to build our customer base or gain any clients, we will be forced to cease our development and/or marketing operations until we raise money. Attempting to raise capital after failing in any phase of our development plan could be difficult. As such, if we cannot secure additional proceeds, we will have to cease operations and investors would lose their entire investment.

 

We intend to raise additional capital through private placements now that we have a quotation on the OTC Bulletin Board. If we need additional cash but are unable to raise it, we will either suspend marketing operations until we do raise the cash, or cease operations entirely. Other than as described in this paragraph, we have no other financing plans.

 

Financing

 

On August 22, 2014, the Company entered into a Securities Purchase Agreement with Platinum Partners Liquid Opportunity Master Fund LP (“Platinum”) whereby the Company issued 1,000,000 shares of Common Stock to the Company at $0.35 per share for a purchase price of $350,000. In consideration for Platinum agreeing to purchase the 1,000,000 shares, the Company agreed to issue to Platinum share purchase warrants entitling Platinum the right to acquire 1,500,000 shares of the Company’s Common stock, at $0.35 per share. In October 2014, Platinum purchased the 10% Convertible Debenture for the aggregate amount of $500,000. On September 25, 2015, Platinum exercised 285,714 warrants for cash proceeds of $100,000. On January 26, 2016 the related party exercised 28,581 warrants for cash proceeds of $10,000. On March 16, 2016 the related party exercised 285,714 warrants for cash proceeds of $100,000. The outstanding principal balance on the note at March 31, 2017 was $500,000. Accrued and unpaid interest on the note at March 31, 2017 was $130,548. The Company is currently in default of the note, making the entire unpaid principal and interest due and payable.

 

Results of Operations

 

For the three months ended March 31, 2017 and 2016

 

Revenue:

 

From inception through March 31, 2017, the Company has generated minimal revenues. 

 

Operating Expenses:

 

We incurred operating expenses of $240,115 for the three months ended March 31, 2017, as compared to $217,060 during the three months ended March 31, 2016, an increase of $23,055. The increase in operating expenses is primarily attributable to an increase of $9,063 in sales and marketing expenses, an increase of $10,520 in professional fees and an increase of $3,472 in general and administrative expenses. 

 

Interest Expense:

 

Interest expense for the three months ended March 31, 2017 was $14,681, primarily attributable to the Company’s convertible notes. During the three months ended March 31, 2016, the Company recorded interest expense of $14,759.

 

Net Loss:

 

We had a net loss of $254,796 for the three months ended March 31, 2017 as compared to $231,815 for the three months ended March 31, 2016, an increase of $22,981. The increase in net loss is primarily due to the increase in operating expenses.

 

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Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. We have been funding our operations through the sale of our common stock and loans.

 

Our primary uses of cash have been for payroll and operating expenses. The following trends are reasonably likely to result in a material decrease in our liquidity in the near term: 

 

· Development of a Company website

 

· Exploration of potential marketing and advertising opportunities, and

 

· The cost of being a public company

 

Our net revenues are not sufficient to fund our operating expenses. At March 31, 2017, we had a cash balance of $106,214. We currently have no material commitments for capital expenditures. We estimate that based on current plans and assumptions, our available cash will not be sufficient to satisfy our cash requirements under our present operating expectations without further financing. Other than working capital, we presently have no other alternative source of working capital. We may need to raise significant additional capital to fund our operating expenses, pay our obligations, and grow our company.  Therefore, our future operations may be dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.

 

We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Management has determined that additional capital will be required in the form of equity or debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further accrue liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.

 

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. 

 

Going Concern and Management’s Liquidity Plans

 

As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of $3,902,487 at March 31, 2017 and a net loss of $254,796. The Company has generated only minimal revenues since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

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The ability of the Company to continue its operations is dependent on management’s plans, which include the raising of capital through debt and/or equity markets, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no assurance that the Company will be able to raise any additional capital.

 

The Company may also require additional funding to finance the growth of our anticipated future operations as well as to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.

 

The Company’s plan regarding these matters is to raise additional debt and/or equity financing to allow the Company the ability to cover its current cash flow requirements and meet its obligations as they become due. There can be no assurances that financing will be available or if available, that such financing will be available under favorable terms. In the event that the Company is unable to generate adequate revenues to cover expenses and cannot obtain additional financing in the near future, the Company may seek protection under bankruptcy laws. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Working Capital

 

The following table summarizes total current assets, liabilities and working capital at March 31, 2017, compared to December 31, 2016:

 

    March 31,
2017 		    December 31,
2016 		    Increase/(Decrease)  
Current Assets   $ 120,910     $ 255,757     $ (134,847 )
Current Liabilities   $ 1,096,901     $ 1,068,793     $ 28,108  
Working Capital Deficit   $ (975,991 )   $ (813,036 )   $ (162,955 )

 

At March 31, 2017, we had a working capital deficit of $975,991, as compared to working capital deficit of $813,036 at December 31, 2016, an increase of $162,955.

 

Net Cash Used In Operating Activities

 

Net cash used in operating activities of $137,707 during the three months ended March 31, 2017 consisted primarily of an increase in accounts payable and accrued expenses of $38,615, a decrease in accrued rent payable to a related party of $10,507 and loss from operations adjusted by non-cash items totaling $92,888.

 

Net cash used in operating activities of $96,309 during the three months ended March 31, 2016 consisted primarily of an increase in accounts payable and accrued expenses of $49,102 and loss from operations adjusted by non-cash items totaling $86,349.

 

Net Cash Used In Investing Activities

 

Net cash used in investing activities during the three months ended March 31, 2017 consisted of the purchase of fixed assets of $1,047. There was no cash used in investing activities during the three months ended March 31, 2016. 

 

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Net Cash Provided By Financing Activities

 

There was no cash provided by financing activities during the three months ended March 31, 2017. 

 

Net cash provided by financing activities of $148,000 during the three months ended March 31, 2016 consisted primarily proceeds from related party convertible notes of $30,000, proceeds from the exercise of warrants of $110,000, loan proceeds of $8,000 and proceeds from related party advances of $7,500. In addition the Company repaid related party advances in the amount of $7,500.

 

Off-Balance Sheet Arrangements

 

We had no off-balance sheet arrangements as of March 31, 2017.

 

Critical Accounting Policies and Estimates

  

Use of Estimates in Financial Statements

  

The presentation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the period covered by these financial statements include the valuation of website costs, valuation of deferred tax asset, stock based compensation and any beneficial conversion features on convertible debt.

 

Fair value measurements and Fair value of Financial Instruments

 

The Company adopted FASB ASC Topic 820, Fair Value Measurements . ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

  

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet date.  

 

Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with FASB ASC Topic 605, Revenue Recognition . In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue when the products are shipped to the customers and collectability is reasonable assured.

 

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The Company recognizes revenue from advertising transactions when there is persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. 

 

Stock-Based Compensation

 

The Company recognizes compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. 

 

Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC Topic 505, Equity Based Payments to Non-Employees . In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification. 

 

Recent Accounting Pronouncements

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15,  Presentation of Financial Statements-Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We adopted the provisions of ASU 2014-15 on January 1, 2017. The adoption of ASU 2014-15 did not materially impact our condensed consolidated financial position, results of operations or cash flows.

 

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging” (topic 815). The FASB issued this update to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. We adopted the provisions of ASU 2016-06 on January 1, 2017. The adoption of ASU 2016-06 did not materially impact our condensed consolidated financial position, results of operations or cash flows.

 

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. We adopted the provisions of ASU 2016-09 on January 1, 2017. The adoption of ASU 2016-06 did not materially impact our condensed consolidated financial position, results of operations or cash flows.

 

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In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 addresses specific cash flow classification issues where there is currently diversity in practice including debt prepayment and proceeds from the settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the new standard on its condensed consolidated financial statements.

 

Other recent accounting pronouncements issued by FASB (including the Emerging Issues Task Force), the AICPA and the SEC, did not or are not believed by the Company management, to have a material impact on the Company’s present or future condensed consolidated financial statements. 

 

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

ITEM 4 CONTROLS AND PROCEDURES

 

We carried out an evaluation required by Rule 13a-15 of the Exchange Act under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Report.

 

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Board and the Chief Executive Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based upon that evaluation, management concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company 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, and that such information is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; (4) lack of expertise with complex GAAP and Securities and Exchange Commission ("SEC") reporting matters and (5) management is dominated by one individual without adequate compensating controls. The aforementioned material weaknesses were identified by our Principal Executive and Financial Officer in connection with the review of our financial statements as of March 31, 2017. At this time, management has decided that given the risks associated with this lack of segregation of duties, the potential benefit of adding additional personnel to clearly segregate duties does not justify the expenses associated with such benefit. Management will periodically review this matter and may make modifications, including adding additional personnel, it determines appropriate. 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended March 31, 2017 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II: OTHER INFORMATION

 

ITEM 1 - LEGAL PROCEEDINGS

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

ITEM I A - RISK FACTORS

 

Not applicable because we are a smaller reporting company. 

 

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

 

On January 01, 2017, the Company issued 6,000 shares of common stock for professional services and recorded stock based compensation of $9,000.

 

On February 01, 2017, the Company issued 6,000 shares of common stock for professional services and recorded stock based compensation of $9,000.

 

On February 28, 2017, the Company issued 572 shares of common stock for professional services and recorded stock based compensation of $858.

 

On March 01, 2017, the Company issued 6,000 shares of common stock for professional services and recorded stock based compensation of $9,000.

 

On March 05, 2017, the Company issued 10,000 shares of common stock for professional services as per the terms of a consulting agreement entered into during a prior period.

 

On March 31, 2017, the Company issued 5,928 shares of common stock for professional services and recorded stock based compensation of $8,892.

 

On March 31, 2017, the Company issued 12,500 shares of common stock for professional services and recorded stock based compensation of $18,750.

 

The above shares were issued in reliance on the exemption under Section 4(2) of the Securities Act. These shares of our common stock qualified for exemption under Section 4(2) since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, manner of the issuance and number of shares issued. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.  

  

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

 

There were no defaults upon senior securities during the quarter ended March 31, 2017. 

 

ITEM 4 - MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5 - OTHER INFORMATION

 

On May 16, 2017, the Company entered into a Social Media Agreement (the “Agreement”) with Bhang Corporation (“Bhang”). Pursuant to the terms of the Agreement, the Company will provide Bhang with social media services, including social media posts, social media post content production and social media monitoring and management. In exchange for these services, the Company will receive a cash payment of $5,000 per month. The term of the Agreement is month to month.

 

The above description of the Agreement is intended as a summary only and is qualified in its entirety by the terms and conditions set forth therein. For further information regarding the terms and conditions of the Agreement, this reference is made to such Agreement, which is filed hereto as Exhibit 10.1 and is incorporated herein by this reference.

 

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ITEM 6. EXHIBITS

 

Exhibits    
     
10.1   Social Media Agreement between Company and Bhang Corporation, dated May 16, 2017
     
31.1   Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Principal Executive Officer pursuant to 18U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of Principal Financial Officer of the Registrant pursuant to 18U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Schema
     
101.CAL   XBRL Taxonomy Calculation Linkbase
     
101.DEF   XBRL Taxonomy Definition Linkbase
     
101.LAB   XBRL Taxonomy Label Linkbase
     
101.PRE   XBRL Taxonomy Presentation Linkbase

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  BANG HOLDINGS CORP.
     
Date: May 19, 2017 By: /s/ Steve Berke
    Steve Berke, Chief Executive Officer
(Principal Executive Officer)

 

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