ITEM 1. BUSINESS.
Corporate Overview and History of Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.).
Pleasant Kids, Inc (Formerly NYBD Holding, Inc) was incorporated in September 2005 in Florida. Then on September 21, 2005, the Company entered into an Asset Purchase Agreement with Anthony Warner pursuant to which the Company acquired the domain name, www.leaguenow.com, its design, associated copyrights and trademarks and all business related to the website including the customer database. The Company originally intended to operate as an application service provider offering web-based services for the online video gaming industry.
The Company commenced offering services in October 2005 through a subscription basis. During 2007 the Company changed directions by using an advertising model. The Company was unable to generate additional revenue streams by charging registered users for the use of enhanced functionality to be incorporated into the site, access to specialized content, and e-commerce of merchandise related to the video console industry. The inability to generate revenue led to the decision that the Company would have to explore other options regarding the development of a new business plan and direction.
On May 29, 2009, the Company's stockholders approved a 1 for 6 reverse stock split for its common stock. As a result, stockholders of record at the close of business on July 1, 2009, received one share of common stock for every six shares held. Common stock, additional paid-in capital, share and per share data for prior periods have been restated to reflect the stock split as if it had occurred at the beginning of the earliest period presented.
On January 19, 2010, the Company's stockholders approved a 2 for 1 forward stock split for its common stock. As a result, stockholders of record at the close of business on January 19, 2010, received two shares of common stock for every one share held. Common stock, additional paid-in capital, share and per share data for prior periods have been restated to reflect the stock split as if it had occurred at the beginning of the earliest period presented.
On April 26, 2010, the Company's stockholders approved a 1 for 3 reverse stock split for its common stock. As a result, stockholders of record at the close of business on June 1, 2010, received one shares of common stock for every three share held. Common stock, additional paid-in capital, share and per share data for prior periods have been restated to reflect the stock split as if it had occurred at the beginning of the earliest period presented.
On October 4, 2010, the Company's stockholders approved a 16 for 1 forward stock split for its common stock. As a result, stockholders of record at the close of business on October 21, 2010, received sixteen shares of common stock for every one share held. Common stock, additional paid-in capital, share and per share data for prior periods have been restated to reflect the stock split as if it had occurred at the beginning of the earliest period presented.
On October 6, 2010, the Company entered into a Share Exchange Agreement, dated October 6, 2010 (the “Share Exchange Agreement”) by and among League Now, James Pregiato, Pure Motion, Inc., a Texas corporation (“Pure Motion”) and the shareholders of Pure Motion (the “Pure Motion Shareholders”). Pursuant to the Share Exchange Agreement, the Company acquired 100% of the outstanding shares of common stock of Pure Motion (the “Pure Motion Stock”), in exchange for the Pure Motion Stock, the Pure Motion Shareholders acquired 24,009,008 shares of the Company’s common stock (the “Exchange Shares”).
Additionally, pursuant to the terms of the Share Exchange Agreement, as consideration for the cancellation of 38,048,000 of the 39,111,136 shares of League Now common shares owned by James Pregiato (“Pregiato”), Pure Motion agreed to pay a total cash payment of $250,000 to Pregiato (the “Cash Payment”) of which $100,000 (the “Initial Cash Payment”) was paid on the closing date and $150,000 (the “Final Cash Payment”) was to be paid within twelve weeks of the closing date. The 38,048,000 shares were being held in escrow until receipt of the Final Cash Payment. Mr. Pregiato agreed to extinguish all outstanding debt and liabilities of League Now outstanding as of the closing date upon receipt of the Cash Payment. Upon closing, Pure Motion became a wholly-owned subsidiary of the Company. The transaction was accounted for as a purchase by the Company of Pure Motion, Inc. Upon closing of the transaction, Mr. Pregiato resigned as an officer and director of the Company.
In May, 2011, the transaction with Pure Motion, Inc. was rescinded and the TOMI golf product and the patents and technology of the Company were returned to the Shareholders of Pure Motion, in exchange for the cancellation of shares that were to have been issued to them. The shares outstanding, at the present time, reflect the absence of any shares ever being issued to the Pure Motion, Inc. Shareholders, by the Company, either upon or subsequent to the closing of the transaction on October 6, 2010, since no such shares were ever issued by the Board following the acquisition of control by Pure Motion’s shareholders of the Company and its affairs. Simultaneously with the withdrawal and rescission of the acquisitive transaction of October 6, 2010, the Company entered into a license agreement (“the License Agreement”) with Pure Motion for the exclusive right to use and exploit its motion capture technology with respect to all medical applications (the Licensed Technology”). In addition to the License Agreement, the Company entered into a consulting agreement (“the Consulting Agreement”) with the former Chief Executive Officer, Mario Barton (who is also the CEO of Pure Motion, Inc.) to stay with the Company as a consultant with regard to the deployment of the medical applications licensed by Pure Motion to the Company, as well as an employment agreement (“the Employment Agreement”) which secure the continuation of his services as President and Chief Executive Officer of the Company for a period of twelve (12) months from the date thereof. The Consulting Agreement and the Employment Agreement provide for no payment of any compensation to Mr. Barton, other than payments which may be due him based upon the successful marketing and deployment of the Licensed Technology.
On January 20, 2012, the Company entered into a Stock Purchase Agreement and Share Exchange (the “Agreement”) with Infiniti Systems Group, Inc. (“Infiniti”). Pursuant to the Agreement, the Company agreed to issue 30 million common shares of the Company’s stock to the shareholders of Infiniti in exchange for 100% of the issued and outstanding capital stock of Infiniti. The shares issued to the shareholders of Infiniti represent 60% of our issued and outstanding capital stock on a fully diluted basis (the “Stock Consideration”). In addition, the Company’s Chief Executive Officer and Chief Financial Officer, Mario Barton, resigned. John Bianco, the Chief Executive Officer of Infiniti, agreed to serve as the Company’s new President and Chief Executive Officer. The Company’s new Treasurer and Chief Financial Officer is Lisa Bischof, and the new Secretary and Chief Operating Officer is D. Bruce Veness. The transactions contemplated by the Agreement were closed on January 31, 2012, with the Company issuing 30 million shares to Bianco, Veness and Bischof. Contemporaneously with the closing, Pregiato agreed to cancel 25,803,288 shares of the Company’s common stock which were held by him.
On February 27, 2013, the Company, then known as League Now Holdings, Inc. consummated a share exchange with NYBD Holdings, Inc. (NYBD) pursuant to which 100% of the equity in NYBD was exchange for 28,500,000 shares of the Company’s common stock, which was previously held by the Company’s former CEO, John Bianco. As a result of the transaction, the shareholders of NYBD became the majority owners of the Company and NYBD became a wholly owned subsidiary. The Company concurrently agreed to sell the operations of League Now to Mr. Bianco in exchange for the assumption by Mr. Bianco of all associated liabilities with the exception the notes payable due Asher Enterprises, Inc. For accounting and reporting purposes, this transaction will be treated as a reverse merger with NYBD being the surviving entity. All balances as of and for the period ended December 31, 2012 are those of League Now exclusive of NYBD. The financial statements for March 31, 2013 and thereafter will reflect the historical balances and results of operations for NYBD, exclusive of League Now. The details of this transaction were previously reported on Form 8-K, filed March 6, 2013, and an 8K/A filed on May 2, 2013.
NYBD Holding, Inc. was incorporated in March 16, 2012 with a Fiscal Year ending of December 31. NYBD Holding, Inc. operates two deli restaurants that specialize in providing a wide variety of Bagels and cream cheese spread toppings along with a full service juice bar and large salad bar. The restaurants are located in downtown Miami located at 350 NE 24th St. and at 155 E. Flagler St.
On September 20, 2013, NYBD Holding, Inc entered into a share exchange agreement with Pleasant Kids, Inc. and all of its stockholders, and as a result of the closing of this agreement, Pleasant Kids, Inc. became the surviving
Company. NYBD Holding, Inc will close both of its deli restaurants at the closing of this agreement and adopt the operation of Pleasant Kid’s. Based on the terms of the share exchange agreement, the controlling stockholder of Pleasant Kids sold all 1,000 issued and outstanding shares of common stock and 10,000,000 million shares of Class A Preferred stock of Pleasant Kids, Inc. to NYBD Holding, Inc. in consideration for the issuance of 1,000 shares of the common shares and 10,000,000 of the Preferred A shares of NYBD Holding, Inc.
Following the closing of the share exchange agreement on September 20, 2013, control and management of the Company is that as Pleasant Kids, Inc. For accounting and reporting purposes, this transaction will be treated as a reverse recapitalization, with Pleasant Kids as the acquirer. As such, the financial information, including the operating and financial results, included in this 10K are that of Pleasant Kids rather than that of NYBD Holding, Inc. prior to the completion of the transactions described herein.
On June 18, 2004, the board of directors of Pleasant Kids, Inc., officially changed its name from NYBD Holding, Inc. to Pleasant Kids, Inc. The name change became effective August 9, 2014 with FINRA but did not become effective until October 7, 2014 in the state of Florida. The Company also changed the symbol from NYBD to PLKD effective August 18, 2014.
OVERVIEW
Pleasant Kids, Inc. (Formerly NYBD Holding, Inc) was incorporated in July 17th, 2013 with a Fiscal Year Ending of September 30th. Pleasant Kids is a Florida Corporation engaged in the business of producing, marketing and distributing naturally balanced alkalized water for children, including and not limited to organic natural juices.
Subsequent to the year ended September 30, 2015, on December 28, 2015, and effective as of August 15, 2015, the Company issued 177,539,180 shares of its restricted common stock and 8,600,000 shares of its Series B preferred stock for 100% of the issued and outstanding shares of Next Group Holdings, Inc. (NEXT). Based on the completion of the agreement NEXT will become a wholly-owned subsidiary of the Company. The completion of the agreement is contingent on the successful financial audit of Next Group Holdings, Inc.
On December 31, 2015, we completed our merger with Next Group Holdings, Inc a Florida Corporation. Our name change and requested symbol change is currently pending with the Financial Industry Regulatory Authority.
As a result of this merger, we adopted Next Group’s corporate structure and began a transition into its business model. Through our newly acquired subsidiaries we began to engage in use of certain licensed technology to provide innovative telecommunications, mobility, and remittance solutions to unserved, unbanked, and emerging markets.
Our new subsidiaries are Next Mobile 360 LLC (100%), a limited liability company formed under the laws of Florida (“Next Mobile”), Meimoun & Mammon, LLC (100%), a limited liability company formed under the laws of Florida (“M&M”), NxtGn, Inc. (65%), a corporation formed under the laws of Florida (“NxtGn”), and Next CALA, Inc. (94%), a corporation formed under the laws of Florida (“Next CALA”).
This new corporate structure is illustrated below.
ITEM 2. BUSINESS DESCRIPTION
Item 2.01. Business Description
Next Group Holdings through its operating subsidiaries, engages in the business of using proprietary technology and certain licensed technology to provide innovative telecommunications and telecommunications mobility and remittance solutions in emerging markets.
PRINCIPAL PRODUCTS
Until the merger we offered retail consumers naturally balanced alkalized spring bottled water for children in an 8oz. bottle through our brand “Pleasant Kids”.
The Company sources our naturally balanced alkalized spring water, throughout the United States. The product requirements are to bottle naturally balanced alkalized spring water with a minimum of 8.0 of pH, without the use of any chemicals, or ionize machinery.
The main reason parents and consumers drink the Company’s product is for the perceived benefit that a proper pH balance helps fight disease and boosts the immune system and the perception that alkaline water helps to maintain a proper body pH and keeps cells young and hydrated.
OPERATIONS
In connection with our transition into a new business model we discontinued our prior operations. In the future, the Company plans to engage in the business of using proprietary technology and certain licensed technology to provide innovative telecommunications and telecommunications mobility and remittance solutions in emerging markets.
Transitioning of operations
Prior to the merger, we operated primarily as a manufacturing, marketing and distribution company. These operations will be phased out over the coming months.
Sample production, market research and consumer product acceptance of our product began in mid2012. The Company has focused on pre-launch market evaluation of our product in California and Orlando/South Florida for year 2014. The product is currently at the introduction phase of its lifecycle. In April of 2013 Pleasant Kids did market research on the demand for naturally balance alkalized bottle water in Los Angeles, California. In June of 2013 the Company repeated the processes in Orlando, Florida. Pleasant Kids launched its online store in August of 2014 on Amazon.com.. When this model failed to produce profits we decided to seek a suitable merger candidate.
ITEM 1A.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.
Owning our common shares involves a high degree of risk. You should consider carefully the following risk factors and all other information contained in this information statement. If any of the following risks occur, the business, financial condition, liquidity, results of operations or as well as our ability of to make distributions to our shareholders, could be materially and adversely affected. In that case, the market price of our common shares could decline significantly, and you could lose all or a part of the value of your ownership in our common shares. Some statements in this information statement, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section in this information statement entitled "Forward-Looking Information."
Risks Related to Next Group Holdings.
We have a limited operating history and therefore we cannot ensure, either in the near- or long-term, that we will be able to generate cash flow or profit or execute our business plan.
The Company is now engaged in a new business started in 2015. As a result, we have a limited operating history upon which you may evaluate our business and an investment in our common stock may entail significantly more risk than the shares of common stock of a company with a substantial operating history. Our business operations are subject to numerous risks, uncertainties, expenses and difficulties associated with early stage enterprises. You should consider an investment in our company in light of these risks, uncertainties, expenses and difficulties. Such risks include: the absence of a lengthy operating history; insufficient capital to fully realize our operating plan; our ability to anticipate and adapt to a developing market; a competitive environment characterized by well-capitalized competitors; our ability to identify, attract and retain qualified personnel; our reliance on key management personnel.
Because we are subject to these risks, evaluating our business may be difficult. We may be unable to successfully overcome these risks, which could harm our business and prospects. Our business strategy may be unsuccessful and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully address these risks, there may be an adverse effect on our business, results of operations, financial condition and cash flows.
We may never achieve profitability from operations or generate sufficient cash flows to make or sustain distributions to our shareholders.
We may never achieve profitability from operations. Even if we do achieve profitability, we cannot assure you that we will be able to sustain or increase profitability on a quarterly or annual basis in the future. There can be no assurance that future operations will be profitable or that we will be able to make or sustain distributions to our shareholders from cash from operations. Revenues and profits, if any, will depend upon various factors, including whether we will be able to successfully implement our business plan and operating strategy. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us. In addition, an inability to achieve profitability could have a detrimental effect on the long term capital appreciation of our common stock.
Due to existing contractual obligations we may not achieve profitability.
Next Group Holdings and/or its subsidiaries are required to perform certain obligations under material contracts with third parties. Next Mobile is required to perform certain obligations under material contracts with Sprint Corporation, Auris, and EZ ILD. M&M is required to perform certain obligations under material contracts with Ariafone Telekom Ltd, Broadvox LLC, IP Network America LLC, Locus Telecommunications LLC, and SMT Telecom (also known in the telecommunications industry as “RAZA”). Next CALA is required to perform certain obligations under material contracts with ITC Financial Licenses, Inc., IH Financial Licenses, Inc., and The Bancorp Bank, and Visa USA, Inc. NxtGn is required to perform certain obligations under material contracts with Telarix, Inc., Vidyo, Inc., and Vitco.
We are an early entrant in an emerging industry, and the long-term viability of our business strategy is unproven.
As an early entrant in this emerging industry, we are subject to the risk that our business model and business plan may not prove to be a viable long-term business strategy. If it turns out that our strategy is not a viable long-term business strategy, we may not be able to generate meaningful cash flows, which would materially and adversely affect the viability of our business and stock price.
We have well-financed, well-managed competitors and may not be able to adequately compete in our market.
Most of our competitors are larger and have greater financial, technical, marketing, and other resources than we do. Some of our competitors have seasoned management teams with more experience and expertise in our industry than we do. Some competitors may enjoy significant competitive advantages that result from, among other things, having substantially more available capital, having a lower cost of capital, having greater economies of scale, and having enhanced operating efficiencies compared to ours.
We may not be able to secure sufficient capital to effectively execute our business plan.
We may not be able to attract and obtain sufficient capital from the equity and debt markets, or any other capital markets, to execute our business plan and grow our business. If we do not have access to sufficient funding in the future, we may not be able to make necessary capital expenditures necessary to execute our business plan, and in that event our ability to generate revenue may be significantly impaired.
If we cannot obtain financing, our growth may be limited.
Recent events in the financial markets have had an adverse impact on the credit markets, and, as a result, credit has become significantly more expensive and difficult to obtain, if available at all. Some lenders are imposing more stringent credit terms and there has been and may continue to be a general reduction in the amount of credit available. Many banks are either unable or unwilling to provide new asset-based lending. Tightening credit markets may have an adverse effect on our ability to obtain financing on favorable terms, thereby increasing financing costs and/or requiring us to accept financing with increasing restrictions. If adverse conditions in the credit markets, in particular with respect to our industry, materially deteriorate, our business could be materially and adversely affected. Our long-term ability to grow through additional investments will be limited if we cannot obtain additional financing. Market conditions may make it difficult to obtain financing, and we cannot assure you that we will be able to obtain debt or equity financing or that we will be able to obtain it on favorable terms.
We anticipate being involved in a variety of litigation.
Although we have not been subject to any litigation to date, we anticipate being involved in a range of court proceedings in the ordinary course of business as we continue to operate our business. While we intend to vigorously defend any non-meritorious action or challenge, no assurance can be given that we will not incur significant expense relating to these matters or that they will not require significant management attention and adversely affect us.
Our business plan involves a number of assumptions that may prove inaccurate, which may cause us to realize substantially different operating results than we hope for.
In developing our business plan and business model, we made a number of assumptions, including assumptions related to annual operating costs, market size and demand, customer retention rates, customer drop-out rates, default rates, and local, national, and worldwide economic conditions. These assumptions may prove inaccurate, causing us our performance and operating results to differ significantly from the performance and operating results we have projected while developing our business plan and business model.
Operating our business on a larger scale could result in substantial increases in our expenses.
As our business grows in size and complexity, we can provide no assurance that we can successfully enter new markets or grow our business without incurring significant additional expenses, that our management platform will ultimately prove to be scalable, and/or that we will be able to achieve economies of scale or we will be able to operate our business on a larger scale than the scale we have historically operated on.
Debt service obligations could adversely affect our operating results, and could adversely affect our ability to make or sustain distributions to our stockholders and the market price of our common stock.
Incurring debt could subject us to many risks, including the risks that: our cash flows from operations will be insufficient to make required payments of principal and interest; our debt may increase our vulnerability to adverse economic and industry conditions; we will be subject to restrictive covenants that require us to satisfy and remain in compliance with certain financial requirements or that impose limitations on the type or extent of activities we conduct; and we may be required to dedicate a substantial portion of our cash flows from operations to payments on our debt, thereby reducing cash available for distribution to our stockholders, funds available for operations and capital expenditures, future business opportunities or other purposes. Additionally, if we do not have sufficient funds to repay any debt we incur when it matures, we may need to refinance the debt or raise additional equity. If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates on refinancing, increases in interest expense could adversely affect our cash flows and, consequently, cash available for distribution to our stockholders. To the extent we are required to raise additional equity to satisfy such debt, existing stockholders would see their interests diluted. If we are unable to refinance our debt or raise additional equity on
acceptable terms, we may be forced to dispose of assets on disadvantageous terms, potentially resulting in losses or the incurrence of special taxes and fees that apply to dispositions of assets. To the extent we cannot meet any existing or future debt service obligations, we will risk losing some or all of our assets that may be pledged to secure our obligations to foreclosure. Any unsecured debt agreements we enter into may contain specific cross-default provisions with respect to specified other indebtedness, giving the unsecured lenders the right to declare a default if we are in default under other loans in some circumstances.
Our financial results in future periods may not be reflective of our earning potential and may cause our stock price to decline.
Our financial results in future periods may not be representative of our future potential. Since we expect to experience rapid growth, we will have a greater percentage of our portfolio invested in assets in the process of stabilization than we would expect to have as a more mature operation. It will take time and significant cash resources to implement our business plan. In addition, future equity or debt financings may impact our financial results in the fiscal periods following such financings for the same reasons listed above.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business we use sophisticated call processing engines and other sophisticated telecommunications technology platforms, and we acquire and store sensitive data, including intellectual property, our proprietary business information and personally identifiable information of our prospective and current tenants, our employees and third-party service providers on our networks and website. The secure processing and maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in revenue losses, legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers or damage our reputation, which could adversely affect our results of operations and competitive position.
We are dependent on our executive officers and dedicated personnel, and the departure of any of our key personnel could materially and adversely affect us.
We rely on a small number of persons to carry out our business and investment strategies. Any member of our senior management may cease to provide services to us at any time. The loss of the services of any of our key management personnel, or our inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results. As we expand, we will continue to need to attract and retain qualified additional senior management but may not be able to do so on acceptable terms or at all.
Our success depends, in part, upon our ability to hire and retain highly skilled managerial, and operational personnel, and the past performance of our senior management may not be indicative of future results.
The implementation of our business plan may require that we employ additional qualified personnel. Competition for highly skilled managerial, telecommunications, financial and operational personnel is intense, and we cannot assure our stockholders that we will be successful in attracting and retaining such skilled personnel. If we are unable to hire and retain qualified personnel as required, our growth and operating results could be adversely affected.
We are subject to regulation which may adversely affect our ability to execute our business plan.
We operate in an ever-evolving and complex legal and regulatory environment. We, the products and services that we offer and market, and those for which we provide processing services, are subject to a variety of federal, state and foreign laws and regulations, including, but not limited to: federal communications laws and regulations; foreign jurisdiction communications laws and regulations; federal anti-money laundering laws and regulations, including the USA PATRIOT Act (the Patriot Act), the Bank Secrecy Act (the BSA), anti-terrorist financing laws and anti-bribery and corrupt practice laws and regulations in the U.S., and similar international laws and regulations, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in Canada); state unclaimed property laws and money transmitter or similar licensing requirements; federal and state consumer protection laws, including the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the CARD Act), and the Durbin
Amendment to Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), and regulations relating to privacy and data security; and foreign jurisdiction payment services industry regulations. We believe that we are currently operating in compliance with all applicable laws and regulations, but there is no certainty that laws and regulations affecting our business will not change. Any such change of laws and regulations applicable to our business might adversely affect our ability to execute our business plan and achieve profitable operating results.
We are subject to Telecommunications Industry Regulation.
Our subsidiaries Next Mobile and M&M are subject to regulation by the Federal Communications Commission and other government agencies and task forces. M&M holds International and Domestic Section 214 licenses issued by the Federal Communications Commission, which may be suspended or revoked by the Federal Communications Commission if M&M does not strictly comply with all applicable regulations and the terms and conditions under which the International and Domestic Section 214 licenses were issued. Next Mobile and M&M are also subject to foreign jurisdiction communications laws and regulations. We believe that we, including our subsidiaries, are currently operating in compliance with all applicable laws and regulations, but there is no certainty that laws and regulations affecting our business will not change. Any such change of laws and regulations applicable to our business might adversely affect our ability to execute our business plan and achieve profitable operating results.
We are subject to Anti-Money Laundering Regulation.
We are subject to a comprehensive federal anti-money laundering regulatory regime that is constantly evolving. The anti-money laundering regulations to which we are subject include the BSA, as amended by the Patriot Act, which criminalizes the financing of terrorism and enhances existing BSA regimes through: (a) expanding AML program requirements to certain delineated financial institutions; (b) strengthening customer identification procedures; (c) prohibiting financial institutions from engaging in business with foreign shell banks; (d) requiring financial institutions to have due diligence procedures and, where appropriate, enhanced due diligence procedures for foreign correspondent and private banking accounts; and (e) improving information sharing between financial institutions and the U.S. government. Pursuant to the BSA, we have instituted a Customer Identification Program, (CIP). The CIP is incorporated into our BSA/anti-money laundering compliance program. We are increasingly facing more stringent anti-money laundering rules and regulations, compliance with which may increase our costs of operation, decrease our operating revenues and disrupt our business” for additional information. Our subsidiary, Next CALA, is or may become subject to reporting and recordkeeping requirements related to anti-money laundering compliance obligations arising under the Patriot Act and its implementing regulations. In addition, provisions of the BSA enacted by the Prepaid Access Rule issued by the Financial Crimes Enforcement Network (FinCEN), impose certain obligations, such as registration and collection of consumer information, on “providers” of certain prepaid access programs, including the prepaid products issued by our Next CALA subsidiary, and our issuing banks for which we serve as program manager. In order to qualify for certain exclusions under the Prepaid Access Rule, some of our content providers were required to modify operational elements of their products, such as limiting the amount that can be loaded onto a card in any one day. In addition, pursuant to the Prepaid Access Rule, Next CALA and some of our retail distribution partners have adopted policies and procedures to prevent the sale of more than $10,000 in prepaid access (including closed loop and open loop products that fall under the monetary thresholds outlined above) to any one person during any one day.
We are subject to Anti-Terrorism and Anti-Bribery Regulation.
We are also subject to an array of federal anti-terrorism and anti-bribery legislation. For example, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) administers a series of laws that impose economic and trade sanctions against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other entities that pose threats to the national security, foreign policy or economy of the United States. As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries, as well as those such as terrorists and narcotics traffickers designated under programs that are not country-specific and with whom U.S. persons are generally prohibited from dealing. The Foreign Corrupt Practices Act, or FCPA, prohibits the payment of bribes to foreign government officials and political figures and includes anti-bribery provisions enforced by the Department of Justice and accounting provisions enforced by the Securities and Exchange Commission. The statute has a broad reach, covering all U.S. companies and citizens doing business abroad, among others, and defining a foreign official to include not only those holding public office but also local citizens affiliated with foreign government-run or government-owned organizations. The statute also requires
maintenance of appropriate books and records and maintenance of adequate internal controls to prevent and detect possible FCPA violations. Abuse of our prepaid products for purposes of financing sanctioned countries, terrorist funding, bribery or corruption could cause reputational or other harm that could have a material adverse effect on our business, results of operations and financial condition” for additional information.
We are subject to Consumer Protection Regulation.
We are subject to various federal, state and foreign consumer protection laws, including those related to unfair and deceptive trade practices as well as privacy and data security. Failure to comply with, or further expansion of, consumer protection regulations could have a material adverse effect on our business, results of operations and financial condition. A data security breach could expose us to liability and protracted and costly litigation, and could adversely affect our reputation and operating revenues.”
We are subject to Federal Regulation.
At the federal level, Congress and federal regulatory agencies have enacted and implemented new laws and regulations that affect the prepaid industry, such the CARD Act and FinCEN’s Prepaid Access Rule. Moreover, there are currently proposals before Congress that could further substantially change the way banks, including prepaid card issuing banks and other financial services companies, are regulated and are permitted to offer their products to consumers. Non-bank financial services companies, including money transmitters and prepaid access providers, are now regulated at the federal level by the Consumer Financial Protection Bureau (the CFPB), which began operations in July 2011, bringing additional uncertainty to the regulatory system and its impact on our business. We are increasingly facing more stringent anti-money laundering rules and regulations, compliance with which may increase our costs of operation, decrease our operating revenues and disrupt our business. Abuse of our prepaid products for purposes of financing sanctioned countries, terrorist funding, bribery or corruption could cause reputational or other harm that could have a material adverse effect on our business, results of operations and financial condition. Failure to comply with, or further expansion of, consumer protection regulations could have a material adverse effect on our business, results of operations and financial condition. Failure by us to comply with federal banking regulation may subject us to fines and penalties and our relationships with our issuing banks may be harmed.
We are subject to State Unclaimed Property Regulations.
For some of our prepaid products, we or our issuing banks are required to remit unredeemed funds to certain (but not all) states pursuant to unclaimed property laws. However, unclaimed property laws are subject to change. Costs of compliance or penalties for failure to comply with or changes in state unclaimed property laws and regulations and changes in state tax codes could have a material adverse effect on our business, financial condition and results of operations.
We are subject to Money Transmitter Licenses or Permits .
Most states regulate the business of sellers of traveler’s checks, money orders, drafts and other monetary instruments, which we refer to collectively as money transmitters. While many states expressly exempt banks and their agents from regulation as money transmitters, others purport to regulate the money transmittal businesses of bank agents or do not extend exemptions to non-branch bank agents. In those states where we are required to be licensed, we are subject to direct supervision and regulation by the relevant state banking departments or similar agencies charged with enforcement of the money transmitter statutes and must comply with various restrictions and requirements, such as those related to the maintenance of certain levels of net worth, surety bonding, selection and oversight of our authorized delegates, permissible investments in an amount equal to our outstanding payment obligations with respect to some of the products subject to licensure, recordkeeping and reporting, and disclosures to consumers. We are also subject to periodic examinations by the relevant licensing authorities, which may include reviews of our compliance practices, policies and procedures, financial position and related records, various agreements that we have with our issuing banks, retail distribution partners and other third parties, privacy and data security policies and procedures, and other matters related to our business. As a regulated entity, Next CALA may incur significant costs associated with regulatory compliance. We anticipate that compliance costs and requirements will increase in the future for our regulated subsidiaries and that additional subsidiaries will need to become subject to these or new regulations. If we fail to maintain our existing money transmitter licenses or permits, or fail to obtain new licenses or permits in a timely manner, our business, results of operations and financial condition could be materially and adversely affected.
We are subject to Privacy Regulation.
In the ordinary course of our business, we collect and store or may collect and store personally identifiable information about customers, holders of our cards, subscribers, and users. This information may include names, addresses, email addresses, social security numbers, driver’s license numbers and account numbers. We also maintain or may maintain a database of cardholder data for our proprietary cards relating to specific transactions, including account numbers, in order to process transactions and prevent fraud. These activities subject us to certain privacy and information security laws, regulations and rules in the United States, including, for example, the privacy provisions of the Gramm-Leach-Bliley Act and its implementing regulations, various other federal and state privacy and information security statutes and regulations, and the Payment Card Industry Data Security Standard. These federal and state laws, as well as our agreements with our issuing banks, contain restrictions relating to the collection, processing, storage, disposal, use and disclosure of personal information, and require that we have in place policies regarding information privacy and security. We have in effect a privacy policy relating to personal information provided to us in connection with requests for information or services, and we continue to work with our issuing banks and other third Parties to update policies and programs and adapt our business practices in order to comply with applicable privacy laws and regulations. Certain state laws also require us to notify affected individuals of certain kinds of security breaches of computer databases that contain their personal information. These laws may also require us to notify state law enforcement, regulators or consumer reporting agencies in the event of a data breach. Failure to comply with, or further expansion of, consumer protection regulations could have a material adverse effect on our business, results of operations and financial condition. A data security breach could expose us to liability and protracted and costly litigation, and could adversely affect our reputation and operating revenues.
We are subject to Foreign Regulation.
We are subject to regulation by foreign governments and must maintain permits and licenses in certain foreign jurisdictions in order to conduct our business. Foreign regulations also present obstacles to, or increased costs associated with, our expansion into international markets. For example, in certain jurisdictions we face costs associated with repatriating funds to the United States, administrative costs associated with payment settlement and other compliance costs related to doing business in foreign jurisdictions. We are also subject to foreign privacy and other regulations. These foreign regulations often differ in kind, scope and complexity from U.S. regulations. We are subject to added business, political, regulatory, operational, financial and economic risks associated with our international operations. We operate in a highly and increasingly regulated environment, and failure by us or the businesses that participate in our distribution network to comply with applicable laws and regulations could have a material adverse effect on our business, results of operations and financial condition. Changes in laws and regulations to which we are subject, or to which we may become subject in the future, may materially increase our costs of operation, decrease our operating revenues and disrupt our business.
We are subject to Card Association and Network Organization Rules.
In addition to the federal, state, local, and foreign jurisdiction laws and regulations discussed above, we, our Next CALA subsidiary and our issuing banks, are also subject to card association and debit network rules and standards. The operating rules govern a variety of areas, including how consumers and merchants may use their cards and data security. Each card association and network organization audits us from time to time to ensure our compliance with these standards. Noncompliance with these rules or standards due to our acts or omissions or the acts or omissions of businesses that work with us could result in fines and penalties or the termination of the card association registrations held by us or any of our issuing banks. Changes in card association rules or standards set by Visa or Vanilla Reload, or changes in card association and debit network fees or products or interchange rates, could materially and adversely affect our business, financial condition and results of operations.
All of the risks related particularly to our subsidiaries Next Mobile, M&M, Next CALA, and NxtGn stated below are also risks related generally to Next Group Holdings:
Risks Related to Next Mobile
Next Mobile has well-financed, well-managed competitors and may not be able to adequately compete in its market.
Next Mobile faces competition from many strong and well-financed competitors and other competitors, including, without limitation, AT&T, Sprint, Viber, WhatsApp, Skype, MetroPCS, TracFone, Telcel, StraightTalk, Simple Mobile, Virgin Mobile, Boost, Net 10, IDT, Boost, and others.
Next Mobile is dependent on the performance of third-party network operators.
MVNO operators, including Next Mobile, earn revenues by purchasing network capacity from other network operators and reselling it to end users. Next Mobile uses Sprint’s network to offer its services, and is dependent on the performance of Sprint and its network.
Other Risks Related to Next Mobile.
Please see “Risks Related to Next Group Holdings” for other risks related to Next Mobile.
Risks Related to M&M
M&M has well-financed, well-managed competitors and may not be able to adequately compete in its market.
M&M faces competition from many strong and well-financed competitors and other competitors, engaged in the wholesale transmission and termination of domestic and international long distance voice, text, and data telephone services, including, without limitation, IDT, Skype, Verizon, WhatsApp, Viber, and others.
Other Risks Related to M&M.
Please see “Risks Related to Next Group Holdings” for other risks related to M&M.
Risks Related to Next CALA
Next CALA has well-financed, well-managed competitors and may not be able to adequately compete in its market.
Next CALA faces competition from many strong and well-financed competitors. The prepaid financial services industry is highly competitive and includes competitors such as American Express, First Data, Total Systems Services, Green Dot, NetSpend, Money Network, Momentum, Blackhawk, Prepaid MasterCard, MasterCard RePower, PayPal, Apple Pay, Amex Serve, H&R Block Emerald, J.P. Morgan Chase, and others. Next CALA faces intense competition from existing players in the prepaid card industry. The Company began operations recently and is much smaller than its competitors.
To compete effectively, Next CALA needs to continuously improve its offerings.
Next CALA began operations recently and is substantially smaller than its competitors. As a result, to compete effectively, Next CALA needs to rapidly and continuously improve its offerings.
Next CALA may be unable to attract and retain users.
As of the date of this filing, Next CALA has an operating history of less than one year. If Next CALA cannot increase the number of cardholders using its Next CALA Prepaid Card® GPR cards, and retain its existing cardholders, this will significantly adversely affect Next CALA’s operating results, revenues, financial condition, and ability to remain in business.
Next CALA may be adversely affected by fraudulent activity.
Criminals, including, without limitation, cyber-organized criminal syndicates, and others, use increasingly sophisticated methods to engage in illegal activities involving prepaid cards, reload products, and customer information. Next CALA relies on third parties for certain transaction processing services, which subjects Next CALA and its customers to risks related to the vulnerabilities of these third parties, as well as Next CALA’s own vulnerabilities to criminals engaged in fraudulent activities. Fraudulent activity could result in the imposition of regulatory sanctions, including significant monetary fines, which could adversely affect Next CALA’s business, operating results, and financial condition.
Next CALA may be adversely affected by changes in laws and regulations.
Next CALA operates in an ever-evolving and complex legal and regulatory environment. The provision of prepaid card services is highly regulated and the laws and regulations affecting the industry and the manner in which they are interpreted are subject to change. Changes in laws and regulations could increase compliance and other costs of business activities, require significant systems redevelopment, or render products or services less profitable or obsolete, any of which could have an adverse effect on Next CALA’s operating results.
Other Risks Related to Next CALA.
Please see “Risks Related to Next Group Holdings” for other risks related to Next CALA.
Risks Related to NxtGn
NxtGn has well-financed, well-managed competitors and may not be able to adequately compete in its market.
NxtGn faces competition from many strong and well-financed competitors who engineer, market, and provide robust, innovative telecommunications call processing engines and other telecommunications and telephony platforms. These competitors include Viber, WhatsApp, Telarix, Speedflow, VoiPSwitch, and others. NxtGn began operations recently and is substantially smaller than many of its competitors.
NxtGn may not be able to operate effectively if it fails to acquire the Optioned Technology.
NxtGn has the option to acquire from Vitco, in consideration for the Option Price, all title, rights and interests in Optioned Technology. The Optioned Technology is currently licensed to NxtGn on a royalty-free basis. If NxtGn fails to acquire the Optioned Technology, NxtGn’s license to use the Optioned Technology basis might expire and might not be renewed, or might not be renewed on favorable terms. The Optioned Technology is essential to the operation of certain functions of NxtGn’s AVYDA Powered by Telarix™ products.
Other Risks Related to NxtGn.
Please see “Risks Related to Next Group Holdings” for other risks related to NxtGn.
Bankruptcy Proceedings during the Past Five Years
The Company has not been involved in any bankruptcy, receivership or any similar proceeding, and, except as set forth herein, we have not had or been a party to any material reclassifications, mergers or consolidations during the previous five (5) years.
Domain Names
N/A
Major Customers
The Company is working to diversify its customer base. It does have the potential to have its sales concentrated in just a few customers. The customers are major concerns and have the potential to take all of the product that the Company will be able to produce in the start up phase.
Research and Development Activities
The Company has not performed any customer-sponsored research and development activities relating to any new products or services during fiscal year 2015.
Environmental Laws
We do not handle, store or transport hazardous materials or waste products. We abide by all applicable federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous
materials and waste products. We do not anticipate the cost of complying with these laws and regulations to be material.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.
ITEM 2. PROPERTIES.
Office Locations
The Company’s headquarters are located at 1111 Brickell Avenue, Suite 2200,Miami, FL 33131. The Company's management believes that the leased premises are suitable and adequate to meet its needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
During the fiscal year ended September 30, 2014, the Company failed to answer a lawsuit from Franjose Yglesias-Bertheau for unpaid salary. The lawsuit was based on the 5 year contract that Mr. Yglesias-Bertheau had with the Company and based on the Company not answering the suit Mr. Ylgesias-Bertheau was awarded a $622,968 judgment. Due to the frivolous nature of the claim the $622,968 judgment was reversed. The Company is in the process of settling the final amount owed Mr. Yglesias-Bertheau but does not think that the claim will be in excess of the accrued salary amount of $34,609 that the Company has accrued on its books.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our Common Stock is traded in the over-the-counter market on the OTCQB under the symbol "PLKD." The following table shows the price range of our Common Stock for each quarter during the years ended September 30, 2015 and 2014. The below quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Prices listed are historic prices and have been adjusted to reflect the several stock splits as if it had occurred at the beginning of the earliest period presented.
Description of Securities
The Company’s authorized capital stock consists of 9,500,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, $0.001 par value per share. As of December 17, 2015, an aggregate of 41,834,795 shares of our common stock were issued and outstanding.
Common Stock
Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters. Stockholders do not have preemptive rights to purchase shares in any future issuance of our common stock. Upon our liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, our assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock.
The holders of shares of our common stock are entitled to dividends out of funds legally available when and as declared by our board of directors. Our board of directors has never declared a cash dividend and does not anticipate declaring any dividend in the foreseeable future. In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to receive, ratably, the net assets available to stockholders after payment of all creditors and preferred stockholders.
Preferred Stock.
Our Articles of Incorporation also provide that we are authorized to issue up to 50,000,000 shares of Series A Preferred Stock and 10,000,000 shares of Series B Preferred Stock with a par value of $.001 per share. As of the date of this report, there are 60,000,000 shares of preferred stock issued and outstanding. Our Board of Directors has the authority, without further action by the shareholders, to issue from time to time the preferred stock in one or more series for such consideration and with such relative rights, privileges, preferences and restrictions that the Board may determine. The preferences, powers, rights and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and purchase funds and other matters. The issuance of preferred stock could adversely affect the voting power or other rights of the holders of common stock.
Holders
As of December 17, 2015, there are approximately 550 shareholders of our common stock.
Transfer Agent and Registrar
Olde Monmouth Stock Transfer is currently the transfer agent and registrar for our common stock. Its address is 200 Memorial Parkway, Atlantic Highlands, NJ 07716. Its phone number is (732) 872-2727.
Dividend Policy
The Company has never declared or paid dividends on common stock. We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.
Securities Authorized for Issuance under Equity Compensation Plans
We did not have any equity compensation plans as of September 30, 2015. Our Board of Directors may adopt an equity compensation plan in the future.
Recent Sales of Unregistered Securities
Based on the share exchange agreement, and on the closing date of September 20, 2013, the controlling stockholder of Pleasant Kids, sold all 1,000 issued and outstanding shares of common stock of Pleasant Kids, Inc. (Formerly NYBD Holding, Inc) to NYBD Holding, Inc. in consideration for the issuance of 1,000 shares of the common shares of NYBD Holding, Inc. Such securities were not registered under the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance of securities 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 transaction, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these shareholders 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 securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities 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.
Subsequent to the year ended September 30, 2015, on December 28, 2015, and effective as of August 15, 2015, the Company issued 177,539,180 shares of its restricted common stock and 8,600,000 shares of its Series B preferred stock for 100% of the issued and outstanding shares of Next Group Holdings, Inc. (NEXT). Based on the completion of the agreement NEXT will become a wholly-owned subsidiary of the Company. The completion of the agreement is contingent on the successful financial audit of Next Group Holdings, Inc.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
The following discussion and analysis of the results of operations and financial condition of Pleasant Kids, Inc (Formerly NYBD Holding, Inc) should be read in conjunction with the Selected Combined Financial Data, Pleasant Kid’s financial statements, and the notes to those financial statements that are included elsewhere in this Form 10-K.
The following tables set forth key components of our results of operations for the periods indicated, in dollars and key components of our revenue for the period indicated, in dollars. The discussion following the table is based on these results.
Results of operations for the year ended September 30, 2015 and September 30, 2014.
Revenue:
Sales for the year ended September 30, 2015, were $4,843 compared to $5,246 for the year ended September 30, 2014. Sales are comprised of direct sales to stores and sales on the internet through Amazon.com. The sales for the year ended September 30, 2014 reflect a write off of accounts receivable where the accounts receivable were netted against sale.
Cost of Goods Sold:
The Company is reporting Cost of Goods Sold of $15,121 for the year ended September 30, 2015, compared to $46,071 for the year ended September 30, 2014.
Operating Expenses:
Operating expenses for the year ended September 30, 2015, were $468,502 compared to $687,153 for the year ended September 30, 2014. The reduced operating expenses for the year ended September 30, 2015 was mainly due to a reduction in Professional expenses of $156,000 from the prior year.
Professional Fees. For the year ended September 30, 2015, professional fees were $24,115 compared to $181,403 for the period from September 30, 2014. This reduction in costs for the current fiscal year is due to less fees paid to Professional promoters.
Officer Compensation. For the year ended September 30, 2015, officer compensation was $356,496 compared to $385,962 and for the period ended September 30, 2014. The officer compensation was higher for the fiscal year ended September 30, 2014, due to the fact that Frank Yglesias was on the payroll for part of the year but left the Company in the fiscal year ended September 30, 2014. On October 1, 2013, the Company entered into employment
agreements with Robert Rico, CEO and Calvin Lewis, VP. The contracts each have a term of 5 years with a base salary plus a bonus of 2% of sales annually. The annual base salaries are as follows:
Robert Rico
$
175,000
Calvin Lewis
$
150,000
Selling, General and Administrative Expense. For the year ended September 30, 2015, selling, general and administrative expense were $87,891 compared to $120,788 for the period ended September 30, 2014.
Loss from Operations:
Loss from operations was $478,780 for the year ended September 30, 2015 compared to $727,978 for the year ended September 30, 2014.
Interest Expense:
Interest expense for the year ended September 30, 2015, was $242,172 compared to $59,930 for the year ended September 30, 2014. The large increase in the interest expense for the current year is due to the debt discount associated with the convertible debenture debt carried by the Company.
Change in fair value of embedded derivative liability:
The change in fair value for the year ended September 30, 2015 was a loss of $861,169 compared to $363,514 for the year ended September 30, 2014. (see note 7 for roll-forward detail of the derivative liability)
Net Loss:
Net Loss from operations for the year ended September 30, 2015, was $1,825,002 compared to $1,729,814 for the fiscal year ended September 30, 2014. This increase in the net loss for the year ended September 30, 2015, is primarily due to non-operating Derivative expenses comprised of $242,172 of interest, derivative expense of 232,715 and $861,169 of change in fair value of embedded liability offset by a reduction in loss from operations of $249,198.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2015, the Company had net current liabilities of $2,468,767 compared to $1,593,649 as of September 30, 2014. The increase in net current liability is due mainly to an increase in derivative liability of $760,495, an increase in accrued salary of $117,101 offset by a decrease in Convertible notes net of debt discount of $14,186. Our balance of cash and cash equivalents at September 30, 2015 is $0.00 compared to $8,799 as of September 30, 2014.
Operational Activities
The Company had cash used in operating activities of $363,642 in the year ended September 30, 2015 and $397,926 of cash used in operating activities as of September 30, 2014. The Company’s primary uses of cash have been for professional support, marketing expenses and working capital. All cash received has been expended in the furtherance of growing future operations.
Investing Activities
The Company had cash used in investing activities of $14,478 in the year ended September 30, 2015, and $3,975 used in investing activities as of September 30, 2014 which was for the purchase of equipment.
Financing Activities
The Company had cash provided in financing activities of $369,321 in the year ended September 30, 2015, of which $343,900 was from convertible debentures, $22,341 was from convertible notes payable to related parties and $3,080 in cash overdrafts. The Company had cash provided in financing activities of $406,042 for the period ended
September 30, 2014, of which $15,000 was from proceeds from loan payable, $52,998 was from the sale of stock and $350,511 was from convertible debentures and $12,467 was paid to convertible notes payable to related parties.
The Company may not have sufficient resources to fully develop any new products or expand our inventory levels unless it is able to raise additional financing. The Company can make no assurances these required funds will be available on favorable terms, if at all. If additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in dilution to our existing stockholders. Additionally, these conditions may increase costs to raise capital and/or result in further dilution. The failure to raise capital when needed, will adversely affect our business, financial condition and results of operations, and could force the Company to reduce or cease operations.
The Company believes that it will be able to meet the costs of growth and public reporting with funds generated from operations and additional amounts generated through debt and equity financing, Although management believes that the required financing to fund product development and increasing inventory levels can be secured at terms satisfactory to the Company, there is no guarantee these funds will be made available, and if funds are available, that the terms will be satisfactory to the Company.
Impact of Inflation
The business will have to absorb any inflationary increases on development costs in the short-term, with the expectation that it will be able to pass inflationary increases on costs on to customers through price increases on the release of these new/enhanced products into the market and hence management does not expect inflation to be a significant factor in our business.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements between the Company and any other entity that have, or are reasonably likely to have, a current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. Some of the critical accounting estimates are detailed below.
Accounting for Derivative instruments.
The Company issues debentures where the number of shares into which a debenture can be converted is not fixed. For example, when a debenture converts at a discount to market based on the stock price on the date of conversion. In such instances, the embedded conversion option of the convertible debentures is bifurcated from the host contract and recorded at their fair value. In accounting for derivatives, the Company records a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the beneficial conversion feature. The discount is then amortized over the life of the debenture and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability is charged to additional paid-in capital. For purposes of determining derivative liability, the Company uses Black-Scholes modeling for computing historic volatility.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
In April of 2015, the PCAOB revoked the registration of the Registrant’s prior independent accountant, Terry L. Johnson, and on April 19, 2015, the Company accepted the resignation of Terry L. Johnson as its independent accountant and auditor.
During the Company's 2014 and 2013 fiscal years and through the date of this Current 10Kreport (1) there were no disagreements with Johnson on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Johnson, would have caused Johnson to make reference to the subject matter of the disagreements in connection with their report, and (2) there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
On May 4, 2015, the Company engaged Anton & Chia, LLP , as the Company's independent accountant to audit the Company’s financial statements and to perform reviews of interim financial statements. During the fiscal years ended September 30, 2015, September 30, 2014 and the period from inception through September 30, 2013 neither the Company nor anyone acting on its behalf consulted with Anton & Chia, LLP regarding (i) either the application of any accounting principles to a specific completed or contemplated transaction of the Company, or the type of audit opinion that might be rendered by Anton & Chia, LLP on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement with Johnson or a reportable event with respect to Johnson.
Critical Accounting Estimates and New Accounting Pronouncements
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
●
it requires assumptions to be made that were uncertain at the time the estimate was made, and
●
changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.
The Company bases its estimates and judgments on our experience, our current knowledge, and our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers and information available from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following accounting policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties: share-based compensation expense, income taxes, and derivative financial instruments.
Share-Based payments. The Company plans to calculate share-based payments to third parties for consulting work based on the intrinsic value of the instrument as determined by the market price of the stock at the time of issuance and recognize the expense based on this value. Although we believe our assumptions used to calculate share-based payments expense are reasonable, these assumptions can involve judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes in timing could significantly impact the amount of expense recorded in a given period.
Income Taxes. As part of the process of preparing our financial statements, the Company will be required to estimate income taxes in each of the jurisdictions in which we operate. Our provision for income taxes is determined using the asset and liability approach to account for income taxes. A current liability is recorded for the estimated taxes payable for the current year. Deferred tax assets and liabilities are recorded for the estimated 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 the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates or tax laws are recognized in the provision for income taxes in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized. Changes in valuation allowances will flow through the statement of operations unless related to deferred tax assets that expire unutilized or are modified through translation, in which case both the deferred tax asset and related valuation allowance are similarly adjusted. Where a
valuation allowance was established through purchase accounting for acquired deferred tax assets, any future change will be credited or charged to income tax expense.
The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain. In spite of our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing authorities. We determine the tax benefits more likely than not to be recognized with respect to uncertain tax positions. Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events and rely on estimates and assumptions. Although we believe these estimates and assumptions are reasonable, the final determination could be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities. (see note 10)
New Accounting Pronouncements
Management does not believe there would be a material effect on the accompanying financial statements had any other recently issued but not yet effective accounting standards been adopted in the current period.
Recent Events
Change in Officers and Directors
On January 20, 2014 Franjose Yglesiaa-Bertheau resigned as Secretary/COO and as a member of the Board of Directors.
On April 9, 2014 Haim Yeffet was removed from the Board of Directors for cause
(a) Resignation of Officers
On January 20, 2014 Franjose Yglesias-Bertheau resigned as Secretary/COO and as a member of the Board of Directors.
(b) Appointment of Directors and Officers
No new appointments were made to replace Mr. Yglesias-Bertheau or Mr. Yeffett. The list of Directors and Officers as of September 30, 2015, is as follows:
Subsequent to the fiscal year ended 2015 the Company entered into a plan of merger with Next Group Holdings, Inc. As part of the merger Robert Rico resigned as CEO and Director, Calvin Lewis resigned as Vice President and director and Kenneth Wiedrich resigned as Director.
Arik Maimoun was appointed as CEO and Chairman of the Board, Michael De Prado was appointed President and Director and Natali Dadon was appointed Director
Off Balance Sheet Arrangements
As of September 30, 2015, the Company had no material off-balance sheet arrangements.
In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified
parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of September 30, 2014 or September 30, 2013.
In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the U.S., an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements.
Effects of Inflation
During the periods for which financial information is presented, the Company’s business and operations have not been materially affected by inflation.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements are included and may be found at pages 30 through 44.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no changes in or disagreements with accountants on accounting or financial disclosure matters.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), the Company's Chief Executive Officer and Chief Financial Officer evaluated 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, they concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2015 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 Commission’s rules and forms, and that such information is accumulated and communicated properly to allow timely decisions regarding required disclosure.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
The Company believes there are material weaknesses in internal controls and procedures and the Company recognizes that additional personnel and counsel with expertise in the area of SEC, generally accepted accounting principles (GAAP) and tax accounting procedures need to be added.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company's internal control over financial reporting includes those policies and procedures that:
●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
●
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of our annual financial statements, we have assessed the effectiveness of internal control over financial reporting as of September 30, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, management has determined that as of September 30, 2015, our internal controls over financial reporting were not effective and that there are material weaknesses in our internal control over financial reporting.
Changes in Internal Controls Over Financial Reporting
During the year ended September 30, 2015, there were no significant changes in internal controls of the Company. Material weaknesses in internal control continue to exist.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
Directors, Executive Officers, Promoter and Control Persons
The below table lists all current officers and directors of the Company. All officers serve at the discretion of the Board of Directors. The term of office of each of our directors expire at our next Annual Meeting of Shareholders or until their successors are duly elected and qualified.
The business background descriptions of the director and officer are as follows:
ROBERT RICO, President/CEO and Director
Mr. Rico is a high energy, goal-driven executive that approaches each new business challenge with his intrinsic flair for innovation, creative problem solving, and measured risk-taking to drive consistent bottom-line improvements and shareholder returns. Mr. Rico began his career in New Jersey, where he entered the workforce at the age of 13 in the family business. Mr. Rico’s experience led him into the investment, mergers and acquisitions business. Mr. Rico has negotiated over $100 million dollars in mergers and acquisitions, and has been CEO and Chairman of a public company for 8 years. Mr. Rico has held various board positions of other private and public entities as well. Mr. Rico has also worked in the licensing and marketing industry with Italian design house Pininfarina Extra. On November of 2009 Mr. Rico was awarded with the Key of the City of Miami for his philanthropic and business achievements.
Until recently Mr. Rico served as President of Pleasant Spring, a mountain spring water bottling company in Tiger, Georgia. This experience in the water bottling industry along with his knowledge of financial investments, has helped to create what today is the Pleasant Kids brand.
CALVIN LEWIS, Vice President and Director
Mr. Lewis is a graduate from Florida International University with a BS in Chemistry and MBA in Finance from Nova Southern University (class of 2014). Mr. Lewis is responsible for managing the financial strategy and Sales of the company. Mr. Lewis is committed to maximizing long-term shareholder value, ensuring a balanced portfolio of growth initiatives, and maintaining the high level of integrity and transparency to ensure that our customers receive the Pleasant Kids’ product in the purist form. Previously as VSP Global Business Consultant, Lewis was able to bring about profitable growth, disciplined decision-making, and transparency in VSP Global Sales. He led the efforts to create and define the value chain for the sales and services model from which VSP is known for.
KENNETH C. WIEDRICH, Treasurer/CFO and Director
Mr. Wiedrich is a Senior level Executive with extensive hands-on experience in management, operational accounting, reporting for public companies, finance functions and in dealing with Board of Directors, Banks, Attorneys, Audit firms and the SEC. He has been the CFO of a number of small public companies, some of which were start-up companies, which he helped through the start up phase of their operation. He also has experience with government cost accounting methods and all related government acquisition regulations.
There are no arrangements or understandings between our officers and directors and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there are no arrangements, plans or understandings as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.
Family Relationships
There are no family relationships between any of our officers and directors.
Other Directorships
Other than as indicated within this section none of the Company's directors hold or have been nominated to hold a directorship in any company with a class of securities registered pursuant to Section 12 of the Exchange Act (the "Act") or subject to the requirements of Section 15(d) of the Securities Act of 1933 or any or any company registered as an investment company under the Investment Company Act of 1940.
Subsequent to the year ended September 30, 2015 the Company entered into a plan of merger with Next Group Holdings, Inc. and as a result has had a change in Directors and officers. Below is the list of the new directors and officers with their background descriptions.
Arik Maimon, CEO and Chairman of the Board
Mr. Maimoun is a founder of the Company and has served as its CEO since its inception. In addition to co-founding the Company and its Next CALA and NxtGn subsidiaries, Mr. Maimon founded the Company’s subsidiaries Next Mobile, and M&M. Prior to founding the Company and its subsidiaries, Mr. Maimon founded and ran successful telecommunications companies operating primarily in the United States and Mexico. In 1998, Mr. Maimon founded and ran a privately-held wholesaler of long distance telecommunications services which, later, under Mr. Maimon’s management, grew from a start up to a profitable enterprise with more than $100 million in annual revenues. Mr. Maimon serves on the Company’s board of directors due to the perspective and experience he brings as our co-founder, Chairman, CEO, and as our largest stockholder.
Michael A. De Prado, President and Director
Mr. De Prado is a founder of the Company and has served as its President since its inception. In addition to co-founding the Company, Mr. De Prado co-founded the Company’s Next CALA subsidiary. Prior to founding the Company and Next CALA, Mr. De Prado spent 20 years in executive positions at various levels of responsibility in the banking, technology, and telecommunications industries. As President of Sales at telecommunications company Radiant/Ntera, Mr. De Prado grew Radiant/Ntera’s sales to more than $200 million in annual revenues. At theglobe.com, Mr. De Prado served as President, reporting directing to Michael S. Egan. Mr. De Prado serves on the Company’s board of directors due to the perspective and experience he brings as our co-founder, President, and COO.
Natali Dadon, Director
Ms Dadon has served as a Director of the Company since its inception. Prior to joining the Company’s board of directors in a non-executive capacity, Ms. Dadon served for five years as the Vice President for Sales of a privately-held wholesale long distance telecommunications services provider with more than $100 million in annual revenues. Ms. Dadon serves on the Company’s board of directors due to the perspective and experience she brings as a seasoned telecommunications executive and one of the first investors in Next CALA
Involvement In Certain Legal Proceedings
During the past five years, the Company's officers and directors have not been involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
None
Board Meetings and Committees; Annual Meeting Attendance
During the year ended September 30, 2015, the Company had 5 formal board meetings and conducted other business through Written Actions.
During the year ended September 30, 2014, the Company 3 formal Board meetings and conducted other business through Written Actions.
Indemnification
The General Corporation Law of Florida provides that directors, officers, employees or agents of Florida corporations are entitled, under certain circumstances, to be indemnified against expenses (including attorneys' fees) and other liabilities actually and reasonably incurred by them in connection with any suit brought against them in their capacity as a director, officer, employee or agent, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. This statute provides that directors, officers, employees and agents may also be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by them in connection with a derivative suit brought against them in their capacity as a director, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval if such person was adjudged liable to the corporation.
Our Certificate of Incorporation provides that we shall indemnify any and all persons whom we shall have power to indemnify to the fullest extent permitted by the Florida Corporate Law. Article VII of our By-Laws provides that we shall indemnify our authorized representatives to the fullest extent permitted by the Florida Law. Our By-Laws also permit us to purchase insurance on behalf of any such person against any liability asserted against such person and incurred by such person in any capacity, or out of such person's status as such, whether or not we would have the power to indemnify such person against such liability under the foregoing provision of the by-laws.
The foregoing discussion of indemnification merely summarizes certain aspects of indemnification provisions and is limited by reference to the above discussed sections of the Florida Corporation Law.
The Company's Articles of Incorporation and Bylaws provide that the Company may indemnify to the full extent of its power to do so, all directors, officers, employees, and/or agents. Insofar as indemnification by the Company for liabilities arising under the Securities Act may be permitted to officers and directors of the Company pursuant to the foregoing provisions or otherwise, the Company is aware that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following tables lists the compensation of the Company's principal executive officers for the years ended September 30, 2015 and September 30, 2014. The following information includes the dollar value of base salaries, bonus awards, the number of non-qualified Company Options granted and certain other compensation, if any, whether paid or deferred. The following information includes the aggregated Company Options issued to the Company's executive officers pursuant to the Merger and those issued under the LTIP.
The following tables sets forth all cash compensation paid by Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.), for the year ended September 30, 2015 and September 30, 2014. The tables below sets forth the positions and compensations for each officer and director of Pleasant Kids, Inc.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. Two of the directors, Robert Rico and Calvin Lewis were paid $5,000 each in director fees in the fiscal year ended September 30, 2015.
Option Grants Table
There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through to date.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
There were no stock options exercised during periods ending September 30, 2015, and September 30, 2014, by the executive officer named in the Summary Compensation Table.
Long-Term Incentive Plan (‘LTIP’) Awards Table
There were no awards made to a named executive officer in the last completed fiscal year under any LTIP.
Compensation Arrangements with Executive Management
On October 1, 2013, the Company entered into Employment Contracts with Robert Rico, President/CEO and Calvin Lewis, Vice President. The contracts each have a term of 5 years with a base salary plus a bonus of 2% of sales annually. The annual base salaries are as follows:
Robert Rico
$
175,000
Calvin Lewis
$
150,000
The Company also has a consulting agreement with Kenneth C. Wiedrich. Mr. Wiedrich is to be paid $2,000 per month to provide accounting services, and part time CFO duties.
Not all compensation was paid during the fiscal year ended September 30, 2014. Below is the list of accrued salaries due each of the officers as of September 30, 2015:
Director Compensation
The Company paid two of the directors, Robert Rico and Calvin Lewis each $5,000 in director fees for the fiscal year ended September 30, 2015.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Beneficial Securities Ownership Table
As of the date of this filing, the following table sets forth certain information with respect to the beneficial ownership of our Common Stock by (i) each shareholder known by us to be the beneficial owner of more than five percent (5%) of our Common Stock, (ii) by each of our current directors and executive officers as identified herein, and (iii) all of the Company’s directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of Common Stock, except as otherwise indicated. Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock and non-qualified Company Options, Company Warrants, and convertible securities that are currently exercisable or convertible into shares of the Company's Common Stock within sixty (60) days of the date of this document, are deemed to be outstanding and to be beneficially owned by the person holding the Company Options, Company Warrants, or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(1)
Percentage of ownership is based on the issued and outstanding preferred stock series “A” shares as of September 30, 2015 which is 50,000,000.
(2)
Percentage of ownership is based on the issued and outstanding preferred stock series ”B” shares as of September 30, 2015 which is 10,000,000.
(3)
Percentage of ownership is based on the issued and outstanding shares of common stock as of September 30, 2015 which is 17,664,074.
Under Rule 144 promulgated under the Securities Act, our officers, directors and beneficial shareholders may sell up to one percent (1%) of the total outstanding shares (or an amount of shares equal to the average weekly reported volume of trading during the four calendar weeks preceding the sale) every three months provided that (i) current public information is available about the Company, (ii) the shares have been fully paid for at least one year, (iii) the shares are sold in a broker’s transaction or through a market-maker, and (iv) the seller files a Form 144 with the SEC.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors and certain officers of the Company, as well as persons who own more than 10% of a registered class of the Company’s equity securities ("Reporting Persons"), to file reports with the Commission. The Company believes that during fiscal 2014, all Reporting Persons timely complied with all filing requirements applicable to them.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Except for the transactions described below, none of the Companies directors, officers or principal shareholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction or in any proposed transaction, which materially affected the Company during the fiscal year ended September 30, 2015.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
As incurred by Pleasant Kids, Inc.
Audit Fees. Terry L. Johnson, CPA, billed the Company $12,000 for professional services rendered for the annual audit for the year ended September 30, 2014 and $5,000 for professional services rendered for the audit reviews through the first two quarters of fiscal year 2015. Anton & Chia billed the Company $38,000 for professional services rendered for the annual audit for the year ended September 30, 2015, and the quarterly review of the Company's financial statements for June 30, 2014, the re-audit of 2014, and for other services that are normally provided by an accountant in connection with statutory and regulatory filings or engagements for the fiscal year.
Tax Fees. There were no fees for taxes
All Other Fees. There were no other fees for the year ended September 30, 2015 and there were no other fees for the year ended September 30, 2014.
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1)(2) Financial Statements. See index to financial statements and supporting schedules.
(a)(3)
Exhibits.
The following exhibits are filed as part of this statement:
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Pleasant Kids, Inc.
We have audited the accompanying balance sheets of Pleasant Kids, Inc. (the “Company”) as of September 30, 2015 and September 30, 2014, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that we considered appropriate under the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2015 and September 30, 2014, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a minimum cash balance available for payment of ongoing operating expenses, has experienced losses from operations since inception, and it does not have a source of revenue sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Anton & Chia, LLP
Newport Beach, California
February 29, 2016
(1)
All common share amounts and per share amounts in these financial statements reflect the 1-for- 500 reverse split of the issued and outstanding shares of common stock of the Company, effective July 6, 2015, including retroactive adjustment of the common share amounts. (see note 12)
The accompanying notes are an integral part of these financial statements.
(1)
All common share amounts and per share amounts in these financial statements reflect the 1-for- 500 reverse split of the issued and outstanding shares of common stock of the Company, effective July 6, 2015, including retroactive adjustment of the common share amounts. (see note 12)
The accompanying notes are an integral part of these unaudited condensed financial statements
The accompanying notes are an integral part of these financial statements
PLEASANT KIDS, INC
(Formerly NYBD Holdings, Inc)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2015 AND SEPTEMBER 30, 2014
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The Company was originally incorporated on September 21, 2005 under the laws of the state of Florida with the name League Now Holdings Corporation. On February 27, 2013, the Company consummated a share exchange with New York Bagel Deli, Inc. (“NYBD”). Under the terms of the share exchange, NYBD received 28,500,000 shares of the Company’s common stock for 100% of the issued and outstanding capital of NYBD. As a result of the transaction, the shareholders of NYBD became the majority owners of the Company and NYBD became a wholly-owned subsidiary. Concurrent with the share exchange, the Company agreed to sell its subsidiary (the operations of League Now) to John Bianco the Company’s former CEO. In exchange for the assumption by Mr. Bianco of all associated liabilities with the exception of convertible notes held by Asher Enterprises Inc in the amount of $75,000.
On September 20, 2013, the Company entered into a share exchange agreement with Pleasant Kids, Inc. whereby the Company issued 10,000,000 preferred shares and 1,000 common shares for all of the outstanding shares of Pleasant Kids, Inc. As a result of the share exchange, Pleasant Kids, Inc. became the surviving Company. In connection with the closing of the share exchange agreement, Haim Yeffet, a shareholder, a director of NYBD Holding, Inc. returned 13,000,000 shares of the common stock and 100,000 shares of the Preferred A stock of NYBD Holding, Inc to the treasury of NYBD Holding, Inc. and received 2,000,000 shares of Preferred A stock. Mr. Haim Yeffett assumed the outstanding debt of NYBD Holding, Inc., with the exception of the Asher convertible notes, and kept all of the assets of NYBD Holding, Inc. For accounting purposes, the share exchange was as a reverse merger. The new operations of the Company will be solely those of Pleasant Kids, Inc. The historical balances and results of operations will be those of Pleasant Kids, exclusive of NYBD Holding, Inc. Pleasant Kids, Inc. was incorporated on July 15, 2013 under the laws of the state of Florida.
On June 18, 2004, the board of directors of Pleasant Kids, Inc., officially changed its name from NYBD Holding, Inc. to Pleasant Kids, Inc. The name change became effective August 9, 2014 with FINRA but did not become effective until October 7, 2014 in the state of Florida. The Company also changed the symbol from NYBD to PLKD effective August 18, 2014.
Pleasant Kids, Inc. (Formerly NYBD Holding, Inc) is engaged in the business of producing, marketing and distributing naturally balanced alkalized water for children, including and not limited to organic natural juices.
Subsequent to the year ended September 30, 2015, on December 28, 2015, and effective as of August 15, 2015, the Company issued 177,539,180 shares of its restricted common stock and 8,600,000 shares of its Series B preferred stock for 100% of the issued and outstanding shares of Next Group Holdings, Inc. (NGH). The agreement was completed on December 31, 2015. All future operations of the Company will be that of NGH. The Company has requested that the Name be changed to Next Group Holdings Inc. and that its symbol be changed accordingly.
NOTE 2 - GOING CONCERN
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company's continued existence is dependent upon the operation of NGH and its ability to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.
NOTE 3 - SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Basis of Presentation
This summary of accounting policies for Pleasant Kids, Inc is presented to assist in understanding the Company’s financial statements. The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America ("GAAP" accounting) and have been consistently applied in the preparation of the financial statements.
Fiscal Year End
The Company has adopted a September 30 fiscal year end.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates. Estimates are used when accounting for allowances for bad debts, collectability of accounts receivable, amounts due to service providers, depreciation and litigation contingencies, among others.
Cash
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. The Company held no cash equivalents as of September 30, 2015 and September 30, 2014.
Revenue recognition
The Company follows paragraph 605-10-S99 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Maintenance and repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized. At the time of retirement or disposal of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations.
Inventory
At September 30, 2015, the Company’s inventory consisted entirely of raw materials. The value of the inventory was minimal and so all inventory was written off.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360, formerly SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of its asset based on estimates of its undiscounted future cash flows. If these estimated future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the difference between the asset's estimated fair value and its carrying
value. As of the date of these financial statements, the Company is not aware of any items or events that would cause it to adjust the recorded value of its long-lived assets for impairment.
.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
Fair Value of Financial Instruments
Fair value of certain of the Company’s financial instruments including cash and cash equivalents, accounts receivable, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments. Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; The Company values it’s available for sale securities using Level 1.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company used Level 2 inputs for its valuation methodology for the conversion option liability in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs:
For the year ended September 30, 2015 the Company recognized a loss of $861,169 on the change in fair value of derivative liabilities. For the year ended September 30, 2014 the Company recognized a loss of 363,514 on the change in fair value of derivative liabilities. As at September 30, 2015 the Company did not identify any other assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 825-10.
Income Taxes
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Use of net operating loss carry forwards for income tax purposes may be limited by Internal Revenue Code section 382 if a change of ownership occurs. (see note 12)
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
At September 30, 2015, the Company is reporting $102,637 in convertible notes net of debt discount. The debt discount amounts to $217,763 and the seven convertible notes outstanding total$320,400, which if converted at the current market would result in 24,458,015 new dilutive common shares. At September 30, 2014, the Company had four convertible notes outstanding totaling $159,500 which if converted at the current stock price would result in 12,175,573 new dilutive common shares.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.
Advertising Costs
The Company's policy regarding advertising is to expense advertising when incurred.
Share Based Payments
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).
Related Parties
The registrant follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the Related parties include (a) affiliates of the registrant; (b) Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the registrant; (e) management of the registrant; (f) other parties with which the registrant may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
NOTE 4 - ACCOUNTS RECEIVABLE
As of September 30, 2015, the Company had $29,744 of accounts receivable of which almost all are over 90 days old. The Company has determined that the receivables are uncollectable and is writing off the accounts receivable against sales. Although the product was shipped and revenue was recognized at time of shipment we are writing off against sales because of the inability to collect on these sales.
NOTE 5 - INVENTORY
There is no inventory stated at cost at September 30, 2015, and 2014.
The Company has also chosen to write off all of its inventory, as the Company’s inventory has very little market value.
NOTE 6 - FIXED ASSETS
Property, plant and equipment consist of the following at June 30, 2015 and September 30, 2014:
Depreciation expense for the year ended September 30, 2015 and September 30, 2014 was $1,211 and $398 respectively.
NOTE 7 - NOTES PAYABLE
On September 3, 2014, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to LG Capital Funding, LLC, for the principal amount of $26,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note has a deduction for legal expense for a net total payout of $25,000. The Note, together with accrued interest at the annual rate of ten (10%), is due on May 25, 2015. The Note is convertible into the Company's common stock commencing one hundred eighty (180) days from the date of issuance at a conversion price equal to 55% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of the year ended September 30, 2015, the balance on the note is $26,500. The Company recorded $2,277 of accrued interest pursuant to this convertible note.
On December 30, 2014, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to LG Capital Funding, LLC, for the principal amount of $52,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note has a deduction for legal expense for a net total payout of $50,000. The Note, which is a the back end portion of the note issued on July 3, 2014, together with accrued interest at the annual rate of 8%, is due on January 3, 2015. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. During the year ended September 30, 2015, LG Capital converted $50,000 of this debt along with $968 of interest into 4,735,857 post reverse shares of the Company’s common stock, leaving an unpaid balance of $2,500. As of September 30, 2015 the Company recorded $3 of accrued interest pursuant to this convertible note.
On February 13, 2015, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to LG Capital Funding, LLC, for the principal amount of $72,450 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a15% OID such that the purchase price shall be $63,000. The Note, together with accrued interest at the annual rate of 8%, is due on February 13, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of September 30, 2015, the balance on the note is $72,450. The Company recorded $3,636 of accrued interest pursuant to this convertible note.
On April 14, 2015, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to Service Trading Company, LLC, for the principal amount of $27,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a 7% OID such that the purchase price shall be $25,000. The Note, together with accrued interest at the annual rate of 8%, is due on April 14, 2016. The Note is convertible into the Company's common stock commencing at any time from the date of issuance at a conversion price equal to 50% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of
issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of September 30, 2015, the balance on the note is $27,000. The Company recorded $624 of accrued interest pursuant to this convertible note.
On July 30, 2015, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to Service Trading Company, LLC, for the principal amount of $37,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a 5% OID such that the purchase price shall be $35,000. The Note, together with accrued interest at the annual rate of 8%, is due on July 30, 2016. The Note is convertible into the Company's common stock commencing at any time from the date of issuance at a conversion price equal to 50% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of September 30, 2015, the balance on the note is $37,000. The Company recorded $503 of accrued interest pursuant to this convertible note.
On August 19, 2015, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to LG Capital Funding, LLC, for the principal amount of $82,500 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a 7% OID such that the purchase price shall be $76,875. The Note, together with accrued interest at the annual rate of 8%, is due on August 19, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of September 30, 2015, the balance on the note is $82,500. The Company recorded $759 of accrued interest pursuant to this convertible note.
On September 21, 2015, Pleasant Kids, Inc. (Formerly NYBD Holding, Inc.) sold and issued a Convertible Promissory Note to LG Capital Funding, LLC, for the principal amount of $72,450 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The note contains a17% OID such that the purchase price shall be $60,000. The Note, together with accrued interest at the annual rate of 8%, is due on September 21, 2016. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 50% of the lowest closing bid price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company has the right to prepay the Note at any time from the date of issuance until the note is paid in full at an amount equal to 150% of the then outstanding principal amount of the Note, including accrued and unpaid interest due on the prepayment date. As of September 30, 2015, the balance on the note is $72,450. The Company recorded $143 of accrued interest pursuant to this convertible note.
As of September 30, 2015, the Company has five convertible notes outstanding with LG Capital Funding, LLC totaling $256,400 and two convertible note with Service Trading Company, LLC for $64,000, for total convertible notes due in the amount of $320,400. The balance of the notes net of debt discount is $209,739. As of September 30, 2014, the Company had convertible notes payable of $159,500. The balance of the notes as of September 30, 2014, net of debt discount was $223,925.
Accrued Interest
As of the year ended September 30, 2015, the Company has accrued interest balance of $15,924. As of September 30, 2014, the Company had an accrued interest balance of $745 pertaining to the outstanding convertible notes.
Derivative Liability
The embedded conversion features of the above convertible notes payable contain discounted conversion price and should be recognized as a derivative instrument. Such embedded conversion features should be bifurcated and accounted for at fair value. As of the year ended September 30, 2015 and September 30, 2014, the Company had a derivative liability balance of $1,875,172 and $1,114,697, respectively. The Company uses the Black Scholes Model to calculate derivate liability.
A summary of the changes in derivative liabilities balance as at September 30, 2015 is as follows:
We calculated the derivative liability using the Black Scholes Model which factors in the Company’s stock price volatility as well as the convertible terms applicable to the outstanding convertible notes. The following is the range of variables used in revaluing the derivative liabilities at September 30, 2015 and 2014:
The following is the range of variables used in revaluing the derivative liabilities at September 30, 2015 and 2014:
NOTE8 - ACCRUED SALARY
On October 1, 2013, the Company entered into Employment Contracts with Robert Rico, President/CEO and Calvin Lewis, Vice President. The contracts each have a term of 5 years with a base salary plus a bonus of 2% of sales annually. The annual base salaries are as follows:
Robert Rico
$
175,000
Calvin Lewis
$
150,000
The Company also has a consulting agreement with Kenneth C. Wiedrich. Mr. Wiedrich is to be paid $2,000 per month to provide accounting services, and part time CFO duties.
As of the year ended September 30, 2015 and 2014, the Company has unpaid salaries to the officers of the Company of $303,741 and $186,641, respectively, broken down as follows:
NOTE 9 - SHAREHOLDER LOAN
As of the fiscal year ended September 30, 2015 the Company has a shareholder loan balance of $108,968 from two officers of the Company. The Company issued two convertible notes, one to Robert Rico who is the CEO of the Company, with a current balance due him of $91,793, and one to Calvin Lewis who is the Vice President of the Company with a current balance due him of $17,175. The notes convert at a 50% discount and bear interest of 8%. No conversions have ever been made on these notes. Of the total The balance for September 30, 2015 net of debt discount is $19,265. As of September 30, 2014 the total amount of the shareholder loans was $106,627 with the
total due to Robert Rico being $90,883and the amount due to Calvin Lewis being $15,744. The balance of the two notes net of debt discount as of September 30, 2014 was $9,788.
NOTE10 - RELATED PARTY TRANSACTIONS
Employment agreements with officers
On October 1, 2013, the Company entered into Employment Contracts with Robert Rico, President/CEO and Calvin Lewis, Vice President. The contracts each have a term of 5 years with a base salary plus a bonus of 2% of sales annually. The annual base salaries for Robert Rico is $175,000 and Calvin Lewis is $150,000.
Shareholder loan
As of the fiscal year ended September 30, 2015 the Company has a shareholder loan balance of $108,968 from two officers of the Company. Robert Rico is the CEO and his portion of the total due is $91,793. Calvin Lewis is the Vice President and the amount due to him is $17,175. As of September 30, 2014 the total amount of the shareholder loans was $106,627 with the total due to Robert Rico being $90,883 and the amount due to Calvin Lewis being $15,744. The respective balances net of debt discount are $19,265 as of September 30, 2015 and $$9,788 for September 30, 2014.
Free office space from its Chief Executive Officer
The Company signed a lease for office space at 2525 Ponce De Leon Blvd, Suite 300, Coral Gables, FL 33134, on August 6, 2015 at an annual cost of $24,000.
NOTE 11 - STOCKHOLDERS’ EQUITY
Preferred Stock
At the time of incorporation, the Company was authorized to issue 10,000,000 shares of preferred stock with a par value of $.001. On April 1, 2013, the Company amended its corporate articles of incorporation to designate 10,000,000 preferred shares as “Series A Preferred Stock”. These Series A Preferred Shares shall for a period of 48 months from the date of issuance, be convertible in aggregate into that number of fully paid and non-assessable shares of the common stock of the Corporation, equal to seventy-five percent (75%) of the post conversion issued and outstanding common stock of the Corporation on the date of conversion.
The Company drafted a second amendment to replace the first amendment to its corporate articles of incorporation section E (Designation of Series A Preferred Stock). Holders of Series A Preferred Stock shall be entitled to 25 votes per 1 vote of common stock, voting together with the holders of common stock. Holders of Series A Preferred Stock will also be entitled to convert 1 share of Series A Preferred Stock into 25 shares of common stock at any time.
As part of the share exchange agreement between NYBD Holding, Inc and Pleasant Kids, Inc., 10,000,000 shares of Series A Preferred Stock were issued to the principals of Pleasant Kids, Inc. During the fiscal year ended September 30, 2014, the Calvin Lewis converted 840,000 shares of preferred Series A for 21,000,000 of common stock and Robert Rico converted 840,000 shares of preferred Series A for 21,000,000 of common stock. As of September 30, 2014, the remaining balance of preferred Series A is 8,320,000 shares.
On February 25, 2015, the Company increased the authorized Preferred Stock Series A from 10,000,000 shares to 50,000,000 shares with a par value of $0.001. On March 18, 2015, Robert Rico and Calvin Lewis each purchased 19,590,000 shares of Preferred Stock Series A for $48,975 each. The $48,975 amount was deducted from their respective accrued salaries. The Company also issued 2,500,000 shares of Preferred Stock Series A to a marketing representative for services rendered. The total amount of Preferred Stock Series A outstanding as of the quarter ended March 31, 2015, is 50,000,000 shares.
On March 19, 2015, the Company increased the authorized Preferred Stock from 50,000,000 shares to 60,000,000 shares with par value of $0.001. The additional 10,000,000 shares of Preferred Stock are designated as Series B. The Series B Preferred Stock is not convertible into Common Stock at any time and is not entitled to dividends of any
kind or liquidation, dissolution rights of any kind. The holders of Series B Preferred Stock shall be entitled to 1,000 votes for each share of Series B Stock that is held when voting together with holders of the Common Stock.
On March 20, 2015, Robert Rico and Calvin Lewis each purchased 5,000,000 shares of Series B Preferred for the sum of $10,000 each. The $10,000 was deducted from each of their respective shareholders loans.
Common Stock
On May 10, 2013, the Company amended its articles of incorporation with the state of Florida to increase its authorized shares of common stock from 250,000,000 to 750,000,000. The stock has a par value of $.001.
During the fiscal year ended September 30, 2014, the Company increased the authorized number of Common shares four times: On January 14, 2014 the Company increased the authorized from 750,000,000 to 1,500,000,000 shares of common stock; on March 31, 2014, the Company increased the authorized from 1,500,000,000 common stock to 2,500,000,000 shares of common; on May 16, 2014, the Company increased the authorized from 2,500,000,000 common stock to 4,000,000 shares of common stock; and on September 9, 2014, the Company increased the authorized from 4,000,000 shares of common to 10,000,000,000 shares of common. During the fiscal year ended September 30, 2015, on December 9, 2014, the Company again decreased the authorized number of Common shares from 10,000,000,000 to 5,000,000,000. Then on February 25, 2015, the Company increased the authorized number of Common shares from 5,000,000,000 to 9,500,000,000, which is the amount of authorized shares as of September 30, 2015.
During fiscal year ended September 30, 2014, the Company issued 23,000,000 shares of common stock in payment of a stock payable of $48,300.
During the fiscal year ended September 30, 2014, the Company issued 3,176,946,873 common shares for the conversion and reduction of $583,000 in convertible debt and $39,122 of accrued interest.
During the fiscal year ended September 30, 2014, the Company issued 150,000,000 shares of common stock for cash of $52,998.
During the fiscal year ended September 30, 3014, the Company issued 42,000,000 shares of common stock for the conversion of 1,680,000 shares of Preferred Series A stock.
During the year ended September 30, 2015, the Company issued 10,698,740 post reverse shares of Common Stock for the conversion and reduction of $210,500 in convertible debt and $6,451 of accrued interest.
On April 26, 2015, the Company approved a reverse stock split. The outstanding common shares of the Company shall be decreased on the basis of 500 shares of Common Stock becoming 1 share of Common Stock (1:500 reverse split) without changing the par value of the shares of the Corporation and without changing the amount of the authorized shares of the Corporation. FINRA approved the reverse split on July 6, 2015, so as of September 30, 2015, common stock, additional paid-in capital, share and per share data for prior periods have been restated to reflect the stock split as if it had occurred at the beginning of the earliest period presented.
12. INCOME TAXES
The provision for income taxes consists of the following for the year ended September 30, 2015 and 2014:
The actual income tax provision differs from the “expected” tax computed by applying the Federal corporate tax rate of 38% to the loss before income taxes as follows:
The tax effects of temporary differences which give rise to significant portions of the deferred taxes are summarized as follows:
Deferred income taxes are provided for the temporary differences between the carrying values of the Company's assets and liabilities for financial reporting purposes and their corresponding income tax basis. The temporary differences give rise to either a deferred tax asset or liability in the consolidated financial statements, which is computed by applying current statutory tax rates to taxable and deductible temporary differences based upon the classification (i.e. current or non-current) of the asset or liability in the consolidated financial statements which relates to the particular temporary difference. Deferred taxes related to differences which are not attributable to a specific asset or liability are classified in accordance with the future period in which they are expected to reverse and be recognized for income tax purposes. The long-term deferred tax assets are fully valued as of September 30, 2015.
NOTE 13 - SUBSEQUENT EVENTS
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that other than listed below, no material subsequent events exist through the date of this filing.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pleasant Kids, Inc.
(Registrant)
Date: February 29, 2016
/s/ Robert Rico
Chief Executive Officer
/s/ Kenneth C. Wiedrich
Chief Financial Officer