UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 2016
[ ] 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: 000-55585
Illumination America, Inc.
(Exact name of registrant as specified in its charter)
| Florida | 46-5289499 |
|
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification Number) |
| 2060 NW Boca Raton Blvd., #6 | |
| Boca Raton, FL | 33431 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 561-997-7270
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 o
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. (Check one):
| Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | x | |||
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 August 12, 2016 there were 10,137,820 shares of common stock, par value $0.001 issued and outstanding.
ILLUMINATION AMERICA, INC.
Table of Contents
| Part I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 8 |
| Item 4. | Controls and Procedures | 8 |
| Part II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 9 |
| Item 1A. | Risk Factors | 9 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3. | Defaults upon Senior Securities | 9 |
| Item 4. | Mine Safety Disclosures | 9 |
| Item 5. | Other Information | 9 |
| Item 6. | Exhibits | 9 |
| 2 |
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.
Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:
| · | adverse economic conditions; |
| · | the inability to attract and retain qualified senior management and technical personnel; |
| · | other risks and uncertainties related to the LED lighting market and our business strategy. |
All forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from expectations under “Risk Factors” in our registration statement and amendments thereto on Form S-1. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
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 the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q.
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 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| Our unaudited financial statements included in this Form 10-Q are as follows: | |
| F-1 | Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015 |
| F-2 | Interim Unaudited Statements of Operations and Comprehensive Income (Loss) for the Three Months and Six Months Ended June 30, 2016 and 2015 |
| F-3 | Interim Unaudited Statements of Cash Flows for the Three Months Ended June 30, 2016 and 2015 |
| F-4 | Notes to Interim Unaudited Financial Statements |
| 4 |
Illumination America, Inc.
BALANCE SHEETS
| June 30, 2016 | December 31, 2015 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 4,576 | $ | 107,673 | ||||
| Accounts Receivable | 196,155 | 17,453 | ||||||
| Related Party Receivable | 518 | 32,872 | ||||||
| Prepaid Expenses | 2,944 | 4,856 | ||||||
| Deposits | – | 1,000 | ||||||
| Total Current Assets | 204,193 | 163,854 | ||||||
| Intangible Assets | 50,000 | – | ||||||
| Total Assets | $ | 254,193 | $ | 163,854 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 196,238 | $ | 32,773 | ||||
| Other accrued expenses | 41,256 | 23,680 | ||||||
| Due to related parties | 94,918 | 34,751 | ||||||
| Total Current Liabilities | 332,412 | 91,204 | ||||||
| Total Liabilities | 332,412 | 91,204 | ||||||
| Commitments and contingencies | – | – | ||||||
| Stockholders' Deficit | ||||||||
| Common stock, par value $0.001, authorized 100,000,000; $0.001 par value common shares issued and outstanding 10,137,820 and 10,000,000 shares as of June 30, 2016 and December 31, 2015, respectively | 10,138 | 10,000 | ||||||
| Preferred stock, $0.001 par value, 25,000,000 shares authorized, -0- shares issued and outstanding | – | – | ||||||
| Additional paid-in capital | 2,386,415 | 2,279,053 | ||||||
| Accumulated Deficit | (2,474,772 | ) | (2,216,403 | ) | ||||
| Total Stockholders' (Deficit) Equity | (78,219 | ) | 72,650 | |||||
| Total Liabilities and Stockholders' Deficit | $ | 254,193 | $ | 163,854 | ||||
See accompanying notes to financial statements
| F-1 |
Illumination America, Inc.
STATEMENTS OF OPERATIONS (unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues | $ | 492,081 | $ | 26,437 | $ | 511,858 | $ | 87,706 | ||||||||
| Cost of sales | 403,286 | 13,756 | 418,262 | 67,482 | ||||||||||||
| Gross profit | 88,795 | 12,681 | 93,596 | 20,224 | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | 27,244 | 47,606 | 61,939 | 57,940 | ||||||||||||
| Executive compensation | 24,923 | 9,000 | 42,923 | 18,000 | ||||||||||||
| Payroll expenses | 82,385 | 18,889 | 106,514 | 50,214 | ||||||||||||
| Professional expenses | 85,719 | 7,974 | 145,694 | 16,144 | ||||||||||||
| Rent | 8,910 | 7,722 | 16,919 | 15,444 | ||||||||||||
| Total operating expenses | 229,181 | 91,191 | 373,989 | 157,742 | ||||||||||||
| Loss from operations | (140,386 | ) | (78,510 | ) | (280,393 | ) | (137,518 | ) | ||||||||
| Other (income) | ||||||||||||||||
| Other income | – | 247 | 7,076 | 247 | ||||||||||||
| Other income - related party | 7,408 | 6,000 | 14,951 | 12,000 | ||||||||||||
| Total other (income) expense, net | 7,408 | 6,247 | 22,027 | 12,247 | ||||||||||||
| Net income (loss) before provision for income taxes | (132,978 | ) | (72,263 | ) | (258,366 | ) | (125,271 | ) | ||||||||
| Provision (benefit) for income tax expense | – | – | – | – | ||||||||||||
| $ | (132,978 | ) | (72,263 | ) | (258,366 | ) | (125,271 | ) | ||||||||
| Net loss per common share- Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | ||||
| Weighted average number of common shares outstanding –basic and diluted | 10,051,317 | 8,371,933 | 10,019,643 | 8,323,810 | ||||||||||||
See accompanying notes to financial statements
| F-2 |
Illumination America, Inc.
STATEMENTS OF CASH FLOWS (unaudited)
For the Six Months Ended June 30 | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | (258,366 | ) | (125,271 | ) | |||
| Changes in Operating Assets and Liabilities | ||||||||
| Accounts Receivable | (178,702 | ) | 19,310 | |||||
| Related Party Receivable | 32,354 | (2,000 | ) | |||||
| Prepaid Expenses and Deposits | 2,912 | (5,000 | ) | |||||
| Accounts Payable and Accrued Expenses | 147,705 | (39,461 | ) | |||||
| Due to related parties | 60,167 | (1,658 | ) | |||||
| Net Cash (Used in) Operating Activities | (193,930 | ) | (154,260 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Intangible Assets | (16,667 | ) | – | |||||
| Net Cash (Used in) Investing Activities | (16,667 | ) | – | |||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from issuance of common stock | 107,500 | 215,000 | ||||||
| Net Cash Provided by Financing Activities | 107,500 | 215,000 | ||||||
| Net (Decrease) Increase in Cash | (103,097 | ) | 60,740 | |||||
| Cash at Beginning of Period | 107,673 | 1,176 | ||||||
| Cash at End of Period | $ | 4,576 | 61,916 | |||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Debt Related to Purchase of Intangible Assets | $ | 33,333 | – | |||||
See accompanying notes to financial statements
| F-3 |
Illumination America, Inc.
Notes to Financial Statements
June 30, 2016 and 2015 (unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Illumination America, Inc., a Florida corporation, formerly Illumination America, LLC, a Florida limited liability company, was formed on October 6, 2009. The limited liability company was converted into a corporation on August 14, 2014. The Company’s accounting year end is December 31.
Management’s Representation of Interim Financial Statements
The accompanying unaudited financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited financial statements at December 31, 2015 as presented in the Company’s annual report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission.
NOTE 2 – GOING CONCERN
The Company’s financial statements as of June 30, 2016 and December 31, 2015 have been prepared using US GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has incurred significant losses.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from its directors and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed financial statements of the Company have been prepared in accordance with US GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred.
Stock Split
On December 22, 2015, the Company’s Board of Directors authorized a forward split of the Company’s issued and outstanding Common Stock whereby each share of Common Stock was exchanged for 1.2847603145 shares, with fractional shares rounded to the nearest round number. In connection therewith, Company shareholders of record as of the close of business on December 22, 2015 the record date, received an additional 1.2847603145 shares of the Company’s Common Stock for each share of Common Stock held by them on the record date. Under the guidelines of Staff Accounting Bulletin 4c, a capital structure change such as a stock split that occurs after the date of the most recent balance sheet must be given retroactive effect in the balance sheet. Accordingly, all references to the numbers of common shares and per share data in the accompanying financial statements have been adjusted to reflect this forward split on a retroactive basis, unless indicated otherwise.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative instruments and recorded debt discount, valuation of deferred tax assets and valuation of in-kind contribution of services and interest.
| F-4 |
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2016 and December 31, 2015, the Company cash equivalents totaled $4,576 and $107,673 respectively.
Accounts Receivable
The Company records accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to Other income (expense) in the statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. As of June 30, 2016 and December 31, 2015, an allowance for estimated uncollectible accounts was determined to be unnecessary.
Net Loss per Share
Net loss per Common Share is computed by dividing net loss by the weighted average Common Shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share". Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per Common Share calculations are determined by dividing net income by the weighted average number of Common Shares and dilutive Common Share equivalents outstanding.
Revenue Recognition
The Company recognizes revenue when the four revenue recognition criteria are met, as follows:
| · | Persuasive evidence of an arrangement exists – our customary practice is to obtain written evidence, typically in the form of a sales contract or purchase order; |
| · | Delivery – when custody is transferred to our customers either upon shipment to or receipt at our customers’ locations, with no right of return or further obligations, such as installation; |
| · | The price is fixed or determinable – prices are typically fixed at the time the order is placed and no price protections or variables are offered; and |
| · | Collectability is reasonably assured – we typically work with businesses with which we have a long standing relationship, as well as monitoring and evaluating customers’ ability to pay. |
Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the consolidated balance sheets. To date, substantially all of the Company’s revenue has come from the sale of LED tubes and fixtures. If the Company enters into a project requiring installation, this installation is performed by the client or from a third party contractor and no revenue is recognized on the installation since the third party directly bills the client.
Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
| · | Level 1 - quoted market prices in active markets for identical assets or liabilities. |
| · | Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| · | Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amount of the Company's financial instruments approximates their fair value as of June 30, 2016 and December 31, 2015, due to the short-term nature of these instruments.
| F-5 |
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 – PURCHASE OF INTANGIBLE ASSETS
In order to expand its sales efforts, on May 5, 2016, the Company purchased certain intangible assets including the tradename “Catalyst LED” (“Catalyst”), its client list, its website domain, list of leads, current pending orders, current bid proposals, and all future orders made under the Catalyst name, as well as its other unregistered trademarks, and goodwill. Under the terms of the Purchase Agreement the Company agreed to pay ForceField Energy Inc., a Nevada corporation, the owner of the assets, $50,000, which was payable in three equal monthly increments of $16,666.67, commencing on May 15, 2016. As of the date of this Report the Company had made one payment of $16,666.67 and owed $33,333.33 to ForceField. The Company intends to make these payments as soon as cash becomes available to do so.
NOTE 5 – RELATED PARTY TRANSACTIONS
Since January 1, 2013, the Company has sub-leased a portion of its office space to a related company, Grom Social, Inc., at the rate of $2,000 per month plus miscellaneous additional charges for other office services. As of June 30, 2016 and December 31, 2015, the balance of the related party receivables on the Company’s balance sheet was $518 and $32,872, respectively.
Members of the Company’s Board of Directors have advanced working capital to pay expenses of the Company. These loans payable are due on demand and non-interest bearing. The outstanding amounts due to related parties was $94,918 and $34,751 as of June 30, 2016 and December 31, 2015, respectively.
NOTE 6 – STOCKHOLDERS' DEFICIT
The Company has 100,000,000 shares of Common Stock authorized with a par value of $0.001 per share and 25,000,000 shares of Preferred Stock authorized, with a par value of $0.001 per share.
Common Stock Issued in Private Placements
During the year ending December 31, 2015, the Company accepted subscription agreements from investors and issued 790,128 shares of its common stock for net proceeds totaling $615,000.
During the three months ended June 30, 2016, the Company accepted subscription agreements from investors and issued 137,820 shares of its common stock for net proceeds totaling $107,500.
| F-6 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview
We were originally formed in the State of Florida on October 6, 2009 as a limited liability company. On April 24, 2014 we reorganized as a Florida corporation. Since inception we have been engaged in the design, development, marketing and sales of energy-efficient lighting systems and solutions. We have intended to create and develop a reliable source of revenue from our activities in order to create the opportunity to market proprietary products that can be utilized both in a commercially beneficial manner, as well as on a custom basis.
We have never been subject to any bankruptcy proceeding. Our executive offices are located at 2060 NW Boca Raton Blvd, Suite 6, Boca Raton, FL 33431, telephone (561) 997-7270. Our website address is www.illuminationamerica.com.
Results of Operations
Comparison of Results of Operations for the three months ended June 30, 2016 and 2015
Revenues
In order to expand our sales efforts, on May 5, 2016, we purchased certain intangible assets including the tradename “Catalyst LED” (“Catalyst”), its client list, its website domain, list of leads, current pending orders, current bid proposals, and all future orders made under the Catalyst name, as well as its other unregistered trademarks, and goodwill. Under the terms of the Purchase Agreement we agreed to pay ForceField Energy Inc., a Nevada corporation, the owner of the assets, $50,000, which was payable in three equal monthly increments of $16,666.67, commencing on May 15, 2016. As of the date of this Report we have made one payment of $16,666.67 and owed $33,333.33 to ForceField. We intend to make these payments as soon as cash becomes available to do so.
As a direct result of this purchase we significantly increased sales of LED products for the period ended June 30, 2016. During the three month period ended June 30, 2016, we generated revenues of $492,081, compared to revenues of $26,437 during the three month period ended June 30, 2015 an increase of $465,644. The material increase in revenue is directly attributable to the hiring of a full time salesman who secured and completed 3 large sales of LED products which represented substantially all our sales during the three month period ended June 30, 2016. One of these sales totaled approximately $343,000, which represented a tenfold increase above our largest historical sale.
Our LED business is based upon bidding and winning new LED contracts. While we expect to record similar sized future sales of LED products, there can be no assurances that we will be successful in doing so, or can maintain the large sales volume generated during the second quarter of 2016. Once an LED project is completed there is very little, if any, opportunity to generate additional revenue from that contract. Due to the nature of our business, we believe that our quarterly and annual revenues and gross margins will continue to fluctuate and are not indicative of sustainable revenue and margin levels we expect to achieve. Therefore, until we achieve higher sustainable revenue levels, individual LED projects could have a material impact on revenue comparisons from period to period. LED projects we typically undertake vary in size and complexity. For example, the number of LED bulbs and fixtures required for an office building may vary from the amount required for a small retail outlet.
| 5 |
Gross margin
Gross margin is calculated by subtracting cost of sales from revenue. Gross margin percentage is calculated by dividing gross margins by revenue. Our gross margin has been and will continue to be affected by a variety of factors, including product mix and fluctuations in the cost of purchased products and components and our ability to properly estimate the costs of projects.
Gross margin for the three month period ended June 30, 2016 was $88,795, or 18.0% of revenue, as compared to gross margin of $12,681, or 48.0% of revenue, during the three month ended June 2015. The decrease in gross margins was attributable to our larger projects in 2016 which are more competitive price wise and which carry a significantly lower margin than small projects. Until we achieve levels of revenue that are consistent from period to period, our gross margin will be subject to significant fluctuation because amount of mark-up we can take on our products varies from job to job, the size of the project and are impacted by factors such as market competition, type of fixtures to be installed and the lighting budgets of each client.
Operating expenses
Operating expenses during the three month period ended June 30, 2016, were $229,181, compared to operating expenses of $91,191 incurred during the three month period ended June 30, 2015, an increase of $137,990. The principal reason for this increase is an increase in professional fees from $7,974 in 2015 to $85,719 due to costs associated with the filing of our initial registration statement and associated expenses incurred to become a full reporting public company. The remaining increase in operating expenses in the three month period ended June 30, 2015 compared to the same period in 2015 is attributable to increase in executive compensation of approximately $16,000, an increase in payroll expenses of approximately $64,000 related to the hiring of a new full time salesperson, offset by a reduction in G&A expenses of approximately $20,000.
Net loss
We generated a net loss of $132,978 during the three months ended June 30, 2016 or ($0.01) per share, compared to a net loss of $72,263 during the three months ended June 30, 2015, or ($0.01) per share. The increase in net loss for the three month period ended June 30, 2016, compared to the same period in 2015 is due to an increase of operating expenses of approximately $137,000 offset by an increase in gross margin due to higher revenues of approximately $76,000.
Comparison of Results of Operations for the six months ended June 30, 2016 and 2015
Revenues
During the six month period ended June 30, 2016, we generated revenues of $511,858, compared to revenues of $87,706 during the six month period ended June 30, 2015, an increase of $423,879. The material increase in revenue is directly attributable to the hiring of a full time salesman during the three month period ended June 30, 2016 who was able to secure and complete. The material increase in revenue is directly attributable to the hiring of a full time salesman who secured and completed 3 large sales of LED products under the Catalyst name with one sale totaling approximately $343,000 which represented a tenfold increase above our largest historical sale.
Gross margin
Gross margin is calculated by subtracting cost of sales from revenue. Gross margin percentage is calculated by dividing gross margins by revenue. Our gross margin has been and will continue to be affected by a variety of factors, including product mix and fluctuations in the cost of purchased products and components and our ability to properly estimate the costs of projects.
Gross margin for the six month period ended June 30, 2016 was $93,596, or 18.4% of revenue, as compared to gross margin of $20,224, or 23.1% of revenue, during the six month ended June 2016. The decrease in gross margins was attributable to our larger projects in 2016 which carry a significantly lower margin than small projects. Until we achieve levels of revenue that our consistent from period to period, our gross margin will be subject to significant fluctuation because amount of mark-up we can take on our products varies from job to job, the size of the project and are impacted by factors such as market competition, type of fixtures to be installed and the lighting budgets of each client.
| 6 |
Operating Expenses
Operating expenses during the six month period ended June 30, 2016, were $373,989, compared to operating expenses of $157,742 incurred during the six month period ended June 30, 2015, an increase of $137,990. The principal reason for this increase was an increase in professional fees from $16,144 in 2015 to $145,694 due to costs associated with the filing of our initial registration statement and associated expenses incurred to become a full reporting public company. The remaining increase in operating expenses in the six month period ended June 30, 2015, compared to the same period in 2015 is attributable to increase in executive compensation of approximately $25,000 and an increase in payroll expenses of approximately $56,000 related to the hiring of a new full time salesperson
Net loss
We generated a net loss of $258,366 during the six months ended June 30, 2016 or ($0.03) per share, compared to a net loss of $125,271 during the six months ended June 30, 2015, or ($0.02) per share. The increase in net loss for the six month period ended June 30, 2016 compared to the same period in 2015 is due to an increase of expenses of approximately $216,247, offset by an increase in gross margin due to higher revenues of $73,372.
Liquidity and Capital Resources
At June 30, 2016, we had $4,576 in cash.
Net cash used in operating activities was $193,930 during the six month period ended June 30, 2016, compared to $154,260 during the comparable period in 2015. The increase in the cash used during the six months ended June 30, 2016, compared to the same period in 2015 was primarily attributable to an increase of $133,095 in net loss offset to a lesser extent by the net changes in operating assets and liabilities of $93,425 during the six months ended June 30, 2016, compared to the same period in 2015.
Cash flows used in investing activities were $16,667 during the six months ended June 30, 2016, compared to $-0- during the same six month period in 2015 due to our purchase in 2016 of $50,000 for the Catalyst intangible assets, $33,333 of which was due to the Seller on June 30, 2016.
Cash flows provided by financing activities were $107,500 for the six month period ended June 30, 2016, compared to $215,000 during the same six month period ended in 2016 due to the proceeds received from the issuance of our Common Stock.
Since our inception substantially all of our funding has been obtained from private placements of our Common Stock and to a lesser extent from loans from related parties. During the year ending December 31, 2015, we accepted subscription agreements from investors and issued 790,128 shares of our Common Stock for net proceeds totaling $615,000.
For the six month period ended June 30, 2016, we have issued 137,280 shares of our Common Stock for net proceeds of $107,500.
In December 2015, we undertook a forward split of our issued and outstanding Common Stock whereby each share of Common Stock was exchanged for 1.2847603145 shares, with fractional shares rounded to the nearest round number. All references in this Report to our outstanding Common Shares is presented on a post forward split basis, unless indicated otherwise.
We believe that our principal difficulty in our ability to successfully generate profits has been the lack of available capital to operate and expand our business. We believe we need a minimum of approximately $1,000,000 in additional working capital to be utilized for beta testing of our website, intellectual property filings, product development, marketing and working capital. As of the date of this Report we have no commitment from any investor or investment-banking firm to provide us with the necessary funding and there can be no assurances we will obtain such funding in the future. Failure to obtain this additional financing will have a material negative impact on our ability to generate profits in the future.
| 7 |
Inflation
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the six month period ended June 30, 2016.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of June 30, 2016 and December 31, 2015.
Critical Accounting Estimates
Our condensed financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Registration Statement on Form S-1 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2016. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer. Based on this evaluation, our CEO/CFO has concluded that our disclosure controls and procedures were effective as of June 30, 2016.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
| 8 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any legal proceeding that we believe will have a material adverse effect upon our business or financial position and no such action has been threatened.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2016, we accepted subscription agreements from investors and issued 137,820 shares of our Common Stock for net proceeds totaling $107,500. We relied upon the exemption from registration provided by Regulation D promulgated under the Securities Act of 1933, as amended. We utilized these net proceeds for working capital.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| 31 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive and Chief Financial Officer | |
| 32 | Chief Executive Officer and Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 9 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| ILLUMINATION AMERICA, INC. | ||
| Date: August 12, 2016 | By: | /s/ Ismael Llera |
| Ismael Llera | ||
| Chief Executive Officer and Chief Financial Officer | ||
| 10 |
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Ismael Llera, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Illumination America, Inc. (the "Registrant" or the "Company"); |
| 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 in order 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. | As both the Principal Executive and Financial Officer of the Company, 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 controls 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 procedure to be designed under our supervision, to ensure that material information relating to the Registrant (including its consolidated subsidiaries), is made known to us 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 assurances 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 our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon 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 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 reportings; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent function): |
| 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. |
| Date: August 12, 2016 | /s/ Ismael Llera |
| Ismael Llera, Chief Executive and Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report of Illumination America, Inc. (the "Company") on Form 10-Q for the six month period ended June 30, 2016, as filed with the Securities and Exchange Commission on August 12, 2016 (the "Report"), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
| 1. | The Report fully complies with the requirements of Rule 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. |
| Date: August 12, 2016 |
/s/ Ismael Llera Ismael Llera, Chief Executive and Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2016 |
Aug. 12, 2016 |
|
| Document And Entity Information | ||
| Entity Registrant Name | Illumination America, Inc. | |
| Entity Central Index Key | 0001662574 | |
| Document Type | 10-Q | |
| Document Period End Date | Jun. 30, 2016 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Is Entity a Well-known Seasoned Issuer? | No | |
| Is Entity a Voluntary Filer? | No | |
| Is Entity's Reporting Status Current? | No | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 10,137,820 | |
| Document Fiscal Period Focus | Q2 | |
| Document Fiscal Year Focus | 2016 |
Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value | $ .001 | $ .001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 10,137,820 | 10,000,000 |
| Common stock, shares outstanding | 10,137,820 | 10,000,000 |
| Preferred stock, par value | $ .001 | $ .001 |
| Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 492,081 | $ 26,437 | $ 511,858 | $ 87,706 |
| Cost of Sales | 403,286 | 13,756 | 418,262 | 67,482 |
| Gross profit | 88,795 | 12,681 | 93,596 | 20,224 |
| Operating Expenses | ||||
| General and administrative expenses | 27,244 | 47,606 | 61,939 | 57,940 |
| Executive compensation | 24,923 | 9,000 | 42,923 | 18,000 |
| Payroll expenses | 82,385 | 18,889 | 106,514 | 50,214 |
| Professional fees | 85,719 | 7,974 | 145,694 | 16,144 |
| Rent | 8,910 | 7,722 | 16,919 | 15,444 |
| Total Operating Expenses | 229,181 | 91,191 | 373,989 | 157,742 |
| Loss from operations | (140,386) | (78,510) | (280,393) | (137,518) |
| Other income | ||||
| Other income | 0 | 247 | 7,076 | 247 |
| Other Income-Related Party | 7,408 | 6,000 | 14,951 | 12,000 |
| Total other income (expense), net | 7,408 | 6,247 | 22,027 | 12,247 |
| Net income (loss) before provision for income taxes | (132,978) | (72,263) | (258,366) | (125,271) |
| Provision (benefit) for income tax expense | 0 | 0 | 0 | 0 |
| Net Loss | $ (132,978) | $ (72,263) | $ (258,366) | $ (125,271) |
| Net loss per common share- Basic and Diluted | $ (.01) | $ (.01) | $ (.03) | $ (.02) |
| Weighted average number of common shares outstanding - basic and diluted | 10,051,317 | 8,371,933 | 10,019,643 | 8,323,810 |
1. Organization and Description of Business |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Accounting Policies [Abstract] | |
| Organization and Description of Business |
Illumination America, Inc., a Florida corporation, formerly Illumination America, LLC, a Florida limited liability company, was formed on October 6, 2009. The limited liability company was converted into a corporation on August 14, 2014. The Company’s accounting year end is December 31.
Management’s Representation of Interim Financial Statements
The accompanying unaudited financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited financial statements at December 31, 2015 as presented in the Company’s annual report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission. |
2. Going Concern |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern |
The Company’s financial statements as of June 30, 2016 and December 31, 2015 have been prepared using US GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has incurred significant losses.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from its directors and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
3. Summary of Significant Accounting Policies |
6 Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||
| Summary of Significant Accounting Policies |
Basis of Presentation
The condensed financial statements of the Company have been prepared in accordance with US GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred.
Stock Split
On December 22, 2015, the Company’s Board of Directors authorized a forward split of the Company’s issued and outstanding Common Stock whereby each share of Common Stock was exchanged for 1.2847603145 shares, with fractional shares rounded to the nearest round number. In connection therewith, Company shareholders of record as of the close of business on December 22, 2015 the record date, received an additional 1.2847603145 shares of the Company’s Common Stock for each share of Common Stock held by them on the record date. Under the guidelines of Staff Accounting Bulletin 4c, a capital structure change such as a stock split that occurs after the date of the most recent balance sheet must be given retroactive effect in the balance sheet. Accordingly, all references to the numbers of common shares and per share data in the accompanying financial statements have been adjusted to reflect this forward split on a retroactive basis, unless indicated otherwise
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative instruments and recorded debt discount, valuation of deferred tax assets and valuation of in-kind contribution of services and interest.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2016 and December 31, 2015, the Company cash equivalents totaled $4,576 and $107,673 respectively.
Accounts Receivable
The Company records accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to Other income (expense) in the statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. As of June 30, 2016 and December 31, 2015, an allowance for estimated uncollectible accounts was determined to be unnecessary.
Net Loss per Share
Net loss per Common Share is computed by dividing net loss by the weighted average Common Shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share". Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per Common Share calculations are determined by dividing net income by the weighted average number of Common Shares and dilutive Common Share equivalents outstanding.
Revenue Recognition
The Company recognizes revenue when the four revenue recognition criteria are met, as follows:
Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the consolidated balance sheets. To date, substantially all of the Company’s revenue has come from the sale of LED tubes and fixtures. If the Company enters into a project requiring installation, this installation is performed by the client or from a third party contractor and no revenue is recognized on the installation since the third party directly bills the client.
Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
The carrying amount of the Company's financial instruments approximates their fair value as of June 30, 2016 and December 31, 2015, due to the short-term nature of these instruments.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
4. Purchase of Intangible Assets |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Purchase of Intangible Assets |
In order to expand its sales efforts, on May 5, 2016, the Company purchased certain intangible assets including the tradename “Catalyst LED” (“Catalyst”), its client list, its website domain, list of leads, current pending orders, current bid proposals, and all future orders made under the Catalyst name, as well as its other unregistered trademarks, and goodwill. Under the terms of the Purchase Agreement the Company agreed to pay ForceField Energy Inc., a Nevada corporation, the owner of the assets, $50,000, which was payable in three equal monthly increments of $16,666.67, commencing on May 15, 2016. As of the date of this Report the Company had made one payment of $16,666.67 and owed $33,333.33 to ForceField. The Company intends to make these payments as soon as cash becomes available to do so. |
5. Related Party Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
Since January 1, 2013, the Company has sub-leased a portion of its office space to a related company, Grom Social, Inc., at the rate of $2,000 per month plus miscellaneous additional charges for other office services. As of June 30, 2016 and December 31, 2015, the balance of the related party receivables on the Company’s balance sheet was $518 and $32,872, respectively.
Members of the Company’s Board of Directors have advanced working capital to pay expenses of the Company. These loans payable are due on demand and non-interest bearing. The outstanding amounts due to related parties was $94,918 and $34,751 as of June 30, 2016 and December 31, 2015, respectively. |
6. Stockholders' Deficit |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Equity [Abstract] | |
| Stockholders' Deficit |
The Company has 100,000,000 shares of Common Stock authorized with a par value of $0.001 per share and 25,000,000 shares of Preferred Stock authorized, with a par value of $0.001 per share.
Common Stock Issued in Private Placements
During the year ending December 31, 2015, the Company accepted subscription agreements from investors and issued 790,128 shares of its common stock for net proceeds totaling $615,000.
During the three months ended June 30, 2016, the Company accepted subscription agreements from investors and issued 137,820 shares of its common stock for net proceeds totaling $107,500. |
3. Summary of Significant Accounting Policies (Policies) |
6 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Basis of Presentation |
Basis of Presentation
The condensed financial statements of the Company have been prepared in accordance with US GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. |
||||||||||||
| Stock Split |
Stock Split
On December 22, 2015, the Company’s Board of Directors authorized a forward split of the Company’s issued and outstanding Common Stock whereby each share of Common Stock was exchanged for 1.2847603145 shares, with fractional shares rounded to the nearest round number. In connection therewith, Company shareholders of record as of the close of business on December 22, 2015 the record date, received an additional 1.2847603145 shares of the Company’s Common Stock for each share of Common Stock held by them on the record date. Under the guidelines of Staff Accounting Bulletin 4c, a capital structure change such as a stock split that occurs after the date of the most recent balance sheet must be given retroactive effect in the balance sheet. Accordingly, all references to the numbers of common shares and per share data in the accompanying financial statements have been adjusted to reflect this forward split on a retroactive basis, unless indicated otherwise. |
||||||||||||
| Use of Estimates |
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative instruments and recorded debt discount, valuation of deferred tax assets and valuation of in-kind contribution of services and interest. |
||||||||||||
| Cash and Cash Equivalents |
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2016 and December 31, 2015, the Company cash equivalents totaled $4,576 and $107,673 respectively. |
||||||||||||
| Accounts Receivable |
Accounts Receivable
The Company records accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to Other income (expense) in the statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. As of June 30, 2016 and December 31, 2015, an allowance for estimated uncollectible accounts was determined to be unnecessary. |
||||||||||||
| Net Loss per Share |
Net Loss per Share
Net loss per Common Share is computed by dividing net loss by the weighted average Common Shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share". Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per Common Share calculations are determined by dividing net income by the weighted average number of Common Shares and dilutive Common Share equivalents outstanding. |
||||||||||||
| Revenue Recognition |
Revenue Recognition
The Company recognizes revenue when the four revenue recognition criteria are met, as follows:
Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the consolidated balance sheets. To date, substantially all of the Company’s revenue has come from the sale of LED tubes and fixtures. If the Company enters into a project requiring installation, this installation is performed by the client or from a third party contractor and no revenue is recognized on the installation since the third party directly bills the client. |
||||||||||||
| Fair Value of Financial Instruments |
Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
The carrying amount of the Company's financial instruments approximates their fair value as of June 30, 2016 and December 31, 2015, due to the short-term nature of these instruments. |
||||||||||||
| Recent Accounting Pronouncements |
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
3. Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2014 |
|
| Summary Of Significant Accounting Policies Details Narrative | ||||
| Stock split share exchange | 1.2847603145 | |||
| Cash | $ 107,673 | $ 4,576 | $ 61,916 | $ 1,176 |
| Allowance for doubtful accounts | $ 0 | $ 0 |
4. Purchase of Intangible Assets (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Purchase of intangible assets | $ (16,667) | $ 0 |
| Accounts payable for intangible asset | $ 333,333 | |
5. Related Party Transactions (Details Narrative) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Grom Social, Inc. [Member] | ||
| Rent receivable | $ 518 | $ 32,872 |
| Members of Board of Directors [Member] | ||
| Loans payable | $ 94,918 | $ 34,751 |
6. Stockholders' Deficit (Details Narrative) - USD ($) |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
| Proceeds from issuance of stock | $ 107,500 | $ 215,000 | |
| Investors [Member] | |||
| Stock issued new, shares issued | 137,820 | 790,128 | |
| Proceeds from issuance of stock | $ 107,500 | $ 615,000 | |