BLACKCRAFT CULT, INC. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - BLACKCRAFT CULT, INC.	Financial_Report.xls
EX-32.1 - CERTIFICATION - BLACKCRAFT CULT, INC.	ex32-1.htm
EX-31.1 - CERTIFICATION - BLACKCRAFT CULT, INC.	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2014

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

Commission file number 000-54898

BLACKCRAFT CULT, INC.

(Exact name of registrant as specified in its charter)

Nevada		30-0686483
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2830 E. Via Martens, Anaheim, CA		92806
(Address of principal executive offices)		(Zip Code)

(949) 547-5916

(Registrant’s telephone number, including area code)

1030 N. Main Street, Unit B

Orange, CA 92867

(Former name, former address and former fiscal year, if changed since last report)

Copies of Communications to:

Stoecklein Law Group, LLP

401 West A Street

Suite 1150

San Diego, CA 92101

(619) 704-1310

Fax (619) 704-1325

Indicate by check mark whether the issuer (1) 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares of Common Stock, $0.001 par value, outstanding on November 11, 2014 was 199,360,046 shares.

BLACKCRAFT CULT, INC.

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014

Index to Report on Form 10-Q


	PART I - FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings

Item1A.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

Item 4.	Mine Safety Disclosures

Item 5.	Other Information

Item 6.	Exhibits

	Signatures

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BLACKCRAFT CULT, INC.
FORMERLY MERCULITE DISTRIBUTING, INC.
BALANCE SHEETS
(UNAUDITED)

	September 30,			December 31,
	2014			2013

ASSETS

Current assets:
Cash and equivalents	$	156,191		$	78,059
Accounts receivable		41			691
Inventory		72,228			76,153
Software		110,800			-
Total current assets		339,260			154,903

Fixed assets, net		3,151			3,928
Marketable securities		50,000			-

Total assets	$	392,411		$	158,831

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	189,470		$	347
Accrued liabilities		10,924			11,617
Income tax payable		12,121			-
Total current liabilities		212,515			11,964

Long-term liabilities:
Accrued interest payable - related party		197			-
Notes payable - related party		9,344			-
Line of credit - related party		8,250			-
Total long-term liabilities		17,791			-

Total liabilities		230,306			11,964

Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding
as of September 30, 2014 and December 31, 2013, respectively		-			-
Common stock, $0.001 par value, 6,666,600,000 shares
authorized, 199,160,014 and 148,350,510, shares issued and outstanding
as of September 30, 2014 and December 31, 2013, respectively		199,160			148,351
Additional paid-in capital		(60,583	)		(430,414	)
Retained earnings (deficit)		23,528			428,930
Total stockholders' equity		162,105			146,867

Total liabilities and stockholders' equity	$	392,411		$	158,831

The accompanying notes are an integral part of the financial statements.

BLACKCRAFT CULT, INC.
FORMERLY MERCULITE DISTRIBUTING, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)




	For the three months ended		For the nine months ended
	September 30,		September 30,
	2014	2013	2014	2013

Revenue
Product sales	$ 339,284	$ 336,189	$ 1,016,421	$ 795,022
Shipping income	59,078	(26,898)	164,300	-
Total revenue	398,362	309,291	1,180,721	795,022

Cost of sales
Product cost of goods sold	96,356	102,010	287,098	241,129
Shipping costs	50,488	38,495	138,044	97,626
Total cost of sales	146,844	140,505	425,142	338,755

Gross profit	251,518	168,786	755,579	456,267

Operating expenses:
General and administrative	166,784	61,076	567,534	134,657
Executive compensation	13,886	-	25,899	-
Depreciation	259	-	776	240

Total operating expenses	180,929	61,076	594,209	134,897

Other expenses:
Currency conversion	4	-	(10)	-

Total other expenses	4	-	(10)	-

Net income (loss) before provision for income taxes	70,593	107,710	161,360	321,370

Income tax expense	24,002	-	12,121	-

Net income (loss)	46,591	107,710	149,239	321,370


Weighted average number of common shares	199,160,014	148,350,510	183,345,333	148,350,510
outstanding - basic

Net loss per common share - basic	$ 0.00	$ 0.00	$ 0.00	$ 0.00



The accompanying notes are an integral part of the financial statements.

BLACKCRAFT CULT, INC.
FORMERLY MERCULITE DISTRIBUTING, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For the			For the
	nine months			nine months
	ended			ended
	September 30,			September 30,
	2014			2013

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	149,239		$	321,370
Adjustment to reconcile to net loss to net cash used in operating activities:
Depreciation		777			240
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable		650			(23	)
(Increase) in inventory		3,925			-
(Increase) in software		(110,800	)
(Increase) in income tax payable		12,121			-
Increase (Decrease) in accounts payable		32,693			-
Increase (Decrease) in accrued liabilities		(693	)		8,129
Increase in accrued interest payable - related party		273			-

Net cash used in operating activities		88,185			329,716

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities		(50,000	)		-
Purchase of furniture and fixtures		-			(3,127	)

Net cash used in investing activities		(50,000	)		(3,127	)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash acquired at merger		21,344			-
Net liabilities acquired at merger		(125,741	)		-
Member's contributions		-			51,161
Member's distributions		-			(223,308	)
Proceeds from notes payable - related party		9,344			-
Proceeds from line of credit - related party		-			-
Payments to line of credit - related party		-			-
Proceeds from sale of common stock, net of offering costs		135,000

Net cash provided by financing activities		39,947			(172,147	)

NET CHANGE IN CASH		78,132			154,442

CASH AT BEGINNING OF PERIOD		78,059			-

CASH AT END OF PERIOD	$	156,191		$	154,442

SUPPLEMENTAL INFORMATION:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

Non-cash activities:
Shares issued for spin off from Oraco Resources, Inc.	$	-		$	-
Shares issued for prepaid expenses	$	-		$	-
Shares issued for debt conversion	$	-		$	-

The accompanying notes are an integral part of the financial statements.

BLACKCRAFT CULT, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto included in the Company’s 8-K current report. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim period are not indicative of annual results.

Organization

The sole proprietorship was formed and a doing business as was filed on January 11, 2013 (Date of Inception) under the laws of the State of California, as DBA Blackcraft Cult.

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to exploration stage enterprises, and are expressed in U.S. dollars. The Company’s fiscal year end is December 31.

On January 15, 2014, the Company entered into Contribution Agreement with Blackcraft Emoji Incorporated, a California corporation (“BEI”), whereby they contributed 100% of the assets, liabilities and operations of the Company in exchange for 148,349,497 shares of BEI. Prior to the Contribution Agreement, BEI had 1,000 shares issued and outstanding.

On March 21, 2014, BEI entered into an Acquisiton Agreement and Plan of Merger (the “Merger Agreement”) by and among Merculite Sub Co (“Sub Co”), a Nevada corporation and wholly owned subsidiary of BCC, and Blackcraft Cult, Inc. (“BCC”), a Nevada corporation; Sub Co and BEI being the constituent entities in the Merger. Pursuant to the Merger Agreement BCC intends to issue 2,234,280 shares of its Rule 144 restricted common stock in exchange for 100% of BEI’s issued and outstanding common stock. Pursuant to the terms of the Merger, Sub co will be merged with BEI and Sub Co will cease to exist and BEI will become a wholly owned-subsidiary of BCC. Subject to the terms and conditions set forth in the Merger Agreement, the Merger closed on March 27, 2014 (the “Closing Date”). The Merger, upon closing will provide BCC with the ownership of 100% of BEI.

The Merger Agreement contains conditions to closing which include: (i) BCC issuing 2,234,580 shares of restricted common stock in exchange for 100% of the issued and outstanding common stock of BEI, and (ii) auditable financial statements of BEI, prepared pursuant to Regulation S-X. The audited financial statements of BEI shall be completed and presented to the Company for filing with a Form 8-K, as required by Item 2.01 and Item 9.01 of Form 8-K, within 4 days of the Closing Date of the Merger.

For accounting purposes, the acquisition of the BEI by BCC has been accounted for as a recapitalization, similar to a reverse acquisition except no goodwill is recorded, whereby the private company, BEI, in substance acquired a non-operational public company (BCC) with nominal assets and liabilities for the purpose of becoming a public company. Accordingly, BEI is considered the acquirer for accounting purposes and thus, the historical financials are primarily that of BEI. As a result of this transaction, BCC, Inc. changed its business direction and is now a beverage business. Additionally, the Company changed its name from Merculite Distributing, Inc. to Blackcraft Cult, Inc.

BLACKCRAFT CULT, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Nature of operations

Currently, the Company’s operations are retail and wholesale sales of merchandise including clothing, hats, etc.

Inventory

Inventories are stated at the lower of cost (average cost) or market (net realizable value). As of September 30, 2014, the Company had finished goods inventory of $72,228.

Revenue recognition

The Company’s records revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. The Company records revenue from the sale of merchandise upon shipment or delivery of the products to the customer. The Company also records the shipping income when the products are sent to the customer.

Sales returns and allowances

The Company has a 14 day return/exchange policy and is accepted for items that are in a like new condition. The return postage is the responsibility of the customer except for those items which are the result of the Company’s improper filling of the order.

Income taxes

For financial reporting purposes, the Company has elected to use the taxes payable method. Under this method, income tax expense represents the amount of income tax the Company expects to pay based on the Company’s current year taxable income. Income tax for the period is provided at the applicable tax rate on taxable income.

Use of estimates

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

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

BLACKCRAFT CULT, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Recent pronouncements

The Company has evaluated recent accounting pronouncements through the filing date and believes that none of them will have a material effect on the Company’s financial statements.

NOTE 2 – FIXED ASSETS

The following is a summary of fixed assets:

	September 30,
	2014
Computer equipment	$	1,229
Machinery and equipment		3,127
Fixed assets, total		4,356
Less: accumulated depreciation		(1,205	)
Fixed assets, net	$	3,151

Depreciation expense for the three months ended September 30, 2014 and 2013 was $259 and $0 respectively. Depreciation expense for the nine months ended September 30, 2014 and 2013 was $776 and $0, respectively.

NOTE 3 – NOTES PAYABLE AND LINE OF CREDIT – RELATED PARTY

During the year ended December 31, 2013, the Company drew down $13,750 and repaid $1,000 against the revolving line of credit. As of September 30, 2014, an amount of $8,250 has been used for general corporate purposes with a remaining balance of $11,750 available.

Interest expense for the three months ended September 30, 2014 and 2013 was $40 and $0, respectively. Interest expense for the nine months ended September 30, 2014 and 2013 was $122 and $0, respectively.

During the nine months ended September 30, 2014, the Company received a loan totaling $9,344 from an officer, director and shareholder. The loan bears no interest and is due upon demand.

BLACKCRAFT CULT, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 4 – STOCKHOLDERS’ EQUITY

During January 2014, BEI sold a total of 620,000 shares of common stock for a total of $155,000.

On March 5, 2014, BEI effectuated a reverse stock split of 66.666 to 1.

During May 2014, BEI sold a total of 540,000 shares of common stock for a total of $135,000.

NOTE 5 – SUBSEQUENT EVENTS

Lease agreement

On October 22, 2014, the Company executed a lease agreement with Knox Living Trust. The lease term is three years commencing on November 1, 2014 at $5,200 per month. The Company paid a refundable security deposit and first month’s rent of $16,500 and $5,200, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

Throughout this Quarterly Report references to “we”, “our”, “us”, “Blackcraft”, “BLCK”, “the Company”, and similar terms refer to Blackcraft Cult, Inc.

AVAILABLE INFORMATION

We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov or on our website at www.merculitedistributing.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Blackcraft Cult, Inc., 2830 E. Via Martens, Anaheim, CA 92806.

OVERVIEW AND OUTLOOK

General

Blackcraft Cult, Inc., formerly Merculite Distributing, Inc., was formed as a Nevada corporation in April of 2011.

Blackcraft is a specialty online retailer of apparel, accessories, and gift items for young men and women. Blackcraft is a lifestyle brand rooted in the ideal of self-realization being superior to religious indoctrination and other society enforced norms. The brand is darker in nature but positive in message, filling a void in the market which until Blackcraft, was non-existent. We generate revenues primarily online through our website. Consumers are able to access and purchase our products 24 hours a day from the convenience of a computer, Internet-enabled mobile telephone or other Internet-enabled devices.

Our business includes sales made to individual consumers, which are fulfilled from our warehouse in Orange, California. We require verification of receipt of payment, or authorization from credit card or other payment vendors whose services we offer to our customers (such as PayPal and BillMeLater), before we ship products to consumers.

On July 11, 2014, Blackcraft Cult, Inc. (OTCQB: BLCK) was verified for trading on the OTCQB®, the venture stage marketplace for early and developing companies.

Products

The Company currently features a product line consisting of a variety of clothing and accessories including T-shirts, sweatshirts, tank-top shirts, crewneck pullovers, women's leggings and crop tops, beanies, hats, patches, cell phone cases, candles, coffee, and much more to come. These products can be purchased at the Company’s website (www.blackcraftcult.com).

All the items are profitable with the lion's share of the business currently coming from the sale of t-shirts and hooded pullovers. The brand identity follows the slogan, “Less is more”, with the merchandise predominantly single color prints that are black garments bodied with white ink.

Apart from the generic product line, Blackcraft also has a popular Limited Edition and Premium product line that is continually sold out. The Limited Edition products consist mostly of t-shirts, hooded pullovers, and women’s leggings with occasional exceptions. The Premium product line are products with more drastic changes in the wash, make, and feel creating a new appearance.

Mobile Application – Blackcraft Zodiac

We recently created the Blackcraft Zodiac dating app. Unlike Tinder, Grindr, Hinge, and other dating apps, which rely solely on GPS, location-based technology, Blackcraft Zodiac uses the science of astrology to help singles meet their soul mate from the palm of their hand. Blackcraft Zodiac's push technology calls upon the universe to play match-maker and helps individuals find their celestial counterpart within the same building or room. The app automatically identifies your zodiac upon registration, and makes matches with your compatible zodiac based on vicinity, age and gender preference. The app is available for download on our mobile app website www.BCZodiac.com, in Google play and in the Apple App Store. We have included our mobile app website here only as an inactive textual reference. The information contained on the website is not incorporated by reference into this quarterly report on Form 10-Q.

RESULTS OF OPERATIONS

Results of Operations for the Three Months Ended September 30, 2014 and September 30, 2013

	For the three months ended September 30,
	2014		2013		Dollar change			% change
Total revenue, net	$	398,362	$	309,291	$	89,071			28.7	%
Cost of sales		146,844		140,505		6,339			4.5

Gross profit		251,518		168,786		82,732			49
Operating expenses		180,929		61,076		119,853			196

Income before provision for income taxes		70,593		107,710		(37,117	)		(34	)
Provision for income tax		24,002		-		24,002			100

Net income	$	46,591	$	107,710	$	(61,119	)		(56.7	%)

Revenues. In the three months ended September 30, 2014, we generated $398,362 in revenue as compared to $309,291 for the three months ended September 30, 2013. The $89,071 increase in revenue for the three months ended September 30, 2014 was primarily due to an increase in shipping income and an increase product sales.

Cost of Sales. Cost of sales for the three months ended September 30, 2014 was $146,844 as compared to $140,505 for the three months ended September 30, 2013. The $6,339 increase in cost of sales for the three months ended September 30, 2014 was primarily due to an increase in shipping costs and the demand for merchandise sold.

Gross Profit. Gross profit for the three months ended September 30, 2014 was $251,518 as compared to $168,786 for the three months ended September 30, 2013. The $82,732 increase in gross profit for the three months ended September 30, 2014 was primarily due to an increase in shipping income and the demand for merchandise sold.

Operating Expenses. Operating expenses totaled $180,929 during the three months ended September 30, 2014. Our expenses primarily consisted of general and administrative of $166,784, executive compensation of $13,886 and depreciation of $259.

General and administrative fees increased $105,708, from the three months ended September 30, 2014 to the three months ended September 30, 2013. This increase was primarily due to an increase in operational activities such as payroll costs, accounting fees and building lease costs.

Executive compensation increased $13,886 from the three months ended September 30, 2014 to the three months ended September 30, 2013. Executive compensation increased due to an increase in the accumulation of management’s personal expenses.

Depreciation increased $259 in the three months ended September 30, 2014 from $0 for the three months ended September 30, 2013. The increase was the result of an increase in fixed assets.

Net Income. During the three months ended September 30, 2014, we generated a net income of $46,591 as compared to $107,710 for the three months ended September 30, 2013. The $61,119 decrease in net income for the three months ended September 30, 2014 was primarily due to an increase in operating expenses and an increase in income tax expense.

Results of Operations for the Nine months Ended September 30, 2014 and September 30, 2013

	For the nine months ended September 30,
	2014		2013		Dollar change			% change
Net sales	$	1,180,721	$	795,022	$	385,699			48.5	%
Cost of sales		425,142		338,755		86,387			25.5

Gross profit		755,579		456,267		299,312			65.6
Operating expenses		594,209		134,897		459,312			340

Income before provision for income taxes		161,360		321,370		(160,000	)		(49.7	)
Provision for income tax		12,121		-		12,121			100

Net income	$	149,239	$	321,370	$	(172,131	)		(53.5	%)

Revenues. In the nine months ended September 30, 2014, we generated $1,180,721 in revenue as compared to $795,022 for the nine months ended September 30, 2013. The $385,699 increase in revenue for the nine months ended September 30, 2014 was primarily due to an increase in demand for merchandise sold and shipping income.

Cost of Sales. Cost of sales for the nine months ended September 30, 2014 was $425,142 as compared to $338,755 for the nine months ended September 30, 2013. The $86,387 increase in cost of sales for the nine months ended September 30, 2014 was primarily due to an increase in shipping costs and demand for merchandise sold.

Gross Profit. Gross profit for the nine months ended September 30, 2014 was $755,579 as compared to $456,267 for the nine months ended September 30, 2013. The $299,312 increase in gross profit for the nine months ended September 30, 2014 was primarily due to an increase in shipping income and demand for merchandise sold.

Expenses. Operating expenses totaled $594,209 during the nine months ended September 30, 2014. Our expenses primarily consisted of general and administrative of $567,534, executive compensation of $25,899 and depreciation of $776.

General and administrative fees increased $432,877, from the nine months ended September 30, 2014 to the nine months ended September 30, 2013. This increase was primarily due to an increase in operational activities such as payroll costs, accounting fees and building lease costs.

Executive compensation increased $25,899 from the nine months ended September 30, 2014 to the nine months ended September 30, 2013. Executive compensation increased due to an increase in the accumulation of management’s personal expenses.

Depreciation increased by $536 to $776 in the nine months ended September 30, 2014 from $240 for the nine months ended September 30, 2013. The increase was the result of an increase in fixed assets.

Net Income. During the nine months ended September 30, 2014, we generated a net income of $149,239 as compared to $321,370 for the nine months ended September 30, 2013. The $172,131 decrease in net income for the nine months ended September 30, 2014 was primarily due to an increase in operating expenses and an increase in income tax expense.

Liquidity and Capital Resources

As of September 30, 2014, we had $156,191 in cash. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Quarterly Report. To date, we have financed our operations through the issuance of stock and borrowings.

The following table sets forth a summary of our cash flows for the nine months ended September 30, 2014 and 2013:

	Nine months ended September 30,
	2014			2013
Net cash used in operating activities	$	88,185		$	270,329
Net cash used in investing activities		(50,000	)		(3,127	)
Net cash provided by financing activities		39,947			(100,397	)
Net increase/(decrease) in Cash		78,132			166,805
Cash, beginning		78,059			458
Cash, ending	$	$156,191		$	$167,263

Operating activities

Net cash used in operating activities was $88,185 for the period ended September 30, 2014, as compared to $241,531 used in operating activities for the same period in 2013. The decrease in net cash used in operating activities was primarily due to the acquisition of technology software.

Investing activities

Net cash used in investing activities was $50,000 for the period ended September 30, 2014, as compared to $3,127 used in investing activities for the same period in 2013. The net cash used in investing activities for the current period was primarily due to a strategic investment.

Financing activities

Net cash provided by financing activities for the period ended September 30, 2014 was $39,947, as compared to net cash used in financing activities of $172,147 for the same period of 2013. The cash provided by financing activities for the nine months ended September 30, 2014 was primarily an increase in equity financing from sale of common stock. The cash used in financing activities for the nine months ended September 30, 2013 was primarily an increase in the accumulation of management’s personal expenses.

Current and Future Sources of Liquidity

Our principal sources of liquidity are cash flows generated from operations, and our existing cash and cash equivalents. At September 30, 2014, we had cash and cash equivalents of $156,191.

We believe that the cash and cash equivalents currently on hand and expected cash flows from future operations will be sufficient to continue operations for at least the next twelve months. We expect that continued focus on acquiring new customers will enable us to increase profitable revenues and continue to generate cash flows from operating activities.

If we do not generate sufficient cash from operations, face unanticipated cash needs or do not otherwise have sufficient cash, we have the ability to reduce certain expenses depending on the level of business operation.

Based on current expectations, we believe that our existing cash of $156,191 as of September 30, 2014 and our net cash provided by operating activities and other potential sources of cash will be sufficient to meet our cash requirements. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We expect to use our cash to invest in our core business, including new product innovations, advertising and marketing. Other than normal operating expenses, cash requirements for fiscal 2014 are expected to consist primarily of capital expenditures and additional investments in advertising and marketing efforts.

If our own financial resources and current cash-flows from operations are insufficient to satisfy our capital requirements, we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, to augment our working capital. In the future we need to generate sufficient revenues in order to eliminate or reduce the need to sell additional stock. Our failure to generate sufficient revenues or profits or to obtain additional financing or raise additional capital could have a material adverse effect on our operations and on our ability to achieve our intended business objectives. Any projections of future cash needs and cash flows are subject to substantial uncertainty.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. See Note 1 – Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements.

Emerging Growth Company

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

This item is not applicable as we are currently considered a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As required by Rule 13a-15 under the Exchange Act, as of the end of the Company’s last fiscal quarter, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s current management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), who concluded that the Company’s disclosure controls and procedures are effective.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.

Management reviews the Company’s system of internal control over financial reporting and makes changes to the Company’s processes and systems to improve controls and increase efficiency, while ensuring that the Company maintains an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities and migrating processes.

During the Company’s last fiscal quarter, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any material legal proceedings.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine month ended September 30, 2014, we did not have any sales of unregistered securities.

Issuer Purchases of Equity Securities.

We did not repurchase any of our equity securities from the time of our inception through the period ended September 30, 2014.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.		Description

31.1		Certification of Principal Executive Officer & Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Principal Executive Officer & Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

*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.

SIGNATURE

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.

	BLACKCRAFT CULT, INC.


Date: November 14, 2014	By:	/S/ Robert Schubenski
		Robert Schubenski
		President
		(Principal Executive Officer and duly authorized signatory)

BLACKCRAFT CULT, INC. - FORM 10-Q - November 14, 2014

Attached files

BLACKCRAFT CULT, INC. Reports