UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,ended: September 30, 2015
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________ to __________._______________.
Commission file number: 000-51225
Wisdom Homes of America, Inc.
(Exact name of registrant as specified in its charter)
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| 43-2041643 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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500 North Northeast Loop 323 Tyler, TX |
| 75708 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’sRegistrant's telephone number, including area code: (800) 727-1024
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large"large accelerated filer,” “accelerated filer”" "accelerated filer" and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨x No ¨
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’sissuer's classes of common stock, as of the latest practicable date. As of May 13,November 14, 2015, there were 56,317,571146,594,770 shares of common stock, par value $0.001, issued and outstanding.
WISDOM HOMES OF AMERICA, INC.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | ||||||
ITEM 1 | Financial Statements | 4 | ||||
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ITEM 2 |
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ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 44 | ||||
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ITEM 4 | Controls and Procedures | 45 | ||||
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PART II – OTHER INFORMATION | 46 | |||||
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ITEM 1 | Legal Proceedings | 46 | ||||
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ITEM 1A | Risk Factors | 46 | ||||
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ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 46 | ||||
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ITEM 3 | Defaults Upon Senior Securities | 47 | ||||
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ITEM 4 | Mine Safety Disclosures | 47 | ||||
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ITEM 5 | Other Information | 47 | ||||
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ITEM 6 | Exhibits |
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PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-lookingforward looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”"Exchange Act"). These statements are based on management’smanagement's beliefs and assumptions, and on information currently available to management. Forward-lookingForward looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking" Forward looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider”"expect," "anticipate," "intend," "plan," "believe," "estimate," "consider" or similar expressions are used.
Forward-lookingForward looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-lookingforward looking statements. Readers are cautioned not to put undue reliance on any forward-lookingforward looking statements.
ITEM 1 Financial StatementsFINANCIAL STATEMENTS
WISDOM HOMES OF AMERICA, INC. |
Condensed Consolidated Balance Sheets |
September 30, December 31, 2015 2014 (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash and cash equivalents Inventory Note receivables Other current assets TOTAL CURRENT ASSETS Property and equipment, net Intangible assets: Domain names Advertising rights Note receivables noncurrent Other assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable Accrued liabilities Notes payable Notes payable - related party Current liabilities - discontinued operations TOTAL CURRENT LIABILITIES LONG TERM LIABILITIES Other accrued liabilities Flooring Credit Line Notes payable Notes payable - related party TOTAL LONG TERM LIABILITIES TOTAL LIABILITIES STOCKHOLDERS' EQUITY Preferred stock, $0.001 par value: 20,000,000 shares authorized; zero shares issued and outstanding at September 30, 2015; zero shares issued and outstanding at December 31, 2014; Common stock, $0.001 par value: 300,000,000 shares authorized; 77,185,304 shares issued and outstanding at September 30, 2015, 50,677,105 shares issued and outstanding at December 31, 2014, Paid-in capital Retained earnings TOTAL STOCKHOLDERS' EQUITY (DEFICIT) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,497 $ 410,828 1,932,910 1,201,693 84,083 450,758 431,672 410,094 $ 2,451,162 $ 2,473,373 76,086 54,434 84,363 84,363 53,937 58,560 878,659 968,924 78,100 3,100 $ 3,622,307 $ 3,642,754 $ 337,369 $ 282,220 1,573,642 1,430,891 1,686,517 929,332 56,865 - 245,442 240,102 $ 3,899,835 $ 2,882,545 118,750 118,750 1,889,568 1,219,241 130,309 404,479 161,250 161,250 2,299,877 1,903,720 $ 6,199,712 $ 4,786,265 - - 77,185 50,677 (8,945,457 ) (9,888,444 ) 6,290,867 8,694,256 (2,577,405 ) (1,143,511 ) $ 3,622,307 $ 3,642,754
The accompanying notes are an integral part of these condensed consolidated financial statements.
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WISDOM HOMES OF AMERICA, INC. |
Condensed Consolidated |
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 16,147 | $ | 410,828 | ||||
Inventory | 2,026,323 | 1,201,693 | ||||||
Note receivables | 184,001 | 450,758 | ||||||
Other current assets | 435,352 | 410,094 | ||||||
TOTAL CURRENT ASSETS | $ | 2,661,823 | $ | 2,473,373 | ||||
Property and equipment, net | 82,063 | 54,434 | ||||||
Intangible assets: | ||||||||
Domain names | 84,363 | 84,363 | ||||||
Advertising rights | 57,019 | 58,560 | ||||||
Note receivables noncurrent | 938,837 | 968,924 | ||||||
Other assets | 3,100 | 3,100 | ||||||
TOTAL ASSETS | $ | 3,827,205 | $ | 3,642,754 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 289,513 | $ | 282,220 | ||||
Accrued liabilities | 1,403,431 | 1,430,891 | ||||||
Notes payable | 1,364,833 | 929,332 | ||||||
Current liabilities - discontinued operations | 237,212 | 240,102 | ||||||
TOTAL CURRENT LIABILITIES | $ | 3,294,989 | $ | 2,882,545 | ||||
LONG TERM LIABILITIES | ||||||||
Other accrued liabilities | 118,750 | 118,750 | ||||||
Flooring Credit Line | 1,938,071 | 1,219,241 | ||||||
Notes payable | 101,915 | 404,479 | ||||||
Notes payable - related party | 161,250 | 161,250 | ||||||
TOTAL LONG TERM LIABILITIES | 2,319,986 | 1,903,720 | ||||||
TOTAL LIABILITIES | $ | 5,614,975 | $ | 4,786,265 | ||||
STOCKHOLDERS' EQUITY | ||||||||
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Preferred stock, $0.001 par value: 20,000,000 shares authorized; zero shares issued and outstanding at March 31, 2015; zero shares issued and outstanding at December 31, 2014; | - | - | ||||||
Common stock, $0.001 par value: 300,000,000 shares authorized; 52,702,105 shares issued and outstanding at March 31, 2015, 50,677,105 shares issued and outstanding at December 31, 2014, | 52,702 | 50,677 | ||||||
Paid-in capital | (9,748,719 | ) | (9,888,444 | ) | ||||
Retained earnings | 7,908,247 | 8,694,256 | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | (1,787,770 | ) | (1,143,511 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 3,827,205 | $ | 3,642,754 |
Three Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 REVENUE Sales Total revenue OPERATING EXPENSES Cost of sales Selling, general and administrative expenses Total operating expenses Operating Loss Other Income (Expense) Other income Interest income Interest expense Total other income (expense) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Provision for Income Taxes INCOME (LOSS) FROM CONTINUING OPERATIONS Loss from discontinued operations, net of zero provision and $3,000 tax benefit for the nine months ended September 30, 2015 and 2014, respectively, and net of zero tax provision and $2,000 tax benefit for the three months ended September 30, 2015 and 2014, respectively. NET INCOME (LOSS) Income (loss) per share, Basic and Diluted Income (loss) from continuing operations Income (loss) from discontinued operations Total income (loss) per share WEIGHTED AVERAGE COMMON SHARES OUTSTANDING $ 72,725 $ 351,543 $ 1,327,538 $ 401,916 72,725 351,543 1,327,538 401,916 231,674 276,523 1,238,359 301,770 302,054 664,248 2,101,210 1,234,192 533,728 940,771 3,339,569 1,535,962 (461,003 ) (589,228 ) (2,012,031 ) (1,134,046 ) 8,238 - 8,238 847,351 2,377 5,173 23,321 13,522 (133,877 ) (76,268 ) (406,581 ) (164,837 ) (123,262 ) (71,095 ) (375,022 ) 696,036 (584,265 ) (660,323 ) (2,387,053 ) (438,010 ) - (97,000 ) - (257,000 ) (584,265 ) (563,323 ) (2,387,053 ) (181,010 ) (5,394 ) (45,083 ) (16,336 ) (343,686 ) $ (589,659 ) $ (608,406 ) $ (2,403,389 ) $ (524,696 ) $ (0.01 ) $ (0.01 ) $ (0.04 ) $ (0.00 ) - (0.00 ) - (0.01 ) $ (0.01 ) $ (0.01 ) $ (0.04 ) $ (0.01 ) 71,982,254 45,897,576 61,174,751 44,041,849
The accompanying notes are an integral part of these condensed consolidated financial statements.
WISDOM HOMES OF AMERICA, INC. |
Condensed Consolidated Statements of |
Three Months Ended | ||||||||
March 31, | March 31, | |||||||
2015 | 2014 | |||||||
OPERATING EXPENSES | ||||||||
Selling, general and administrative expenses | 688,945 | 372,169 | ||||||
Total operating expenses | 688,945 | 372,169 | ||||||
Operating Loss | (688,945 | ) | (372,169 | ) | ||||
Other Income (Expense) | ||||||||
Interest income | 3,416 | 3,929 | ||||||
Interest expense | (94,878 | ) | (34,046 | ) | ||||
Total other income (expense) | (91,462 | ) | (30,117 | ) | ||||
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (780,407 | ) | (402,286 | ) | ||||
Provision for Income Taxes | - | (112,000 | ) | |||||
LOSS FROM CONTINUING OPERATIONS | (780,407 | ) | (290,286 | ) | ||||
Loss from discontinued operations, net of zero tax provision and $1,000 tax benefit for the quarters ended March 31, 2015 and 2014, respectively. | (5,602 | ) | (88,347 | ) | ||||
NET LOSS | $ | (786,009 | ) | $ | (378,633 | ) | ||
Loss per share, Basic and Diluted | ||||||||
Loss from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | ||
Loss from discontinued operations | - | (0.00 | ) | |||||
Total loss per share | $ | (0.02 | ) | $ | (0.01 | ) | ||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 52,229,605 | 41,018,772 |
Nine Months Ended September 30, September 30, 2015 2014 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Amortization Stock-based compensation Gain on sale of ManufacturedHomes.com Shares issued in satisfaction of debt Changes in operating assets and liabilities: Accounts receivable Inventories Prepaid expenses and deposits Other assets & note receivables Accounts payable and accrued liabilities Net cash used in operating activities Cash flows used in investing activities: Purchases of property and equipment Net cash used in investing activities Cash flows provided by financing activities: Payments on note payable Proceeds from note payable Proceeds from note payable - related party Net cash provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Non-cash investing and financing activity: Shares issued pursuant to stock based compensation Shares issued pursuant to conversion of debt Shares issued as additional interest expense $ (2,403,389 ) $ (524,696 ) 9,994 3,889 4,623 1,541 818,440 717,200 — (847,351 ) 151,055 — — (21,666 ) 28,127 29,533 69,905 (293,924 ) 389,315 904,676 137,633 (397,760 ) (794,297 ) (428,558 ) (31,646 ) (21,136 ) (31,646 ) (21,136 ) (528,638 ) (390,880 ) 889,385 822,500 56,865 41,497 417,612 473,117 (408,331 ) 23,423 410,828 93,152 $ 2,497 $ 116,575 $ 818,440 $ 695,000 $ 151,055 $ 59,000 $ — $ 22,200
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Three Months Ended | ||||||||
March 31, | March 31, | |||||||
2015 | 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (786,009 | ) | $ | (378,633 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 3,285 | 1,090 | ||||||
Amortization | 1,541 | — | ||||||
Stock-based compensation | 141,750 | 440,000 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | — | 81,497 | ||||||
Inventories | 800,499 | — | ||||||
Prepaid expenses and deposits | (584,260 | ) | (110,692 | ) | ||||
Other assets & note receivables | 300,000 | 337,571 | ||||||
Accounts payable and accrued liabilities | (401,988 | ) | (550,232 | ) | ||||
Net cash used in operating activities | (525,182 | ) | (179,399 | ) | ||||
Cash flows used in investing activities: | ||||||||
Purchases of property and equipment | (30,914 | ) | — | |||||
Net cash used in investing activities | (30,914 | ) | — | |||||
Cash flows provided by financing activities: | ||||||||
Payments on note payable | (100,500 | ) | (95,601 | ) | ||||
Proceeds from note payable | 261,915 | 166,000 | ||||||
Proceeds from note payable - related party | — | 41,497 | ||||||
Net cash provided by financing activities | 161,415 | 111,896 | ||||||
Net decrease in cash and cash equivalents | (394,681 | ) | (67,503 | ) | ||||
Cash and cash equivalents at beginning of period | 410,828 | 93,152 | ||||||
Cash and cash equivalents at end of period | $ | 16,147 | $ | 25,649 | ||||
Non-cash investing and financing activity: | ||||||||
Shares issued pursuant to stock based compensation | $ | 141,750 | $ | 360,000 | ||||
Shares issued pursuant to conversion of accounts payable | $ | — | $ | 80,000 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WISDOM HOMES OF AMERICA, INC.
Notes to the Consolidated Financial Statements
March 31,September 30, 2015
Unaudited
Note 1. General
Nature of Business
The Company, together with its wholly owned subsidiaries, is engaged in opening and operating manufactured home retail centers, currently in Texas. Its manufactured home operations are primarily conducted through its wholly owned subsidiary, Wisdom Manufactured Homes Of America, Inc., however, the Company does maintain other wholly-owned subsidiaries which have little or no activity, each of which is incorporated or qualified to do business in the states in which it does so.
Wisdom Homes Of America, Inc. was formed on July 14, 2003 in the State of Nevada as Tora Technologies, Inc. On November 21, 2006, it changed its name to Makeup.com Limited, on January 29, 2010, it changed its name to LC Luxuries Limited, on November 5, 2010, it changed its name to General Cannabis, Inc., and on January 6, 2012, it changed its name to SearchCore, Inc. On March 3, 2015, the Company changed its name to Wisdom Homes Of America, Inc.
Corporate Name Change
On March 3, 2015, the Company changed its name from SearchCore, Inc. to Wisdom Homes of America, Inc. and increased the authorized common stock from 200 million shares to 300 million shares. The name change and increase in authorized common stock were unanimously approved by the Board of Directors on December 22, 2014, and by a majority of its outstanding shares of common stock at the annual shareholder meeting held on March 3, 2015.
Chief Financial Officer Appointment
On September 24, 2015, Munjit Johal resigned as one of the members of our Board of Directors, and as our Chief Financial Officer. Mr. Johal's resignation did not involve any disagreement with the Company or other management relating to the Company's operations, policies, practices or otherwise. James Pakulis will take over as interim Chief Financial Officer until a replacement can be identified.
Principal Services
The Company’sCompany's principal service is opening and operating manufactured home retail centers, also known as model home retail centers. Its primary customers are homebuyers who generally purchase manufactured homes to place on their own homesites, although periodically customers will request assistance in locating a homesite in the areas where the Company has its retail centers. The Company generally operates its retail sales centers by having inventory on the retail center lots, although customers can order homes that are shipped directly from the factory to their homesite. Most of the Company’sCompany's sales are to customers living within a radius of approximately one hundred miles from its retail centers.
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WISDOM HOMES OF AMERICA, INC.
Notes to the Consolidated Financial Statements
September 30, 2015
Unaudited
In addition to Wisdom Manufactured Homes Of America, Inc., the Company has the following wholly-owned subsidiaries which have little operations:
Alpine Creek, Inc.
The Company has the following wholly-owned subsidiaries which have no operations:
Currently, the Company has no imminent or specific plans for any of these entities and they are held as corporations in good standing.
Manufactured Home Retail Centers
The Company owns and operates manufactured home retail centers. In February 2014, the Company opened its first retail center in Rhome, Texas. Its second retail center in Tyler, Texas, was opened in April 2014, its third retail center in Jacksboro, Texas, in May 2014 and its fourth retail center in Mt. Pleasant, Texas, in December 2014. The retail centers are operated by the
Note 2. Basis Of Presentation And Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP).
Reclassifications
Certain prior year amounts in the accompanying consolidated financial statements have been reclassified to conform to the current
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on knowledge of current events and anticipated future events and accordingly, actual results may differ from those estimates.
The Company maintains cash in bank and deposit accounts, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Cash and Cash
The Company considers only highly liquid investments such as money market funds and commercial paper with maturities of 90 days or less at the date of their acquisition as cash and cash equivalents.
Fair Value of Financial Instruments
The accounting standards regarding disclosures about fair value of financial instruments defines financial instruments and required fair value disclosure of those instruments. This accounting standard defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. Receivables, investments, payables, short and long term debt and warrant liabilities qualified as financial instruments. Management believes the carrying amounts of receivables, payables and debt are a reasonable estimate of fair value because of the short period of time between the origination of such instruments, their expected realization, and if applicable, their stated interest rate is equivalent to interest rates currently available. The three levels are defined as follows:
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
The Company analyzes all financial instruments with features of both liabilities and equity under the accounting standards regarding accounting for certain financial instruments with characteristics of both liabilities and equity, accounting for derivative instruments and hedging activities, accounting for derivative financial instruments indexed to, and potentially settled in, a
Advertising Cost
The Company expenses advertising costs when incurred. Advertising expense for the
Allowance for Doubtful Accounts
Allowance for doubtful accounts is defined as a company's estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company does not maintain an allowance for doubtful accounts based upon
Inventory
Inventory is stated at the lower of cost or market. Cost is determined under the first-in, first-out method. The cost of a manufactured home in inventory is removed from inventory and recorded as a component of cost of sales at the time revenue is recognized.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from six to seven years. Property and equipment at
Intangible Assets
In accordance with Goodwill and Other Intangible Assets, intangible assets that are determined not to have an indefinite useful life are subject to amortization. The Company amortizes intangible assets using the straight-line method over their estimated useful lives.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
Impairment of Long-Lived and Intangible Assets
In accordance with Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses the recoverability of the long-lived and intangible assets by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. No impairment of intangible assets was recognized during the
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the provisions of Share-Based Payment, which addresses the accounting for equity-based compensation and which requires that the cost of all equity-based compensation arrangements be reflected in the financial statements over the vesting period based on the estimated fair value of the awards. During the
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605,
The Company and its wholly owned subsidiaries recognize revenue as follows:
Manufactured Home Retail Centers – the Company generates revenues through its manufactured home retail centers operated by Wisdom Manufactured Homes Of America, Inc., which it started in January 2014. The Company anticipates opening and/or acquiring additional retail centers in 2015 and branding them under the name Wisdom Manufactured Homes Of America, Inc. The Company purchases factory built houses and sells them to end users, and also anticipates structuring the sale of used manufactured homes. The Company recognizes revenue from manufactured homes sold generally when (i) the customer has entered into a binding sales agreement with the Company, (ii) the manufactured home has been delivered and installed at the
Income Taxes
The Company follows Accounting for Income Taxes which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
The charge for taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect to temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also recorded in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Uncertain tax positions
The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax-related interest and penalties as interest expense and SGA expense, respectively, on the Consolidated Statement of Operations.
Recent Accounting Pronouncements
In June, 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation - Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this ASU as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company is currently assessing the impact this standard will have on its consolidated financial statements and required disclosures.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited In November, 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments in this ASU also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. Specifically, the assessment of the substance of the relevant terms and features should incorporate a consideration of: (1) the characteristics of the terms and features themselves (for example, contingent versus non-contingent, in-the-money versus out-of-the-money); (2) the circumstances under which the hybrid financial instrument was issued or acquired (e.g., issuer-specific characteristics, such as whether the issuer is thinly capitalized or profitable and well-capitalized); and (3) the potential outcomes of the hybrid financial instrument (e.g., the instrument may be settled by the issuer issuing a fixed number of shares, the instrument may be settled by the issuer transferring a specified amount of cash, or the instrument may remain legal-form equity), as well as the likelihood of those potential outcomes. The amendments in this ASU apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The effects of initially adopting the amendments in this ASU should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods. The Company is currently assessing the impact this standard will have on its consolidated financial statements and required disclosures. In April, 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). The Company is currently assessing the impact this standard will have on its consolidated financial statements and required disclosures.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited In April 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-08 Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU No. 2014-08 changes the requirements for reporting discontinued operations in that a discontinued operation may include a component of an entity, a group of components of an entity, or a business or non-profit activity. In addition, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an
In July 2012, the Financial Accounting Standard Board
In July 2013, the FASB issued ASU No. 2013-11,
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606)
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
In December 2011, the Financial Accounting Standards Board, or FASB, issued an accounting standards update to require disclosure of information about the effect of rights of offset with certain financial instruments on an
In February 2013, the FASB issued an accounting standards update that requires presentation for reclassification adjustments from accumulated other comprehensive income into net income in a single note or on the face of the financial statements. The Company has adopted the amendments in this standard effective in the first quarter of 2013. The adoption of this standard had an immaterial effect on the
In July 2013, the FASB issued an accounting standards update that specifies that unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. When a net operating loss carryforward, a similar tax loss or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes or the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this accounting standards update did not have a significant impact on the
FASB issued an accounting standards update amending ASC 220 to improve the comparability, consistency and transparency of reporting of comprehensive income. It amends existing guidance by allowing only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement, statement of comprehensive income or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of other comprehensive income. Also, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements. ASU No. 2011-05 requires retrospective application, and it is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. In December 2011, FASB issued ASU 2011-12. ASU 2011-12 indefinitely deferred the provisions of ASU 2011-05 requiring the presentation of reclassification adjustments on the face of the financial statements for items reclassified from other comprehensive income to net income. The adoption of this standard did not have a material impact on the
FASB issued an accounting standards update amending ASC 820, which is effective for interim and annual periods beginning after December 31, 2011, to achieve common fair value measurement and disclosure requirements between GAAP and IFRS. This amendment changes the wording used to describe fair value and requires additional disclosures. The adoption of this amendment did not have a material impact on the
In September 2011, the FASB issued an amendment to an existing accounting standard, which provides an option to perform a qualitative assessment to determine whether further impairment testing on goodwill is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this standard did not have a material impact on the
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
During May 2009 and February 2010, the FASB issued a new authoritative pronouncement regarding recognized and non-recognized subsequent events. This guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The adoption of this guidance had no impact on the
Other Recently Issued, but Not Yet Effective Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 3. Equity Transactions
At
Common Stock On July 18, 2014, the Company entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC, pursuant to which it sold to Typenex a 10% Convertible Promissory Note in the original principal amount of $85,500 (the "Note"), which reflected an original issue discount of $7,500 and legal fees of $3,000. The Note had a maturity date of June 23, 2015, and was convertible after 180 days into common stock at $0.075 per share (the "Conversion Price"). The Conversion Price was subject to adjustment downward if the Company issued its common stock at a lower price prior to any conversion. On April 22, 2015, May 22, 2015, June 22, 2015, and August 20, 2015 the Company converted $14,583.75, $14,488.46, $14,373.22, and $10,296.64 of the Note into 378,799, 812,224, 1,271,032, and 2,958,804 shares of the Company's common stock, respectively. On October 29, 2014, the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG Capital"), pursuant to which the Company sold to LG Capital an 8% Convertible Promissory Note in the original principal amount of $105,000 (the "Note"). The Note has a maturity date of October 29, 2015, and is convertible after 180 days into its common stock at a forty two percent (42%) discount from the lowest trading price of its common stock, as reported by any exchange upon which its common stock is then traded, for the ten (10) trading days prior to its receipt of notice from the Note holder to exercise this conversion feature. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 120% of the principal amount; (b) between 91 and 150 days after issuance – 130% of the principal amount; (c) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. On April 27, 2015, we repaid $75,000 of the promissory note to LG Capital. The remaining outstanding principal amount of the Note, in the amount of $53,000, plus accrued interest of $4,165.48, was sold by LG Capital to Carebourn Capital, L.P. On May 6, 2015 and June 9, 2015, the Company converted $16,500 and $30,300 of the Note into 500,000, and 1,500,000 shares of the Company's common stock, respectively.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited On December 30, 2014, we entered into a Securities Purchase Agreement with KBM Worldwide, Inc., pursuant to which we sold to KBM a 8% Convertible Promissory Note in the original principal amount of$45,000 (the "Note"). The Note has a maturity date of October 2, 2015, and is convertible after 180 days into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 51% multiplied by the Market Price (representing a discount rate of49%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means the closing bid price on the applicable day. The "Fixed Conversion Price" shall mean $0.00005. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by us at a premium as follows: (a) between 0 and 90 days after issuance – 130% of the principal amount and any accrued and unpaid interest; (b) between 91 and 150 days after issuance – 135% of the principal amount and any accrued and unpaid interest; and (c) between 151 and 180 days after issuance – 140% of the principal amount and any accrued and unpaid interest. The purchase and sale of the Note closed on December 31, 2014, the date that the purchase price was delivered to us. On July 7, 2015 and July 20, 2015 the Company converted $10,000 and $17,500 along with $1,800 in accrued but unpaid interest, of the Note into 653,595 and 1,892,157 shares of the Company's common stock, respectively. On January 22, 2015, we entered into a Securities Purchase Agreement with Vista Capital Investments, LLC, pursuant to which we sold to Vista a 12% Convertible Promissory Note in the original principal amount of $55,000 (the "Note") with a $5,000 original issue discount. The Note has a maturity date of January 22, 2016, and is convertible after 120 days into our common stock at 90% of the Market Price of our common stock (representing a discount rate of 10%). "Market Price" means the lowest traded price for the Common Stock during the twenty (20) trading days before the conversion. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by us up to 180 days after issuance at 120% of the principal amount and any accrued and unpaid interest. On July 29, 2015 and August 11, 2015 the Company converted $7,425 and $10,675 of the Note into 750,000 and 3,500,000 shares of the Company's common stock, respectively. On February 24, 2015, we entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG Capital"), pursuant to which we sold to LG Capital an 8% Convertible Promissory Note in the original principal amount of $105,000 (the "Note"). The Note has a maturity date of February 24, 2016, and is convertible after 170 days into our common stock at a forty two percent (42%) discount from the lowest trading price of our common stock, as reported by any exchange upon which our common stock is then traded, for the ten (10) trading days prior to our receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.0001 per share (the "floor price"), but in the event that the floor price is triggered, the conversion discount shall increase from forty two percent (42%) to fifty two (52%), calculated against the floor price. Interest accrued on the Note shall be payable in shares of our common stock, calculated using the same conversion formula. The Note can be prepaid by us at a premium as follows: (a) between 0 and 90 days after issuance – 120% of the principal amount; (b) between 91 and 150 days after issuance – 130% of the principal amount; (c) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on February 27, 2015, the date that the purchase price was delivered to us. On August 28, 2015, the Company converted $3,000 of the Note along with $119.67 of accrued but unpaid interest into 1,629,921 shares of the Company's common stock.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Stock-based Compensation
On January 7, 2015, the Company approved the issuance of an aggregate of 1,050,000 shares of its common stock, effective as of December 31, 2014, restricted in accordance with Rule 144, to seven (7) individuals and entities for services valued at $73,500.
On January 7, 2015, the Company approved the issuance of an aggregate of 975,000 shares of its common stock, effective as of January 2, 2015, restricted in accordance with Rule 144, to five (5) individuals and entities for services valued at $68,250.
On February 6, 2015, the Company authorized the issuance of an aggregate of 650,000 shares of its common stock, effective as of December 31, 2014, restricted in accordance with Rule 144, to an entity for services valued at $45,500. On April 15, 2015, we renewed a Consulting Agreement, which the Company had entered into on September 8, 2014, with a third party to provide consulting and advice related to potential partnerships, strategic contacts, joint ventures, corporate restructuring, and other business relationships, for a period of six months. Pursuant to the On April 23, 2015, in connection with the execution of a Consulting Agreement dated April 20, 2015, we agreed to issue 300,000 shares of our common stock, restricted in accordance with Rule 144, valued at $21,000, to one individual. On May 15, 2015, we issued 5,100,000 shares of our common stock, restricted in accordance with Rule 144, valued at $392,190, to two individuals for services rendered, including 5,000,000 shares to Brent Nelms, the President of our subsidiary, Wisdom Manufactured Homes of America, Inc. On or about July 6, 2015, we entered into a Consulting Agreement with Brighton Capital, Ltd. Pursuant to that agreement, we issued 150,000 shares of our common stock to Brighton in consideration for services rendered to us. In connection with the issuance, the Company record $18,000 in stock based compensation expense.
Note 4. Inventory
The inventory balance at
WISDOM HOMES OF AMERICA, INC. Notes to the September 30, 2015 Unaudited
Note 5. Note receivables
Current Note Receivables
At
At
Noncurrent Note Receivables
At September 30, 2015,
Note 6. Other Current Assets
At
Note 7. Property And Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from six to seven years. Property and equipment at
For the
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Note 8. Intangible Assets
Intangible assets consist of a suite of domain names. The domain names have been determined to have an indefinite useful life based primarily on the renewability of the domain name. Intangible assets with an indefinite life are not subject to amortization, but will be subject to periodic evaluation for impairment.
Intangible asset amounts at
September 30, December 31, Intangible Assets 2015 2014 Domain names Advertising rights Subtotal Accumulated amortization Total intangible Assets
Summary of the Company's premium and non-premium domain names Amount ToyHaulers.com* TravelTrailer.com* Various other non-premium domain names Total premium and non-premium domain names
* These domain names have been pledged as collateral in connection with a financing sale-leaseback with Domain Capital.
Note 9. Other Assets
At
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
Note 10. Discontinued Operations
General Management Solutions, Inc.
The Company discontinued the operations of General Management Solutions, Inc.
The liabilities of discontinued operations related to GMS at
General Health Solutions, Inc.
The Company discontinued the operations of General Health Solutions, Inc., which constituted its entire Medical Clinic Management segment. The Company discontinued the operations of General Health Solutions because of increasing costs associated with managing the clinics and the recent increased competition in the medicinal cannabis clinic industry. A major factor in the success of managing the medicinal cannabis clinics is running successful online Pay Per Click
During February 2012, the Company committed to a definitive plan to terminate the Management Agreement
The assets and liabilities of the
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
VerticalCore Merchant, Inc. - Tattoo.com
On January 21, 2013, the Company entered into a Management Agreement with Tattoo Interactive, LLC, pursuant to which it
The company discontinued the operations of VerticalCore Merchant, Inc.
For comparative purposes, all prior periods presented have been restated to reflect the reclassification of this entity to discontinued operations on a consistent basis. The Company does not expect any continuing cash flows from
The liabilities of the
Note 11. Accrued Liabilities
Accrued liabilities at
At
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Note 12. Notes Payable
Adar Bays, LLC On June 18, 2015, the Company entered into a Securities Purchase Agreement with Adar Bays, LLC, pursuant to which the Company sold to Adar Bays a 8% convertible note in the principal amount of $40,000 (the "Note"). The Note has a maturity date of June 18, 2016, and is convertible after 180 days into the Company's common stock at 58% of the lowest trading price of the Company's common stock for the ten (10) prior trading days (including the day upon which a notice of conversion is received), with a floor of $0.0001 per share. If the floor price is triggered, the discount at which Adar Bays may convert the Note increases to 48% of the lowest trading price. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 120% of the principal amount; (b) between 91 and 150 days after issuance – 130% of the principal amount; and (c) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on June 22, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation. American National Credit
On January 20, 2015, the Company entered into an agreement to purchase one (1) homesite for the purchase price of $27,500. The Company made a $1,500 down payment and issued a twenty six thousand dollar ($26,000) promissory note which carries 10% interest per annum and is payable over 360 equal monthly payments beginning on February 26, 2015. The homesite is located at the Hills of Oliver Creek Development, in the City of Rhome, Texas.
Auctus Private Equity Fund On July 1, 2015, we repaid the promissory note to Auctus Private Equity Fund, LLC, that on December 15, 2014, we entered into in connection with a Securities Purchase Agreement, pursuant to which we sold Auctus an 8% Convertible Promissory Note in the principal amount of $55,000. We repaid the entire principal balance of the Note plus accrued interest and a prepayment premium, in the total amount of $83,175.97. On July 9, 2015, we entered into a Securities Purchase Agreement with Auctus Fund, LLC ("Auctus"), pursuant to which we sold to Auctus a 10% Convertible Promissory Note in the original principal amount of Fifty Five Thousand Dollars ($55,000) (the "Note"). The Note has a maturity date of April 9, 2016, and is immediately convertible into our common stock at a forty two percent (42%) discount from the lowest trading price of our common stock, as reported by any exchange upon which our common stock is then traded, for the fifteen (15) trading days prior to our receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.00005 per share. The Note can be prepaid by us at a premium as follows: (a) between 0 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 120% of the principal amount; (c) between 61 and 90 days after issuance – 125% of the principal amount; (d) between 91 and 120 days after issuance – 130% of the principal amount; (e) between 121 and 150 days after issuance – 135% of the principal amount; (f) between 151 days and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on July 10, 2015, the date that the purchase price was delivered to us.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Backman Notes On March 28, 2014, the Company entered into, with a third party investor, a 20% convertible secured promissory note with a maturity date of April 28, 2015, and in the principal amount of $100,000 (the "Note"), which is convertible into common stock at $0.08 per share and which is collateralized by up to $15,000 on a monthly basis by the $100,000 in monthly payments which the Company receives pursuant to its sale of WeedMaps Media, Inc. if not paid in full within six months of the date of the Note. Furthermore, as further collateral, the Company placed 2,500,000 shares of its common stock into escrow. On May 5, 2015, and effective as of April 28, 2015, the Company entered into a First Amendment to 20% Convertible Secured Promissory Note pursuant to which the parties extended the maturity date of the Note from April 28, 2015, to April 30, 2016. The transaction closed on May 15, 2015, the day the executed amendment was delivered to the Company. Then, on May 19, 2015, the Company entered into a Second Amendment to 20% Convertible Secured Promissory Note pursuant to which the parties reduced the maturity date of the Note from April 30, 2016, to October 31, 2015. This transaction closed on May 20, 2015, the day the executed amendment was delivered to the Company. Carebourn Capital, L.P. On April 27, 2015, the Company entered into a Securities Purchase Agreement with Carebourn Capital, L.P. ("Carebourn"), pursuant to which the Company sold to Carebourn a 10% Convertible Promissory Note in the original principal amount of $85,500 (the "Note"). The Note has a maturity date of January 27, 2016, and is convertible after 180 days into the Company's common stock at a forty two percent (42%) discount from the average of the three lowest trading prices of the Company's common stock, as reported by any exchange upon which the Company's common stock is then traded, for the ten (10) trading days prior to the Company's receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.0001 per share (the "floor price"). The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 120% of the principal amount; (c) between 61 and 90 days after issuance – 125% of the principal amount; (d) between 91 and 120 days after issuance – 130% of the principal amount; (e) between 121 and 150 days after issuance – 135% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on April 29, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements under the Securities Act of 1933 pursuant to Rule 506 of Regulation D thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation. On May 22, 2015, the Company entered into a Securities Purchase Agreement with Carebourn Capital, L.P. ("Carebourn"), pursuant to which the Company sold to Carebourn a 10% Convertible Promissory Note in the original principal amount of $25,000 (the "Note"). The Note has a maturity date of February 22, 2016, and is convertible after 180 days into the Company's common stock at a forty two percent (42%) discount from the average of the three (3) lowest trading prices of the Company's common stock, as reported by any exchange upon which the Company's common stock is then traded, for the ten (10) trading days prior to the Company's receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.0001 per share (the "floor price"). The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 120% of the principal amount; (c) between 61 and 90 days after issuance – 125% of the principal amount; (d) between 91 and 120 days after issuance – 130% of the principal amount; (e) between 121 and 150 days after issuance – 135% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on May 22, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements under the Securities Act of 1933 pursuant to Rule 506 of Regulation D thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited On June 26, 2015, the Company entered into a Securities Purchase Agreement with Carebourn Capital, L.P. ("Carebourn"), pursuant to which the Company sold to Carebourn a 10% Convertible Promissory Note in the original principal amount of $30,500 (the "Note"). The Note has a maturity date of June 26, 2016, and is convertible after 180 days into the Company's common stock at a forty two percent (42%) discount from the average of the three (3) lowest trading prices of the Company's common stock, as reported by any exchange upon which the Company's common stock is then traded, for the ten (10) trading days prior to the Company's receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.0001 per share (the "floor price"). The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 120% of the principal amount; (c) between 61 and 90 days after issuance – 125% of the principal amount; (d) between 91 and 120 days after issuance – 130% of the principal amount; (e) between 121 and 150 days after issuance – 135% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on June 26, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements under the Securities Act of 1933 pursuant to Rule 506 of Regulation D thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation. DeLue Notes On March 26, 2014, the Company entered into, with a third party investor, a 20% convertible secured promissory note with a maturity date of April 26, 2015, and in the principal amount of $100,000 (the "Convertible Note"), which is convertible into the Company's common stock at $0.08 per share and which is collateralized by up to $15,000 on a monthly basis by the $100,000 in monthly payments which the Company receives pursuant to its sale of WeedMaps Media, Inc., if not paid in full within six months of the date of the Note. Furthermore, as further collateral, the Company placed 2,500,000 shares of its common stock into escrow. Finally, as an incentive to the third party investor to enter into the Note, the Company issued 300,000 shares of its common stock. The Company accounts for debt discount according to ASC 470-20 Debt With Conversion And Other Options. No debt discount associated with the Convertible Note was recorded because the fair value of the common stock at the commitment date ($0.05) was less than the effective conversion price of the conversion feature ($0.07). As such, there was no intrinsic value associated with the conversion feature and thus no debt discount was recognized. On May 5, 2015, and effective as of April 26, 2015, the Company entered into a First Amendment to 20% Convertible Secured Promissory Note pursuant to which the parties extended the maturity date of the Note from April 26, 2015, to October 31, 2015. The transaction closed on May 15, 2015, the day the executed amendment was delivered to the Company. GW Holdings Group, LLC On June 17, 2015, the Company entered into a Securities Purchase Agreement with GW Holdings Group, LLC, pursuant to which the Company sold to GW Group a 8% convertible note in the principal amount of $30,000 (the "Note"). The Note has a maturity date of June 17, 2016, and is convertible after 180 days into the Company's common stock at 58% of the lowest trading price of the Company's common stock for the ten (10) prior trading days (including the day upon which a notice of conversion is received), with a floor of $0.0001 per share. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 125% of the principal amount; (b) between 91 and 150 days after issuance – 135% of the principal amount; and (c) between 151 and 180 days after issuance – 145% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on June 19, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited JARVCO Note
On January 29, 2015, the Company entered into an agreement to purchase eleven (11) homesites in exchange for issuing a
JMJ Financial On July 20, 2015, we issued a $200,000 Convertible Note (the "Note") to JMJ Financial. The Note contains a ten percent (10%) original issue discount, and is to be funded in tranches at the sole discretion of JMJ. The first tranche was for $20,000. The Note has a maturity date of two years from the funding of each tranche and is convertible at the lesser of $0.02 or 60% of the lowest trade price in the 25 trading days before conversion. Each tranche is subject to a onetime interest charge of 12% 90 days after its funding. The Note can be prepaid by us only during the first 90 days following the issuance of each funding tranche. The purchase and sale of the Note closed on July 23, 2015, the date that the purchase price was delivered to us. KBM
On January 9, 2015, the Company repaid the promissory note to KBM Worldwide, Inc., that on July 9, 2014, the Company entered into in connection with a Securities Purchase Agreement, pursuant to which the Company sold KBM Worldwide an 8% Convertible Promissory Note in the principal amount of Fifty Three Thousand Dollars ($53,000) (the
On February 26, 2015, the Company repaid the promissory note to KBM Worldwide, Inc., that on August 26, 2014, the Company entered into in connection with a Securities Purchase Agreement, pursuant to which the Company sold KBM Worldwide an 8% Convertible Promissory Note in the principal amount of Forty Seven Thousand Five Hundred Dollars ($47,500) (the
On April 28, 2015, the Company repaid the promissory note to KBM Enterprises, LLC, that on October 20, 2014, the Company entered into in connection with a Securities Purchase Agreement, pursuant to which the Company sold KBM Enterprises an 8% Convertible Promissory Note in the principal amount of $83,000. The Company repaid the entire principal balance of the Note plus accrued interest and a prepayment premium, in the total amount of $111,192.71. On May 12, 2015, the Company repaid the promissory note to KBM Enterprises, LLC, that on November 10, 2014, the Company entered into in connection with a Securities Purchase Agreement, pursuant to which the Company sold KBM Enterprises an 8% Convertible Promissory Note in the principal amount of $54,000. The Company repaid the entire principal balance of the Note plus accrued interest and a prepayment premium, in the total amount of $72,330.41. On June 12, 2015, the Company repaid the promissory note to KBM Enterprises, LLC, that on December 9, 2014, the Company entered into in connection with a Securities Purchase Agreement, pursuant to which the Company sold KBM Enterprises an 8% Convertible Promissory Note in the principal amount of $63,500. The Company repaid the entire principal balance of the Note plus accrued interest and a prepayment premium, in the total amount of $85,096.96.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited LG Capital Funding, LLC
On February 24, 2015, the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC
On April 27, 2015, the Company repaid $75,000 of the promissory note to LG Capital Funding, LLC, that on October 29, 2014, the Company entered into in connection with a Securities Purchase Agreement, pursuant to which the Company sold to LG Capital Funding, LLC an 8% Convertible Promissory Note in the principal amount of $105,000 (the "Note"). The remaining outstanding principal amount of the Note, in the amount of $53,000, plus accrued interest of $4,165.48, was sold by LG Capital to Carebourn Capital, L.P. On June 4, 2015, the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG Capital"), pursuant to which the Company sold to LG Capital an 8% Convertible Promissory Note in the original principal amount of $78,750 (the "Note"). The Note has a maturity date of June 4, 2016, and is convertible after 180 days into the Company's common stock at a forty two percent (42%) discount from the lowest trading price of the Company's common stock, as reported by any exchange upon which the Company's common stock is then traded, for the ten (10) trading days prior to the Company's receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.0001 per share (the "floor price"), but in the event that the floor price is triggered, the conversion discount shall increase from forty two percent (42%) to fifty two percent (52%), calculated against the floor price. Interest accrued on the Note shall be payable in shares of the Company's common stock, calculated using the same conversion formula. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 120% of the principal amount; (b) between 91 and 150 days after issuance – 130% of the principal amount; (c) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on June 5, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Oakmore Opportunity Fund I LP On June 23, 2015, the Company entered into a Securities Purchase Agreement with Oakmore Opportunity Fund I LP ("Oakmore"), pursuant to which the Company sold to Oakmore a 8% Convertible Promissory Note in the original principal amount of $40,000 (the "Note"). The Note has a maturity date of June 23, 2016, and is convertible after 180 days into the Company's common stock at a forty two percent (42%) discount from the average of the three (3) lowest trading prices of the Company's common stock, as reported by any exchange upon which the Company's common stock is then traded, for the ten (10) trading days prior to the Company's receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.00005 per share (the "floor price"), but in the event that the Company's common stock becomes "chilled" by the Deposit Trust Corporation, the conversion discount shall increase from forty two percent (42%) to fifty two percent (52%) for as long as the Company's common stock is chilled, calculated against the floor price. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 130% of the principal amount; (b) between 91 and 120 days after issuance – 135% of the principal amount; (c) between 121 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on June 30, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements under the Securities Act of 1933 pursuant to Rule 506 of Regulation D thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation. Rock Capital On July 1, 2015, we entered into a Securities Purchase Agreement with Rock Capital, LLC ("Rock Capital"), pursuant to which we sold to Rock Capital an 8% Convertible Promissory Note in the original principal amount of Thirty Seven Thousand Five Hundred Dollars ($37,500) (the "Note"). The Note has a maturity date of April 1, 2016, and is convertible after 180 days into our common stock at a forty two percent (42%) discount from the lowest trading price of our common stock, as reported by any exchange upon which our common stock is then traded, for the ten (10) trading days prior to our receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.00005 per share (the "floor price"). The Note can be prepaid by us at a premium as follows: (a) between 0 and 90 days after issuance – 125% of the principal amount; (b) between 91 and 150 days after issuance – 135% of the principal amount; and (c) between 151 and 180 days after issuance – 145% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on July 4, 2015, the date that the purchase price was delivered to us. Service Trading Company, LLC On June 4, 2015, the Company entered into a Securities Purchase Agreement with Service Trading Company, LLC, ("Service Trading"), pursuant to which the Company sold to Service Trading an 8% Convertible Promissory Note in the original principal amount of $31,500 (the "Note"). The Note has a maturity date of June 4, 2016, and is convertible after 180 days into the Company's common stock at a forty two percent (42%) discount from the lowest trading price of the Company's common stock, as reported by any exchange upon which the Company's common stock is then traded, for the ten (10) trading days prior to the Company's receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.0001 per share (the "floor price"), but in the event that the floor price is triggered, the conversion discount shall increase from forty two percent (42%) to fifty two percent (52%), calculated against the floor price. Interest accrued on the Note shall be payable in shares of the Company's common stock, calculated using the same conversion formula. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 120% of the principal amount; (b) between 91 and 150 days after issuance – 130% of the principal amount; (c) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on June 9, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Vis Vires Group, Inc. On April 6, 2015, the Company entered into a Securities Purchase Agreement with Vis Vires Group, Inc., pursuant to which the Company sold to Vires a 8% Convertible Promissory Note in the original principal amount of $90,000 (the "Note"). The Note has a maturity date of January 9, 2016, and is convertible after 180 days into the Company's common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means the closing bid price on the applicable day. The "Fixed Conversion Price" shall mean $0.00005. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 130% of the principal amount and any accrued and unpaid interest; (b) between 91 and 150 days after issuance – 135% of the principal amount and any accrued and unpaid interest; and (c) between 151 and 180 days after issuance – 140% of the principal amount and any accrued and unpaid interest. The purchase and sale of the Note closed on April 9, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation. On April 29, 2015, the Company entered into a Securities Purchase Agreement with Vis Vires Group, Inc., pursuant to which the Company sold to Vires a 8% Convertible Promissory Note in the original principal amount of $53,500 (the "Note"). The Note has a maturity date of February 1, 2016, and is convertible after 180 days into the Company's common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means the closing bid price on the applicable day. The "Fixed Conversion Price" shall mean $0.00005. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 130% of the principal amount and any accrued and unpaid interest; (b) between 91 and 120 days after issuance – 135% of the principal amount and any accrued and unpaid interest; and (c) between 121 and 180 days after issuance – 140% of the principal amount and any accrued and unpaid interest. The purchase and sale of the Note closed on May 5, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation. On June 8, 2015, the Company entered into a Securities Purchase Agreement with Vis Vires Group, Inc., pursuant to which the Company sold to Vires a 8% Convertible Promissory Note in the original principal amount of $43,500 (the "Note"). The Note has a maturity date of March 10, 2016, and is convertible after 180 days into the Company's common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means the closing bid price on the applicable day. The "Fixed Conversion Price" shall mean $0.00005. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by the Company at a premium as follows: (a) between 0 and 90 days after issuance – 130% of the principal amount and any accrued and unpaid interest; (b) between 91 and 120 days after issuance – 135% of the principal amount and any accrued and unpaid interest; and (c) between 121 and 180 days after issuance – 140% of the principal amount and any accrued and unpaid interest. The purchase and sale of the Note closed on June 15, 2015, the date that the purchase price was delivered to the Company. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with the Company's operations, and there was no solicitation.
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Vista Capital Investments, LLC
On January 22, 2015, the Company entered into a Securities Purchase Agreement with Vista Capital Investments, LLC, pursuant to which the Company sold to Vista a 12% Convertible Promissory Note in the original principal amount of $55,000 (the
Below is a summary of note payable amounts which include accrued interest:
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited Notes payable - noncurrent portion September 30, December 31, Abrams Notes American National Note Backman Note Buckles Note Caesar Capital Group DeLue Notes Elkins Trust Note Geist Note JMJ Financial Note JARVCO Notes Total notes payable - noncurrent portion
During the
Note 13. Notes Payable - Related Party
From April 2015 through September 2015, Mr. James Pakulis, who is a member of the Company's Board of Directors and serves as its Chief Executive Office, loaned the Company $56,865. The Company recorded the amount as a demand note, which carries imputed interest. At September 30, 2015, accrued but unpaid interest totaled $265. Sportify Note
On December 31, 2012, the Company entered into a Securities Purchase Agreement by and among it, on the one hand, and Sportify, Inc., a Nevada corporation, and its shareholders, Sabas Carrillo
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
Note 14. Other Long Term Accrued Liabilities
At
Note 15. Inventory Flooring Credit Line
On May 12, 2014, the Company entered into a consignment agreement (the
The consignment price for used inventory shall be One Thousand Dollars ($1,000) greater than the Inventory
The Consignment Agreement shall be effective for a term of five (5) years or for so long as there are manufactured homes consigned to WMHOA by the Inventory Financer. During the term of the Consignment Agreement, WMHOA will maintain insurance on all manufactured homes consigned to it by
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
On May 12, 2014, the Company entered into an addendum to the Consignment Agreement. Pursuant thereto, so long as WMHOA is current on all amounts owed to the Inventory Financer and maintains a consignment inventory of at least four (4) manufactured homes during the previous month, the consignment fee owed to the Inventory Financer shall be reduced from 1% to 0.8% per month, and prorated for any partial month. This reduced rate shall be in addition to a Ten Dollar ($10) monthly administration fee and does not pertain to any consigned inventory that has been held on consignment for more than one (1) year.
On May 21, 2014, the Company paid the Inventory Financer a Fifty Thousand Dollar ($50,000) security deposit, which the Inventory Financer can use to setoff past due amounts owed pursuant to the Consignment Agreement, should any exist in the future. In two (2) years, if WMHOA is in compliance with the Consignment Agreement and current on all amounts due and owing to the Inventory Financer thereunder, if any, the security deposit will be refunded to WMHOA. During November 2014, the Company paid the Inventory Financer an additional Twenty Five Thousand Dollar ($25,000) security deposit in connection with the opening of the Mt. Pleasant retail center.
During October 2014, the Company was offered, by the Inventory Financer, a no-interest financing program pursuant to which this one-time financing program effectively increased its flooring line by approximately $1 million.
At
Note 16. Income Per Common Share
Income per common share is based on the weighted average number of common shares outstanding. The Company complies with Earnings Per Share, which requires dual presentation of basic and diluted earnings per share on the face of the statements of operations. Basic per share earnings or loss excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average common shares outstanding for the period. Diluted per share earnings or loss reflect the potential dilution that could occur if convertible preferred stock or debentures, options and warrants were to be exercised or converted or otherwise result in the issuance of common stock that is then shared in the earnings of the entity.
As of
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements
Unaudited
Note 17. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Significant components of the Company's tax provisions and deferred tax assets as of The components of tax provision:
The total tax provision for the
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited The components of deferred tax assets and liabilities:
September 30, December 31, Deferred income tax assets: State taxes Net operating losses Depreciation Accruals and other Deferred income tax liabilities: Depreciation Installment gain Valuation allowance Net deferred tax assets/(liabilities)
The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the Company's loss for the
The amount of deferred tax assets considered realizable could change if future taxable income is realized. At both
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited
Note 18. Related Party Transactions
All material intercompany transactions have been eliminated upon consolidation of the
See Note 13. Notes Payable- Related Party for information regarding a Securities Purchase Agreement entered into on December 31, 2012, with Sportify, Inc., a Nevada corporation, and its shareholders, Sabas Carrillo, an individual, and James Pakulis, an individual and one of the See Note 13. Notes Payable- Related Party for information regarding a demand note with James Pakulis, who is a member of the Company's Board of Directors and serves as its Chief Executive Office, pursuant to which he loaned the Company $56,865.
Note 19. Commitments And Contingencies
The
On July 1, 2014, the Company entered into a Lease Agreement for a two-acre lot, including office and parking, in Mt. Pleasant, Texas. The base rent is $2,500 per month, and the lease is for a period of 24 months.
Set forth below is a summary of current obligations as of
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements
Unaudited
Note 20. Warrants
As of
Note 21. Subsequent Events
The Company evaluated its
On Carebourn Capital Subsequent to the quarter ending September 30, 2015, the Company
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements
Unaudited
Typenex Co-Investment Subsequent to the quarter
Vis Vires Group Subsequent to the quarter ending September 30, 2015, the Company issued 37,969,748 shares of its common stock to Vis Vires Group, Inc. in satisfaction of debt. Vista Capital Investments
Increase In Authorized Common Stock Effective on We held a Special Meeting of Shareholders on October 23, 2015, in Tyler, Texas. There were shareholders representing 57,136,360 votes present at the meeting, either in person or by proxy, which represented approximately 70.9% of the 1. To approve an amendment to the Company's Articles of
WISDOM HOMES OF AMERICA, INC. Notes to the Consolidated Financial Statements September 30, 2015 Unaudited The For Against Abstain Percentage Approving 2. To approve an amendment to the Company's Articles of Incorporation to effectuate a reverse split of the
The agenda item passed with votes as For Against Abstain Percentage Approving A more detailed description of each agenda item at the
ITEM
Three and Nine Months Ended
Results of Operations
In early 2014 we transitioned Wisdom Homes of America, Inc., into the manufactured home retail industry and discontinued the operations of our wholly-owned subsidiaries that had operations related to our prior finder site business. For comparative purposes, all prior periods presented have been restated to reflect the reclassification of these entities to discontinued operations on a consistent basis. All revenue that was generated from operations related to our finder site business has been reclassified to discontinued operations on a consistent basis.
Revenues and Net Operating Loss
Our revenue, cost of sales, operating expenses, and net operating loss
Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2015 2014 2015 2014 Sales Cost of sales SG&A expenses Operating loss
Revenue
Sales– For the We had no sales during the first quarter of
For the
At
Operating Expenses
Operating Expenses Overview - Our operating expenses increased during the
Salaries And Employee Benefits - During the
Professional Fees - During the
General And Administrative Expenses - During the
Interest Expense –During the
Liquidity and Capital Resources
Our cash, current assets, intangible assets, total assets, current liabilities, and total liabilities as of
Our inventory balance at
Our total current assets
Our intangible assets at
Our current liabilities increased by
Our total long-term liabilities increased by
Cash Requirements
We had approximately
Sources and Uses of Cash
Operations
We had net cash used in operating activities of
Investments
During the
Financing
We had net cash from financing activities of
Debt Instruments, Guarantees, and Related Covenants
We have no disclosure required by this Item.
Critical Accounting Estimates
Intangible Assets
In accordance with Goodwill and Other Intangible Assets, intangible assets that are determined not to have an indefinite useful life are subject to amortization. We amortize intangible assets using the straight-line method over their estimated useful lives.
Impairment of Long-Lived and Intangible Assets
In accordance with Accounting for the Impairment or Disposal of Long-Lived Assets, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. We assess the recoverability of the long-lived and intangible assets by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. No impairment of intangible assets was recognized during the
Net Loss
For the
ITEM
As a smaller reporting company, we are not required to provide the information required by this Item.
(a) Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of
Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended
ITEM
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Rock Capital, LLC
Rock Capital, LLC On
Brighton Capital, Ltd. On or about July 6, 2015, we entered into a Consulting Agreement with Brighton Capital, Ltd. Pursuant to that agreement, we issued one hundred and fifty thousand (150,000) shares of our common stock to Brighton in consideration for services rendered to us. The issuance of the shares was exempt from the registration requirements under the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The investor was a sophisticated investor, familiar with our operations, and there was no solicitation. Auctus Fund, LLC On July 9, 2015, we entered into a Securities Purchase Agreement with Auctus Fund, LLC ("Auctus"), pursuant to which we sold to Auctus a 10% Convertible Promissory Note in the original principal amount of Fifty Five Thousand Dollars ($55,000) (the "Note"). The Note has a maturity date of April 9, 2016, and is immediately convertible into our common stock at a forty two percent (42%) discount from the lowest trading price of our common stock, as reported by any exchange upon which our common stock is then traded, for the fifteen (15) trading days prior to our receipt of notice from the Note holder to exercise this conversion feature. The conversion price shall be subject to a minimum conversion price of $0.00005 per share. The Note can be prepaid by us at a premium as follows: (a) between 0 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 120% of the principal amount; (c) between 61 and 90 days after issuance – 125% of the principal amount; (d) between 91 and 120 days after issuance – 130% of the principal amount; (e) between 121 and 150 days after issuance – 135% of the principal amount; (f) between 151 days and 180 days after issuance – 140% of the principal amount. There is no right to prepay the Note after 180 days. The purchase and sale of the Note closed on The issuance of the Note was exempt from the registration requirements under the Securities Act of 1933 pursuant to Rule 506 of Regulation D and Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
JMJ Financial On July 20, 2015, we issued a $200,000 Convertible Note (the "Note") to JMJ Financial. The Note contains a ten percent (10%) original issue discount, and is to be funded in tranches at the sole discretion of JMJ. The first tranche was for $20,000. The Note has a maturity date of two years from the funding of each tranche and is convertible at the lesser of $0.02 or 60% of the lowest trade price in the 25 trading days before conversion. Each tranche is subject to a one-time interest charge of 12% 90 days after its funding. The Note can be prepaid by us only during the first 90 days following the issuance of each funding tranche. The purchase and sale of the Note closed on July 23, 2015, the date that the purchase price was delivered to us. The issuance of the Note was exempt from the registration requirements under the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
ITEM
There have been no events which are required to be reported under this Item.
ITEM
Not applicable.
ITEM
There have been no events which are required to be reported under this Item.
ITEM
(a) Exhibits
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** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Wisdom Homes of America, Inc. |
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Dated: |
| /s/ James Pakulis |
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By: | James Pakulis |
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Its: | President and Chief Executive Officer |
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