SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

October 17, 2016

Date of Report

(Date of Earliest Event Reported)

 

DIGITAL DONATIONS TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware		000- 55483		47-4485832
(State or other jurisdiction		(Commission File Number)		(IRS Employer
of incorporation)				Identification No.)

 

68 South Service Road, Suite 100

Melville, New York 11747

(Address of Principal Executive Offices)

 

631-465-2163

(Registrant’s Telephone Number)

 

 

Special Note Regarding Forward-Looking Statements

 

This report contains forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. In some cases, forward-looking statements are identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect the Company’s current views respecting future events and are based on assumptions and subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” below.

 

Also, forward-looking statements represent the Company’s estimates and assumptions only as of the date of this report. You should read this report and the documents that the Company references and files as exhibits to this report in their entirety and with the understanding that actual future results may be materially different from what the Company expects. Except as required by law, the Company assumes no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available or other events occur in the future.

 

ITEM 1.01

Entry into a Material Definitive Agreement

 

On October 17, 2016, Digital Donations Technologies Inc., a Delaware corporation (the “Company”), entered into a stock-for-stock acquisition agreement (the “Acquisition Agreement”) with Digital Donations, Inc., a private company organized under the laws of the State of New York.

 

For the purposes of disclosures throughout this 8-K document when the “Company” is used, it refers to Digital Donations Technologies Inc. on a Pro Forma basis with Digital Donations Inc. included as a subsidiary in the structure.

 

Messrs. Keith Orlean and Jeffrey Marden, who are the officers, directors and majority shareholders of the Company, owned and controlled a majority of the shares of Digital Donations Inc., prior to the Acquisition.

 

 

Pursuant to the Acquisition Agreement, the Company acquired Digital Donations, Inc. through the one-for-one exchange of the shares of Digital Donations Inc. As of the date hereof, the Company has issued 71,500,000 shares of its common stock in exchange for 71,500,000 of the 79,084,807 outstanding shares of Digital Donations, Inc. The Company intends to allow additional exchanges of the shares of Digital Donations Inc. until October 31, 2016, which can be extended for an additional 30 days by the Company.

 

ITEM 2.01

Completion of Acquisition or Disposition of Assets

 

On October 17, 2016 Digital Donations Technologies, Inc., a Delaware corporation (the “Company”), effected the acquisition of Digital Donations, Inc., a New York corporation (“Digital Donations”) (the “Acquisition”) with the issuance of 71,500,000 shares of its common stock in exchange for 71,500,000 of the 79,084,807 outstanding shares of common stock of Digital Donations Inc. The Company intends to allow additional exchanges of the shares of Digital Donations Inc. until October 31, 2016, which can be extended for an additional 30 days by the Company.

 

Prior to the Acquisition, the Company had no business or operations. Pursuant to the Acquisition, the Company acquired the business plan, operations and contracts of its now wholly-owned subsidiary, Digital Donations, Inc. (“Digital Donations”)

 

Digital Donations is an operating company formed in 2014 to provide support to the nonprofit industry (“NPOs”) with innovative and cost-effective fundraising technologies.

 

THE BUSINESS

 

Business Operations and Business Plan

 

Digital Donations is headquartered in Melville, New York. Digital Donations provides alternative and new fundraising solutions for NPOs encompassing an array of techniques and technologies designed to assist large and small nonprofits to increase their donations and lower costs.

 

Digital Donations develops and distributes creative and innovative fundraising technologies and provides payment processing solutions that connect charities and foundations with the consumer and corporate America. The Digital DonationsÔ platform is available for integration to point of sale payment systems, ATMs, e-commerce, mobile commerce (MYGIV) and interactive video crowdfunding (CROWDGIV).

 

Through the process of integrating a donation request as part of a financial transaction, retailers, e-tailers and service providers have the ability to create a new or enhance their existing cause marketing program. In addition, the Digital Donation platform has the ability to connect nonprofits with corporate partnerships who have the opportunity to promote their products / services by offering rewards to donors. Rewards are a proven method of driving donor participation.

 

Products/Services

 

Digital Donations is a provider of alternative fundraising solutions for NPOs that allow consumers to make charitable donations as part of a financial transaction. The cornerstone of the business is the Digital Donations fundraising platform that allows charities to present requests for support to potential donors as the potential donors pay for goods and services purchased from participating merchants, at ATMs, mobile devices (MYGIV) or online through the CROWDGIV platform. These requests are for amounts called micro donations (under $10) and have the ability to reach large segments of the population.

 

The Digital Donations software automates the solicitation, collection, payment and reporting of these donations for non–profit organizations. The software can be integrated into new or existing payment processing platforms or can operate as a standalone solution for companies who have a corporate giving program in place or intend to develop a new one.

 

 

The Digital Donations suite of fundraising solutions and services are tailored for the special philanthropic business needs of clients. Digital Donations provides what it believes to be a unique approach to providing transaction processing services and credit card processing for many industries, such as retail, specialty retail, travel and hospitality, professional sports and fund raising events, health care, e-commerce, not-for-profit, municipalities, utilities, online bill payments, and many more. Most consumers are familiar with this form of fundraising technology having experienced being solicited at check-out either by a cashier or automatically through the credit card processing terminal).

 

Revenue is derived directly from the funds received by the charity from the use of the Digital Donations technology. Once the donation is made, regardless of the fundraising platform, the donations is collected and 100% is paid directly to the charity. The Digital Donation’s fundraising fees are billed directly to the NPO. This eliminates any up-front cost to the charity or impact on its personnel, and in most cases, the service fee is well within non-profit industry parameters, as it directly relates to the cost of the funds raised.

 

Digital Donation Technology Platform

 

The Digital Donation’s technology can be applied to a variety of hardware devices, digital / mobile platforms, credit card payment terminals and ATMs that are used by numerous merchants, including retail stores, restaurants and banks.

 

When a customer makes a purchase at a merchant (Point of Sale), online, with a mobile device or a withdrawal at an ATM and uses a credit or debit card, the Digital Donations system presents the opportunity on the payment screen to donate to a charity. If the customer selects “yes” on the screen, several dollar amounts are presented for the customer’s selection, including a roundup and the option to choose “another amount”. Once the amount of the donation is approved, a receipt is printed for the customer showing the amount donated and, the name of the NPO to which the contribution was made. This receipt, provided either in hard copy or electronically, is the donor’s documentary evidence of their tax-deductible charitable contribution.

 

Point of Sale: Point of sale technology provides a donation request at the time a consumer completes the sale of goods or services–at the point of purchase/sale. This is a familiar technique seen at many store checkouts such as grocery, gas or clothing stores. This technology allows charities to present requests for support to potential donors as such potential donors pay for goods and services purchased from merchant.

 

ATM Fundraising: As Digital Donations continues in providing “alternative fundraising solutions”, it is one of the first companies to develop fundraising technology for the ATM industry at large. With ATMs offering such items as postage stamps, lottery tickets, and gift cards, Digital Donations determined to integrate fundraising technology into ATMs. An optional instant incentive program will provide advertisers / sponsors the ability to provide their offers and discounts to those who donate via on screen ads, mobile messaging, custom ATM wraps and by printing their offer on the customer receipt.

 

MYGIV (mobile device donation app): The myGIV mobile app developed by Digital Donations utilizes location based search and marketing (geo-targeting) and gamification (scratch off game) to deliver valuable rewards to consumers that make a small donation to a charitable cause. Registered myGIV users will have access to offers provided by retailers, restaurants and service providers where they can play, win and donate to redeem their reward. By connecting merchant rewards with a charitable cause it creates a mutual benefit for the donor, the cause and the merchant. myGIV works with local, regional and national businesses to develop new customers and retain existing ones through cause related marketing initiatives.

 

 

CROWDGIV (a crowdfunding technique), is a method of fundraising in which a large number of individuals are solicited to finance a new business venture or a charitable cause. Crowdfunding makes use of the easy accessibility of vast networks of friends, family and colleagues through social media networks like Facebook, Twitter and LinkedIn to get the word out about a fundraising campaign.

 

The Digital Donation’s CROWDGIV platform provides easy to navigate, “smart interface”, and allows for instant donation acceptance before, during or after viewing videos and the ability to share on multiple social networks with one click. A client can also send out individual or group emails by syncing its own contact list. Another unique part of the Digital Donation’s CROWDGIV platform is the ability to connect nonprofits with corporate partnerships who have the opportunity to promote their products / services by offering rewards to donors. Rewards are a proven method of driving donor participation.

 

Unlike the majority of crowdfunding sites, CROWDGIV’s model focuses solely on nonprofit fundraising. The platform allows individuals, nonprofits and corporate entities to set up fundraising campaigns on behalf of any qualified charitable, religious or educational organization they wish to support. A major part of the growth plan for CrowdGIV is extending the platform to offer individuals the ability to raise funds for personal needs similar to a GOFUNDME model.

 

As in most crowdfunding platforms, a user can select team fundraising which allows a non-profit or business to set up a master campaign and then invite others to set up sub-campaigns, (their own page) and set their own goals that feed the total objective of the master campaign. Each of these campaigns can be easily marketed to friends, family members and colleagues through social sharing, email or text, linking the request for a donation directly to your campaign page.

 

There are no costs to setup a campaign on CROWDGIV and no minimum fundraising requirements. Campaign costs are based on a number of factors which include credit card processing fees, platform and fundraising costs.

 

The Digital Donations Pledge

 

Digital Donations has credited The Digital Donations Pledge which it believes separates it from the others in the fundraising industry. The Digital Donations Pledge provides that any 501c3 in good standing that meets the requirements can apply for a minimum $5,000 in-kind donation pledge from Digital Donations. The non-profit organization can immediately use the donation to purchase products and services from Digital Donations at the lowest cost for any product or service offered by Digital Donations.

 

Some of the goods and services that can be purchased with pledge credits:

 

· CrowdGIV (Crowdfunding Platform) Campaign Development

· CrowdGIV (Crowdfunding Platform) Campaign Coaching

· Credit Card Processing

· Mobile Giving Campaigns

· Text to Give Campaigns

· Logo Design and Branding

· Website Design & Development

· PR and Writing Services

· Social Media Strategy Consulting

· Create and Manage Social Media

· Logo Premiums and Incentives

· Travel / Resort Packages, Hospitality and Events

 

Credit Card Payment Processing

 

The Company believes that the commoditization of the credit card processing industry has created an opportunity to utilize merchant accounts as part of an overall strategy for growth.

 

 

Digital Donations has entered into an agreement with WorldPay, a multi-national payment processing company, which affords it national account preferred pricing as a Visa-approved Payment Service Provider (PSP). WorldPay is the largest provider of ATM services in the United States www.worldpay.us.

 

The Company plans to combine this preferred pricing with the Digital Donations platform to create a new revenue stream for targeted accounts. Digital Donations has already entered into processing agreements with the American Cancer Society, American Heart Association, National Multiple Sclerosis, The Humane Society of the United States, Alzheimer’s Foundation and Morgan Stanley. These charities utilize the Company’s ATM fundraising technology and are presented as a fundraising opportunity to a consumer as that consumer withdraws cash from an ATM. Donations are collected by the Company and dispersed to the charity selected by the consumer. The Company bills each charity for its services and processing fees.

 

In addition, Messenger, a 100-year-old company that provides products and services to over 20,000 funeral homes across the U.S., has been working with Digital Donations to develop an application for a kiosk to accept donations at funeral services utilizing the Digital Donations platform.

 

As the Digital Donations business evolved, instead of focusing efforts on acquiring traditional credit card processing accounts Digital Donations chose to partner with major processing companies, ATM manufacturers / distributors with an existing base of customers and charities that provide access to major retailers and corporations that fit our target profile. With the development of Digital Donations as a “Processor Independent” solution we now have the ability to integrate our technology into accounts where previously there was minimal opportunity for the company to capture a merchants processing business. This provides us with the ability to sell our solutions to accounts regardless of who they use as a processor.

 

Current contracts

 

The Company’s plan for success revolves around strategic agreements with NPOs, payment processors, integration partners, ATM manufacturers, distributors, mobile platforms and direct response companies. Working closely with NPOs and their corporate sponsors, many of which are merchants and service providers, the opportunity exists to integrate the Digital Donations platform into their point-of-sale systems, e-commerce shopping carts, ATMs and mobile devices that are capable of utilizing the Digital Donations technology.

 

United Charitable. United Charitable (UC) is a 501(c)(3) nonprofit organization whose mission is to make philanthropy accessible by providing comprehensive management of charitable programs and donor-advised foundations on a community, national, or global level. United Charitable serves as an umbrella organization for individuals or entities which are generally so small that they lack the infrastructure to run their non-profit. The Company , though its subsidiary Digital Donations, Inc., entered into an agreement in June 2014 to provide to the merchants within each of UC’s 500+ Programs access to the Digital DonationsÔ fundraising technology. Pursuant to the terms of the agreement the Company will work with selected merchants and use the Digital Donations Software to automate the solicitation, collection and delivery of charitable contributions to United Charitable at approved merchant locations.

 

Nautilus Hyosung. Nautilus Hyosung America is a subsidiary of South Korea Hyosung, Inc., a global leader in providing ATMs to the retail off-premises and financial institution markets. Since entering the North American market in 1998, Nautilus Hyosung America has shipped more than 200,000 ATMs and is the largest provider of ATMs in the United States. Nautilus Hyosung America is headquartered in Irving, Texas and has research and development support in its Global Software Center in Dayton, Ohio. In February, 2015, the Company, though its subsidiary Digital Donations, Inc., entered into a renewable three-year license agreement with Nautilus whereby the Company granted Nautilus the non0exclusive license to use the Company’s fundraising software technology and the Company’s trademark for ATM locations and ATM distributors.

 

 

WorldPay. WorldPay is a global card payment acquiring business with 450,000 merchants in the United States and operating in over 30 countries around the globe. WorldPay’s platforms allow customers to accept card payments both at point-of-sale and over the Internet. WorldPay is the largest provider of ATM services in the United States. The Company, though its subsidiary Digital Donations, Inc., entered into a processing agreement with WorldPay whereby WorldPay will provide authorization, electronic draft capture, submission of transactions to payment networks, and additional related services for sales originated by the Company.

 

Triton Manufacturing. With more than 200,000 ATMs shipped in over 24 countries worldwide, (130,000 in the United States) Triton has been a leader in ATM affordability and service for over 30 years. Digital Donations recently launched a national effort with Triton to allow charitable giving on ATMs currently in the marketplace. Through its subsidiary, Digital Donations, the Company entered into an agreement whereby Triton Systems of Delaware would act as an independent sales contractor in selling and marketing the Company’s fundraising and marketing platform. In addition Triton has appoint the Company as the exclusive provider of ATM fundraising technology and services on all Triton ATMS.

 

Revenues

 

Revenue is derived directly from the funds that are raised through the use of the Digital Donations technology and fundraising fees charged to the charity, credit card processing fees and products and services provided through the Pledge.

 

Fundraising service fees are expected to be determined by several factors including the number of retail locations and charities using the technology, volume of transactions and amount of donations processed on behalf of the charity. Payment processing income is determined by the amount charged to the business above the cost of processing (Interchange) which is determined by Visa/MasterCard, AMEX and Discover.

 

One hundred percent of funds received is deposited with the Company’s fiscal sponsor (United Charitable) which is responsible for managing all aspects of compliance and of forwarding donations to the chosen charity. Digital Donation’s professional fundraising and compliance management fees for NPO technology based revenues are billed to and paid by the NPO. This is accomplished without any up-front cost to the charity or impact on its personnel, and in most cases at a service fee that is well within non-profit industry parameters, as it directly relates to the cost of the funds raised.

 

In all its fundraising programs, Digital Donation is paid strictly on the success of the program’s ability to generate donations.

 

Current Sources of Revenue:

 

·

Credit and Debit Card Processing

·

Check processing

 

 

Future Sources of Revenue:

 

·

ATM Fundraising

·

CROWDGIV (crowdfunding)

·

Digital Donations Point of Sale Program

·

MYGIV (Mobile)

·

E-commerce Donation Checkout

 

The Market: Fundraising Services

 

According to the National Center on Charitable Statistics there are estimated to be over 1.5 million nonprofits in the United States. The Company believes that many of these nonprofits struggle to keep their doors open and lights on. With advances in technology there is a constant demand for every donated dollar leaving smaller nonprofits with limited resources behind the curve in implementing current technology trends. Nonprofits that don’t have the bandwidth or funding to establish a strong digital presence may be missing critical tools. Online marketing can raise money and awareness and draw the attention of potential funding sources.

 

The Company believes there is a considerable need for alternative fundraising solutions in the United States. In today’s uncertain economy NPOs are faced with the burden of reaching their fundraising goals with reduced opportunities and at costs that continue to rise, and are difficult to justify, causing fundraisers to look for new and alternative ways to seek donations for their organizations.

 

Point of Sale: In 2015, Cause Marketing Forum reported that more than $358 million was raised by 63 point of sale programs. The Company believes that the market for Digital Donations software is significant, as it has been developed to integrate into the majority of payment terminals manufactured by Verifone, Equinox and Ingenico, which are the top three manufacturers in the world. Of this group, Verifone is the largest and manages payment acceptance in over 60% of our nation’s retailers.

 

ATMs: One of the key components to creating brand awareness and distribution for the Digital Donations fundraising suite has been the exclusive contracts with ATM manufacturers and distributors which provide a unique opportunity to create national exposure for the Digital Donations brand and the ability to accept donations for up to seven charities at any given time including the ability to respond to local, regional or global disasters immediately.

 

The Company believes that American consumers are relying on cash machines more than ever before and a great majority of consumers use ATM terminals as part of their everyday banking activity. An ATM machine can be found on almost every city block or in every grocery or market in the United States and most developed countries. The Company believes ATM donations fit perfectly into a non-profits evolving approach to donors and the evolution of the Digital DonationsÔ suite of solutions.

 

Crowdfunding: The Company believes that crowdfunding is poised to become a super-large industry by 2025 and increasing numbers of charitable organizations are looking to the power of the internet to fund their efforts. According to Bob Mulholland’s article Crowdfunding in the Modern Fundraising Platform: “Crowdfunded campaigns succeed in large part because of incentives that organizations promise in exchange for donations.”

 

 

Products in Development

 

PAYGIVÔ (alternative payment solution): PAYGIVÔ is an alternative payments solution that is designed to reduce the costs of processing and allow consumers to discreetly donate to a charity of their choice by simply using PAYGIV as a payment option when making a purchase or donation. Donors can also enable their accounts to automatically “roundup” a purchase to the nearest dollar or to set a fixed donation amount per month and send that amount directly to the nonprofit that they chose when registering their account. Merchants that accept PAYGIV will be able to utilize the Digital Donations rewards program or tie this activity to an existing rewards / loyalty program gaining an additional benefit for all parties.

 

PAYGIVÔ Digital Wallet. The Company is also developing a PAYGIVÔ digital wallet (e-wallet) which would allow consumers to register multiple credit/debit cards and bank account numbers that can be stored securely, eliminating the need to enter account information when transacting online or at the point of sale removing the need to carry credit or debit cards in order to make a purchase and donate.

 

PAYGIVÔ Possible Benefits:

 

	·	Less expensive for the Merchant to accept then Visa / MasterCard
	·	Safer then credit cards (reduces fraud and stolen identity)
	·	Automated donations from donors opting in to donate upon registration
	·	Connects purchasing with charitable giving activity
	·	Incorporates rewards and loyalty with every transaction and donation
	·	Available as a private label program for eligible merchants

 

Risks and Uncertainties facing the Company

 

The Company has a limited operating history and may experience losses in the near term. The Company needs to maintain a steady operating structure, ensuring that expenses are contained such that profits are consistently achieved. In order to expand the Company’s business, the Company would likely require additional financing.

 

One of the biggest challenges facing the Company will be in securing adequate capital to continue to expand its business and build a larger scale and more efficient set of operations. Secondarily, an ongoing challenge remains the maintenance of an efficient operating structure and business model. The Company must keep its expenses and the costs of employees at a minimum in order to generate a profit from the revenues that it receives from its clients.

 

The Company has not yet located the sources of funding to develop the Company on a broader scale. If the Company were unable to locate such financing and/or later develop strong and reliable sources of potential customers and a means to efficiently reach customers, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the above assumes that the Company’s services are consistently met with client satisfaction in the marketplace and exhibit steady success amongst the potential customer base, neither of which is reasonably predictable or guaranteed.

 

Due to these and other factors, the Company’s need for additional capital, the Company’s independent auditors have issued a report raising substantial doubt of the Company’s ability to continue as a going concern.

 

 

THE COMPANY

Background

 

The Company, formerly known as Fishing Ridge Acquisition Corporation, was incorporated in Delaware on May 21, 2015 and filed a registration statement on Form 10 with the Securities and Exchange Commission on July 28, 2015 and became a public reporting company sixty days thereafter. In January, 2016, Fishing Ridge Acquisition Corporation changed its name to Digital Donations Technologies, Inc. On January 7, 2016, the effected a change of control with the resignation of the then officers and directors, redemption of 19,500,000 shares of the 20,000,000 outstanding shares of its common stock, the appointment of new officers and directors and the issuance of 5,000,000 shares of common stock, pro rata, to the new shareholders of the Company. The disclosure required by Form 8-K herein is incorporated by reference from the Form 10-12G filed on July 28, 2015 as amended and supplemented by the information contained in this report.

 

Emerging Growth Company

 

Digital Donations Technologies, Inc., qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act which became law in April, 2012. The definition of an “emerging growth company” is a company with an initial public offering of common equity securities which occurred after December 8, 2011 and has less than $1 billion of total annual gross revenues during last completed fiscal year. The disclosure regarding the company and The Jumpstart Our Business Startups Act is incorporated herein by reference from the Form 10-12G filed on July 28, 2015.

 

Acquisition

 

On October 17, 2016, the Company acquired a majority of the outstanding shares of common stock of Digital Donations, Inc., a New York company(the “Acquisition”). Prior to the Acquisition, the Company had no ongoing business or operations. Pursuant to the Acquisition, the Company has acquired the business and business plan of Digital Donations, Inc. which has become a wholly-owned subsidiary of the Company

 

The Company has an authorized capitalization of 300,000,000 shares of common stock and 100,000,000 shares of preferred stock. The Company has a fiscal year end of December 31. At the time of the Acquisition, there were 5,500,000 shares of common stock of the Company issued and outstanding. Pursuant to the Acquisition,71,500,000 shares of the Company’s common stock were issued to the shareholders of Digital Donations, Inc. in exchange for 71,500,000 of the 79,084,807 shares held thereof. The Company intends to allow additional exchanges of the shares of Digital Donations Inc. until October 31, 2016, which can be extended for an additional 30 days by the Company.

 

Employees

 

The Company has only two executive officers and no employees. The Company’s wholly-owned subsidiary, Digital Donations, has two full time employees.

 

Subsidiaries

 

The Company has one wholly-owned subsidiary, Digital Donations, Inc.

 

Property

 

The Company has its headquarters at 68 South Service Road, Suite 100, Melville, New York 11747.

 

Legal Proceedings

 

There are no pending, threatened or actual legal proceedings in which the Company is a party.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

As the result of the Acquisition Agreement and the change in business and operations of the Company, from an non-operating reporting company, to the business of becoming a provider of alternative fundraising solutions to the nonprofit industry, a discussion of the past, pre-Share Exchange financial results of Digital Donations Technologies, Inc., is not pertinent, and under applicable accounting principles the historical financial results of Digital Donations, Inc. the wholly owned operating subsidiary of Digital Donations Technologies, Inc., the accounting acquirer, prior to the Acquisition Agreement are considered the historical financial results of the Company.

 

The following discussion highlights Digital Donations, Inc.’s results of operations and the principal factors that have affected its financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on Digital Donations, Inc.’s audited and unaudited financial statements contained in this Current Report, which have been prepared in accordance with United States generally accepted accounting principles. This discussion and analysis together with such financial statements and the related notes thereto.

 

Basis of Presentation

 

The audited financial statements for the fiscal year ended December 31, 2015 and the period from inception on March 10, 2014, to December 31, 2014, and the unaudited financial statements for our fiscal six months ended June 30, 2016 and 2015, include a summary of significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.

 

Overview of the Results of Operations for the Period from Inception on March 10, 2014 through December 31, 2014 and the year ended December 31, 2015

 

The following does not compare results from year to year because in 2014 Digital Donations, Inc. was near dormant. Instead the discussion concentrates on an overview of what occurred in each period.

 

Overview for the period ended December 31, 2014.

 

Digital Donations, Inc. was incorporated in March 2014 in the state of New York. No revenues were generated in 2014 as 2014 was not an operational year for the Company. Expenses were minimal. During the period from inception through December 31, 2014, total expenses outside the write-off of amounts advanced to a related party (see discussion below), were approximately $700. As discussed below, the Company did not truly commence operations until the second half of 2015.

 

Overview for the year ended December 31, 2015.

 

In 2015 the Company was still in the development stage and generated no revenues. The Company did not truly commence operations until the second half of the year. In the fourth quarter two employees were hired, one of which is an officer and director of the Company. Additionally, the Company issued shares of common stock for various consulting services and recorded an expense of $186,000. Approximately $10,000 was invested in software development as an aspect of the Company’s technology platform. The Company incurred approximately $33,000 in professional fees related to the costs incurred for financial statement audits included in this 8K, general legal work performed and investment banking services we received during 2015. Total salaries, wages and taxes paid during the fourth quarter were approximately $46,000.

 

 

The Company expects that going forward it will significantly increase the level of operations (see the discussion below under salaries and wages in the June 30, 2016 overview). In January 2016, the Company began generating revenues from credit card processing and check processing services provided to its clients in the NPO industry. In addition in the second and third quarter of 2016 the Company completed the development of the first set of its NPO platform technologies . The Company expects to begin marketing those first technologies into the marketplace in the fourth quarter of 2016 and expects to continue to work on development of the suite of NPO platform technologies going forward in 2016 and 2017.

 

In addition to the costs for 2015 noted above, the Company wrote off approximately $24,000, net, of amounts advanced to the same entity that the Company advanced funds (approximately $6,600) to in 2014.  The Company also advanced funds through June 30, 2016 to that same entity. Upon completion of the Acquisition Agreement, the Company will no longer make such advances. The amounts were advanced in order to assist the entity in winding down its operations. The Company will have one final transaction with the related party as it is the owner of the intangible assets the Company plans on purchasing (see Note 4 in the audited financial statements attached to this 8K) in the fourth quarter of 2016.

 

Components of the Results of Operations for the Six Months Ended June 30, 2016 and June 30, 2015.

 

As noted above, the Company did not commence principal operations until after June 30, 2015. The discussion below therefore concentrates on activities during the six months ended June 30, 2016.

 

Overview for the Six Months Ended June 30, 2016.

 

Revenues. Through June 30, 2016, revenues were from the processing of credit card and check payments made to clients. As noted above, the Company completed development of the first NPO Platform technology in the third quarter of 2016 and expects to begin marketing of that product in the fourth quarter of 2016.

 

Research and development. Research and development expenses consist primarily of fees the Company is charged for developing the source code of the software platform enabling it to build new products as well as improve existing products. The Company expenses substantially all of its research and development costs as they are incurred. The Company expects that its research and development activities will increase in future periods as revenues provide the funding needed to assist the development work needed to bring products to market.

 

Salaries and Wages. Salaries and wages expenses consist primarily of salaries for one executive and one administrative staff, which amounted to approximately $81,000 for the six months ended June 30, 2016. In the fourth quarter of 2016, the Company has hired a new executive, the VP of Operations. The Company is not currently paying the new VP, but expects in the future that he will draw a base salary of $75,000 on an annual basis. In addition, as the Company grows, it expects that both of its founders will receive salaries from the Company at the rate of $175,000 each. Therefore the Company expects salaries and wages to increase in future periods.

 

Selling, General and Administrative Costs. Selling, general and administrative costs were approximately $118,000 for the six months ended June 30, 2016. These consisted primarily of Advertising and Marketing costs of $33,000, Rent expense of $21,500 and IT Service expense of $19,150. The Company expects these costs to increase in future periods as it continues to expand its operations.

 

Professional Fees. Professional fees were minor in the six months ended June 30, 2016. However, the Company expects professional fee costs to increase as the Company is a public reporting company with the Securities and Exchange Commission, which requires that it maintain relationships with both PCAOB registered audit firms and securities counsel to perform and assist with the SEC reporting requirements. In addition, the Company may also attempt to purchase other entities or assets and operations of other entities if the advantageous situation presents itself. This could require the Company to incur substantial professional fees.

 

Critical Accounting Policies

 

The Company believes that the following significant accounting policies, which are described in note 2 to the financial statements, involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

 

 

Estimates

 

The Company regularly evaluate the accounting estimates that used to prepare the financial statements. A complete summary of these policies is included in the Notes to the audited financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Revenue Recognition

 

The Company generates its revenue from administration and service fees of transactions on the Digital Donations fundraising platform, and from residual fees and commissions from the processing of payments made by customers to client merchants via debit or credit cards, or by manual checks. Revenue from these transactions is accounted for in the monthly period a donation is made or a payment processed.

 

For the brokering of credit card processing fees, the Company recognizes revenues at the time the credit card process transaction is approved, when its fee becomes fixed and determinable. For check processing, the Company recognizes revenue in the same manner, when the check is processed, as at that time its fee becomes fixed and determinable. In addition, because the Company only brokers these services, the revenue recognized is net of the fee charged by the actual process provider.

 

Financial Condition, Liquidity and Capital Resources

 

Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in this Current Report and in the notes to the Digital Donations, Inc. financial statements, the Company has incurred operating losses, and at December 31, 2015, has a working capital deficiency of approximately $3,700. For the interim period ending June 2016, working capital deficiency amounted to $52,132. These factors raise substantial doubt about the ability of the Company to continue as a going concern.  Additionally, the Company’s independent registered public accounting firm included an explanatory paragraph in their report for the years ended December 31, 2015 and 2014 regarding concerns about the Company’s ability to continue as a going concern.  

 

The Company’s ability to continue as a going concern is dependent upon our generating operating cash flow and raising capital sufficient to fund operations.  We have discussed our strategy and plans relating to these matters elsewhere in this Current Report although the financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties. The Company’s business strategy may not be successful in addressing these issues, however, and if it cannot continue as a going concern, its stockholders may lose their entire investment.

 

As of June 30, 2016 and December 31, 2015, the Company had cash on hand of $3,952 and $48,080, respectively, and a working capital deficit of $52,132 and $3,764, respectively.  Its liquidity position at June 30, 2016, decreased as compared to December 31, 2015, by approximately $44,000. This decrease in cash can be attributed to the fact that the Company commenced principal operations in 2016, including entering into a lease for office space which also added correlated costs such as utilities, office supplies, etc., greatly increased funds spent for advertising and marketing, added third party support for IT services including customer support services, and an overall growth in other selling, general and administrative expenses. The negative cash flow could not be fully compensated by additional paid in capital.

 

In order to be able to achieve its strategic goals, the Company needs to further expand its business and financing activities. The Company’s aim to accomplish these goals by further developing its technology platform and correlated services. Expanding the technology platform and payment processing solutions will require future capital and liquidity expansion. Since inception in March 2014, the Company’s shareholders have contributed a significant amount of capital making it possible for it to develop our technology platform, services and activities. To continue to develop its product offerings and to expand services, a significant capital increase has been and will continue to be required. The Company believes it needs to raise additional capital from current shareholders and new investors.

 

 

In 2015, Digital Donations, Inc. raised approximately $177,000 in gross proceeds through the sale of its common stock to three new investors. In 2016, through June 30, Digital Donations, Inc. raised an additional gross amount of $110,000 through the sale of its common stock to one new investor. And from July 1, 2016 through the date of the filing of this 8K, the Company raised further gross equity proceeds through private placements of the sale of its common stock of $95,000 and also received $30,000 from the issuance of two promissory notes.

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of June 30, 2016 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

MANAGEMENT

 

The following tables set forth information regarding the Company’s board of directors and its executive officers as well as those of the Company’s wholly-owned subsidiary, Digital Donations..

 

Officers and Directors of Digital Donations Technologies, Inc. (the “Company”)

 

Name	Age	Position
Keith Orlean	59	Chief Executive Officer and Treasurer, Director
Jeffrey Marder	59	President, Director

 

Officers and Directors of Digital Donations, Inc. (wholly-owned subsidiary)

 

Keith Orlean	59	President  and Director
Jeffrey Marder	59	Chief Executive Officer and Director
Kenneth P. Murphy	64	Vice President, Operations Manager

 

Directors

 

The Company is authorized to have at least one director but no more than five. Each of the Company’s directors serves for a term of one year or until a successor is elected and qualified.

 

Director Independence

 

Pursuant to Rule 4200 of The NASDAQ Stock Market one of the definitions of an independent director is a person other than an executive officer or employee of a company. The Company’s board of directors has reviewed the materiality of any relationship that each of the directors has with the Company, either directly or indirectly.

 

 

Committees and Terms

 

The Board of Directors (the “Board”) has not established any committees. The Company will notify its shareholders for an annual shareholder meeting and that they may present proposals for inclusion in the Company’s proxy statement to be mailed in connection with any such annual meeting; such proposals must be received by the Company at least 90 days prior to the meeting. No other specific policy has been adopted in regard to the inclusion of shareholder nominations to the Board of Directors.

 

Jeffrey Marder

 

As co-founder and Chief Executive Officer of Digital Donations, Inc., Mr. Marder co-developed the Digital Donations technology platform and is responsible for setting corporate strategy, driving revenue, structuring and negotiating strategic agreements, and maintaining the company’s key relationships with market partners and non-profits on a day-to-day basis. His experience in transacting business with C-Suite executives and global organizations has been crucial to the signing of strategic agreements with major industry players and numerous national nonprofits. In 2013, Mr. Marder was asked to contribute and sit on the committee of ARTS (Association Retail Technology Standards) a division of the National Retail Federation to assist in creating a new standard that will be used at the retail point of sale, by POS distributors and software developers. This Standard released in November of 2013 is now available to retailers of big box stores allowing them to support charities nationwide or on a local, regional basis.

 

Prior to joining Digital Donations, Mr. Marder spent 16 years at Active International, a global full service media and financial services company. Mr. Marder has received numerous business accolades. In 2004 the executive management team of Active presented him with the most valuable contributor award. His previous responsibilities included VP of Business Development, where he led a team of executives that were responsible for global new business development and lead generation. The team under his direction and leadership concentrated on developing C-Suite relationships with fortune 500 / 1000 companies, resulting in 37mm in new business for 3 consecutive years. He also was responsible for training domestic and international sales associates and managing directors, which led to being promoted to Senior Vice President in 2006.

 

Keith Orlean

 

As co-founder and President of Digital Donations, Inc. Mr. Orlean draws on more than 20 years of experience in sales, marketing and business development in the electronic payments and financial services industry, setting the strategic direction of the Company. Although he oversees all aspects of the Company’s operations Mr. Orlean focuses specifically on new product development and developing relationships with payment processors, independent sales organizations and other industry resources that drive the continued growth of the Company.

 

His knowledge of the payments industry led to the development of products and services such as private label rewards and loyalty programs that increase customer loyalty and reduce attrition. Mr. Orlean applied this same strategy in developing the Digital DonationsÔ platform including a rewards component to drive donor participation. This alternative method of collecting and delivering donations to charities and foundations allows retailers, e-commerce businesses and ATM owners to develop a cause marketing strategy by integrating fundraising technology at the point of transaction. His relationships with major payment processors and software developers such as: Merchant First, TSYS, Global Payments, First Data, VeriFone, Chase Paymentech, and many others has been critical in the development and growth of the Digital DonationsÔ platform.

 

Kenneth P. Murphy, Jr.

 

Mr. Murphy brings 33 years experience in operations management and systems development, in both large corporations and business start-ups. During 16 years at Westinghouse Corporation he managed repair, production, and inventory operations consistently increasing productivity by 25% or more while reducing costs by 20% or more. When Westinghouse Electric Corporation was sold to ABB (Asea, Brown, Boveri), Mr. Murphy spent four years developing and implementing all procedures and systems, both physical and electronic, of an integrated supply operation to tightly coordinate vendor and supplier activities with plant production requirements, increasing “throughput” for plant operations by 20%. In 1994, he joined M B Hall Company as founding manager of an Integrated Supply Division (ISD). He not only developed all of ISD’s systems and processes, he also participated in marketing the Divisions services. Sales after 6 years were $5.6 million, with a gross profit margin of 20%. In 2000, Mr. Murphy joined with others to found a new company, QuixScan, Inc. The purpose of the company was to develop an integrated system for inventory management, sales tracking and fulfillment for multi-level-marketing organizations. Mr. Murphy oversaw product development, developed company control systems and processes and designed the backbone of the product, as well as a unique system to use laser barcode scanners to transmit product codes over the internet to record sales and request inventory replenishment (patent pending). Mr. Murphy developed and manages the systems for customer service, inventory and financial control for Digital EFT, LLC, of which he was a co-founder

 

 

EXECUTIVE COMPENSATION

 

Summary Compensation

 

The Company has not paid any executive compensation. In 2015, Keith Orlean received compensation of $39,000 as an employee of Digital Donations, Inc.

 

Anticipated Officer and Director Remuneration

 

The Company anticipates that Messrs. Marder and Orlean will each receive an annual salary of $175,000 for their services to the Company.

 

The Company has not entered into any employment agreements with any of its officers. It intends to pay annual salaries to such officers and will pay an annual stipend to its directors when the Board determines, in its sole discretion, that cash flow is sufficient to make such payments in light of other cash needs of the Company.

 

Although not presently offered, the Company anticipates that its officers and directors will be provided with a group health, vision and dental insurance program. In addition, the Company plans to offer 401(k) matching funds as a retirement benefit, paid vacation days and paid holidays.

 

Employment Agreements

 

The Company has not entered into any employment agreements with any officers or key personnel. The Company has no oral agreements or understandings with any officer or employee regarding base salary or other compensation.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information as of the date of this prospectus regarding the beneficial ownership of the Company’s common stock by each of its executive officers and directors, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.

 

						Percent of
Name and Position		Shares Owned				Class (1)
Keith Orlean, Director (2)			37,500,000				49	%
CEO and Treasurer
Jeffrey Marder, Director (2)			37,500,000				49	%
President
All Officers and directors as a Group (2 persons)			75,000,000				98	%

 

 

(1)

Based on 76,500,000 shares of common stock outstanding.

(2)

Consists of 2,500,000 shares issued on change of control and 35,000,000 shares issued pursuant to the Acquisition in exchange for the 35,000,000 shares of Digital Donations Inc. held.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Messrs. Orlean and Marder each owned 35,000,000 shares (44%) of the 79,084,807 outstanding shares of common stock of Digital Donations, Inc. The reorganization by which Digital Donations became a wholly owned subsidiary of the Company was not an arms length transaction. Messrs. Orlean and Marder serve as officers and directors of the Company and as the officers and directors of Digital Donations, Inc.

 

MARKET PRICE OF AND DIVIDENDS AND RELATED STOCKHOLDER MATTERS

 

Dividends

 

The Company nor its subsidiary have ever declared or paid any cash dividends on capital stock and do not currently intend to pay any cash dividends in the foreseeable future. The Company expects to retain all available funds and future earnings, if any, to fund the development and growth of the business. Any future determination to pay dividends, if any, on the Common Stock will be at the discretion of the Board of Directors and will depend on, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions.

 

Common Stock

 

The Company has 300,000,000 shares of authorized common stock.

 

Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable.

Holders of common stock have no preemptive rights to purchase the common stock of the Company. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.

 

Preferred Stock

 

The Company has 100,000,000 shares of authorized non-designated preferred stock.

 

The Board of Directors is authorized to provide for the issuance of shares of preferred stock in series and, by filing a certificate pursuant to the applicable law of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the shareholders. Any shares of preferred stock so issued would have priority over the common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. At present, the Company has no plans to issue any preferred stock nor adopt any series, preferences or other classification of preferred stock.

 

 

The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable the holder to block such a transaction, or facilitate a business combination by including voting rights that would provide a required percentage vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of the holders of the common stock.

 

Although the Board of Directors is required to make any determination to issue such stock based on its judgment as to the best interests of the stockholders of the Company, the Board of Directors could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of such stock. The Board of Directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or otherwise. The Company has no present plans to issue any preferred stock.

 

Market Price

 

There is no public market for the Company’s common stock and there is no market price for the Company’s common stock.

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

The Company’s Certificate of Incorporation include an indemnification provision that provides that the Company shall indemnify directors against monetary damages to the Company or any of its shareholders by reason of a breach of the director’s fiduciary except (i) for any breach of the director’s duty of loyalty to the Company or its shareholders or (ii) for acts or omissions not in good faith or which involve intentional misconduct of (iii) for unlawful payment of dividend or unlawful stock purchase or redemption or (iv) for any transaction from which the director derived an improper personal benefit.

 

The Bylaws of the Company provide that the Company shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify all directors of the Company, as well as any officers or employees of the Company to whom the Company has agreed to grant indemnification. Section 145 of the Delaware General Corporation Law (“DCL”) empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers provided that this provision shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) arising under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. The Delaware General Corporation Law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation’s by-laws, any agreement, vote of shareholders or otherwise.

 

The effect of the foregoing is to require the Company to indemnify the officers and directors of the Company for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

The Certificate of Incorporation does not specifically indemnify the officers or directors or controlling persons against liability under the Securities Act.

 

The Securities and Exchange Commission’s position on indemnification of officers, directors and control persons under the Securities Act by the Company is as follows:

 

 

INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS OF THE SMALL BUSINESS ISSUER PURSUANT TO THE RULES OF THE COMMISSION, OR OTHERWISE, THE SMALL BUSINESS ISSUER HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE.

 

ITEM 3.02

Recent Sales of Unregistered Securities

 

The Company has issued the following securities in the last three (3) years. Such securities were issued pursuant to exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering, as noted below. Each of these transactions was issued as part of a private placement of securities by the Company in which (i) no general advertising or solicitation was used, and (ii) the investors purchasing securities were acquiring the same for investment purposes only, without a view to resale.

 

Since inception, the Company has issued shares of common stock as follows:

 

The Company issued an aggregate of 20,000,000 shares on formation in May 2015 to two shareholders of which all but 500,000 shares were redeemed pro rata.

 

On January 8, 2016, the Company issued 2,500,000 shares of its common stock to Keith Orlean and 2,500,000 shares of its common stock to Jeffrey Marder.

 

On October 17, 2016, in connection with the acquisition of Digital Donations, Inc., the Company issued 71,500,000 shares of its common stock to the shareholders of Digital Donations, Inc. in exchange 71,500,000 of the 79,084,807 outstanding shares of Digital Donations, Inc. held by such exchanging shareholder.

 

ITEM 5.06

Change in Shell Company Status

 

The Company has acquired Digital Donations, Inc. which has a defined business plan and operations and accordingly, the Company has commenced operations and is no longer deemed to be a shell company.

 

ITEM 9.01

Financial Statements and Exhibits

 

The unaudited interim financial statements of Digital Donations, Inc. as of June 30, 2016 and 2015 are included herewith.

 

The audited financial statements of Digital Donations Inc. as of December 31, 2015 and 2014 are included herewith.

 

Exhibits

 

Certain exhibits listed below are incorporated by reference as so marked with the date and filing with which such exhibits were filed with the Securities and Exchange Commission).

 

2.1*	Agreement and Plan of Reorganization
3.1	Certificate of Incorporation (filed as exhibit to the Form 10-12G)
3.2	By-laws (filed as exhibit to the Form 10-12G)
3.3	Sample stock certificate (filed as exhibit to the Form 10-12G)

 

*

Filed herewith

 

 

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 hereunder duly authorized.

 

 

Date: October 17, 2016

/s/  Keith Orlean

 

  

Digital Donations, Inc.

Balance Sheets

As of June 30, 2016 and December 31, 2015

(Unaudited)

 

		2016				2015
Assets
Current Assets
Cash and cash equivalents		$	3,952			$	48,080
Accounts receivable - Trade		$	9,828
Advances to shareholders		$	1,133
Total Current Assets		$	14,913			$	48,080
Fixed Assets
Equipment		$	6,076
Accumulated depreciation		$	(349	)
Fixed Assets, net		$	5,727			$	-
Total Assets		$	20,640			$	48,080
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable		$	23,918			$	8,535
Accrued liabilities		$	43,129			$	37,408
Advance from shareholder						$	5,901
Total Current Liabilities		$	67,047			$	51,844
Commitments and Contingencies
Stockholders’ Equity (Deficit)
Preferred Stock, $0.001 par value; 100,000,000 shares authorized at June 30, 2016 and December 31, 2015; 0 shares issued and outstanding as of June 30, 2016 and December 31, 2015.		$	-
Common Stock, $0.001 par value; 300,000,000 shares authorized at June 30, 2016 and December 31, 2015; 75,992,327 and 74,390,337 shares issued, issuable and outstanding at June 30, 2016 and December 31, 2015, respectively		$	75,992			$	74,390
Additional paid-in capital		$	465,477			$	352,650
Accumulated deficit		$	(587,876	)		$	(430,804	)
Total Stockholders’ Equity (Deficit)		$	(46,407	)		$	(3,764	)
Total Liabilities and Stockholders’ Equity (Deficit)		$	20,640			$	48,080

 

 

Digital Donations, Inc.

Statements of Operations

(Unaudited)

 

For the Six Months Ended June 30,		2016				2015
Revenues
Payment processing income		$	58,783			$	-
Operating Expenses
Payroll expenses			81,045				-
Legal and professional			3,118				160
Selling, general and administrative			117,518				(69	)
Research and development expense			13,892
Total Operating Expenses			215,573				91
Operating Loss			(156,790	)			(91	)
Other Income and Expense
Other income			67
Depreciation Expense			(349	)
Total Other Income and Expense			(282	)			-
Net Loss		$	(157,072	)		$	(91	)

 

 

Digital Donations, Inc.

Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

		Common Stock								Additional Paid in				Accumulated				Total Stockholders’
		Shares				Amount				Capital				Deficit				Equity (Deficit)
Balance, December 31, 2014			300,000,000			$	300,000							$	(306,053	)		$	(6,053	)
Cancellation of founders shares			(230,000,000	)			(230,000	)							230,000				0
Net loss															(91	)			(91	)
Balance, June 30, 2015			70,000,000				70,000				0				(76,144	)			(6,144	)
Issuance of common stock			1,792,466				1,792				174,708								176,500
Costs of Issuance											(5,026	)							(5,026	)
Non-employee stock compensation			2,597,871				2,598				182,968								185,566
Dividend															(50,000	)			(50,000	)
Net Loss															(304,660	)			(304,660	)
Balance, December 31, 2015			74,390,337				74,390				352,650				(430,804	)			(3,764	)
Issuance of common stock			1,539,969				1,540				108,459								109,999
Non-employee stock compensation			62,021				62				4,368								4,430
Net Loss															(157,072	)			(157,072	)
Balance, June 30, 2016			75,992,327			$	75,992			$	465,477			$	(587,876	)		$	(46,407	)

 

 

Digital Donations, Inc.

Statement of Cash Flows

(Unaudited)

 

For the Six Months Ended June 30,		2016				2015
Operating Activities
Net loss		$	(157,072	)		$	(91	)
Adjustments to reconcile net loss to
Net cash used in operating activities
Depreciation			349
Stock based compensation			4,430
Impairment of related party advances			(9,245	)			6,416
Changes in operating assets and liabilities:
Cash deficit							243
Accounts receivable			(9,828	)
Accounts payable and accrued expenses			21,102
Net Cash Used in Operating Activities			(150,264	)			6,568
Investing Activities
Purchases of equipment			(6,076	)
(Advances to)/Repayments from Related Parties, net			9,245				(6,416	)
Net Cash Used in Investing Activities			3,169				(6,416	)
Financing Activities
Proceeds from/(Repayments to) shareholder advances, net			(7,033	)			(751	)
Dividends			-
Proceeds from sale of common stock			110,000
Issuance costs paid			-
Net Cash Provided by Investing Activities			102,967				(751	)
Net Increase in Cash and Cash Equivalents			(44,128	)			(599	)
Cash and Cash Equivalents, beginning of year/period			48,080				599
Cash and Cash Equivalents, end of year/period		$	3,952			$	-
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-

 

 

Digital Donations, Inc.

Notes to the Unaudited Condensed Financial Statements

 

1.

Organization and Nature of Operations

 

Description of Business

 

Digital Donations, Inc. (the “Company”) was incorporated on March 10, 2014, under the laws of the State of New York. The business purpose of the Company is to continuously develop alternative payments and fundraising solutions that allow consumers to make a small donation as part of a financial transaction. The Company is currently developing proprietary fundraising platforms which allow non-profit organizations (“NPO” or “NPOs”) to present requests for support to potential donors, as they pay for goods and services purchased at the point of sale (“POS”) at participating merchants, ATM’s, mobile devices or via the Company’s website online.

 

2.

Summary of Significant Accounting Policies

 

Basis of Presentation

 

The condensed financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2016 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the interim information presented not misleading.

 

Going Concern

 

The Company has incurred operating losses since inception as it has sought to develop alternative payments and fundraising solutions to its target market. As of June 30, 2016, the Company had an accumulated deficit of $587,876 and a cash balance of $3,952. During the six months ended June 30, 2016, the Company incurred a net loss of $157,072, negative cash flows from operating activities of $150,264 and had shareholders’ deficit of $46,405.

 

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to fund future operations through additional financing from investors and/or lenders, and through October 12, had raised $381,500 (see Note 5).

 

However, there can be no assurance that the Company will be successful in raising the additional funds needed. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

Digital Donations, Inc.

Notes to the Unaudited Condensed Financial Statements

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from those estimates.

 

Revenue Recognition

 

The Company generates its revenue from administration and service fees of transactions on the Digital Donations fundraising platform, and from residual fees and commissions from the processing of payments made by customers to client merchants via debit or credit cards, or by manual checks. Revenue from these transactions is accounted for in the monthly period a donation is made or a payment processed.

 

For the brokering of credit card processing fees, the Company recognizes revenues at the time the credit card process transaction is approved, when its fee becomes fixed and determinable. For check processing, the Company recognizes revenue in the same manner, when the check is processed, as at that time its fee becomes fixed and determinable. In addition, because the Company only brokers these services, the revenue recognized is net of the fee charged by the actual process provider.

 

Income Taxes

 

On January 1, 2015, the Company filed an election with the United States Treasury to be taxed under the Subchapter S provisions of Chapter 1 of the Internal Revenue Code, whereby all income and losses pass through to the shareholders. Accordingly, the Company does not record any tax asset or provision, either current or deferred.

 

Advertising and Promotional Costs

 

Advertising and promotional costs are expensed as incurred. Advertising and promotional costs totaled $33,426 and $0 for the six months ended June 30, 2016 and June 30, 2015, respectively. The costs are included in other operating expenses in the accompanying statements of operations.

 

Software Development Costs

 

Software development costs are expensed as incurred until a product’s technological feasibility has been established. Any cost incurred after establishment of the products technological feasibility until its general release are capitalized. Through June 30, 2016, none of the software in development has reached a stage of technological feasibility and, accordingly, none has been released. As such, there are no capitalized software development costs on the accompanying balance sheets.

 

 

Digital Donations, Inc.

Notes to the Unaudited Condensed Financial Statements

 

Pro Forma Financial Information

 

As discussed in above, the Company filed to be taxed as a Subchapter S Company with the Internal Revenue Service. Upon closing of the Merger (see Note 5), its tax status will change to that of a corporation. The change will result in the post-merger company becoming obligated for the tax liabilities for the portion of income generated subsequent to the date of the merger, whereas the previous income and associated liability was passed through to the Company shareholders.

 

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Number 1B.2 “Pro Forma Financial Statements and Earnings per Share” (“SAB 1B.2”), pro forma information on the face of the income statement has been presented which reflects the pro forma impact as if the Company had changed its tax status and capital structure at the commencement of operations on March 10, 2014 and was therefore subject to income taxes. This presentation reflects the Company generating current deferred tax asset for losses during the period presented and having the preferred shares outstanding that were given as consideration for the merger.

 

3.

Stockholders’ Equity (Deficit)

 

At June 30, 2016, the Company has authorized 400,000,000 shares of capital stock, consisting of 100,000,000 shares (par value of $0.001 per share) of preferred stock and 300,000,000 shares (par value of $0.001 per share) of common stock. The total number of shares of common stock issued and outstanding at June 30, 2016 and December 31, 2015, was 75,992,327 and 74,390,337, respectively.

 

In January 2016, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $25,000 and will issue 349,993 shares of its common stock.

 

In March 2016, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $50,000 and will issue 699,986 shares of its commons stock.

 

In April 2016, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $20,000 and will issue 279,994 shares of its common stock.

 

In May 2016, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $5,000 and will issue 69,999 shares of its common stock.

 

In June 2016, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $10,000 and will issue 139,997 shares of its common stock.

 

The issuances described above were offered to accredited investors as defined in Rule 501 and subject to exemptions provided under Rule 506 of Regulation D of the Securities and Exchange Acts.

 

 

Digital Donations, Inc.

Notes to the Unaudited Condensed Financial Statements

 

4.

Related Party Transactions

 

During 2014 and 2015, Digital Donations, Inc. advanced funds on a net basis to a company in which the two founders of the Digital Donations, Inc. are also majority owners. As of June 30, 2016 and December 31, 2015, the Company had advanced, net, approximately $20,800 and $30,000, respectively. The related entity during this period was under significant liquidity pressures and in 2016, the owners of the related entity decided to begin winding down the entity. Because of this, the Company fully impaired the net advances as of June 30, 2016 and December 31, 2015, which resulted in an impairment recovery of $9,245 in 2016 and an impairment expense of $23,621 in 2015, both being recorded within the general and administrative expense line item on the statement of operations for the six month period ended June 30, 2016 and the year ended December 31, 2015.

 

Prior to the incorporation of the Company, the founders began work in the related entity noted above on what later was incorporated into Digital Donations, Inc. As part of that beginning work, they created and purchased the logo, trade name and trade mark that the Company now uses. However, because of the serious financial issues with the related entity, no work outside of the creation and purchase of the logo, trade name and trade mark ever commenced in the related entity. In 2016 the Company expects to enter into a transaction with the related entity to acquire the logo, trade name and trade mark and expects to issue its equity in consideration for those items due to the current liquidity situation of the Company. Because the intangible items will be purchased from a related entity, the Company will record intangible assets purchased at the historical cost incurred by the related entity to acquire those intangibles as the purchase price.

 

During 2014 the founders of the Company made unsecured, non-interest bearing advances to the Company that totaled $6,652 as of December 31, 2014. During the six months ended June 30, 2016 and the year ended December 31, 2015, the Company received net repayments totaling $4,769 and $751, respectively, against those advances and as of June 30, 2016, the balance due from the shareholder was $1,132. No amounts have been imputed as interest in these financial statements as the amount would be immaterial.

 

5.

Subsequent Events

 

From July 1, 2016 through October 12, 2016, the Company raised gross cash proceeds of $95,000 through the issuance of its common stock in private placements to accredited investors. The Company will issue 1,329,973 shares for the funds received.

 

In August and October, 2016 the Company issued two promissory notes for $25,000 and $5,000 respectively. The notes are unsecured, bear interest at the rate of 24% per annum and have a term of 180 days from issuance.

 

 

Digital Donations, Inc.

Notes to the Unaudited Condensed Financial Statements

 

On October 7, 2016, the Board of Directors of the Company authorized the issuance of 2,100,000 shares of the Company’s common stock to 8 individuals. The shares were meant to be originally issued at founding as founders shares, but were not authorized until the board meeting noted herein.

 

On October 17, 2016, the Company entered into a transaction with Digital Donations Technologies, Inc. (“DDTI”), in which DDTI issued 79,084,807 shares to the shareholders of DDI in exchange for 100% of the then issued and outstanding shares of the Company’s common stock, and at which time DDI became a wholly owned subsidiary of DDTI. At the time of the transaction, DDTI was a reporting public shell corporation as defined by the US Securities and Exchange Commission. The effect of this transaction will be that the financials of DDI will become those of DDTI from the date of the transaction forward. In addition, the merger resulted in the cancellation of the Company’s status with the Internal Revenue Service as an S Corporation and the Company is now a C corporation, which means that on a go-forward basis, income earned by the Company will be taxed at the corporation level and not passed through to shareholders.

 

 

Digital Donations, Inc.

 

Financial Statements

For the Year Ended December 31, 2015

and the Period from March 10, 2014 (inception)

to December 31, 2014

 

 

Digital Donations, Inc.

 

Contents

 

Financial Statements
Report of independent registered public accounting firm	F-1
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Stockholders’ Equity (Deficit)	F-4
Statements of Cash Flows	F-5
Notes to Financial Statements	F-6

 

 

Digital Donations, Inc.

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of
Digital Donations, Inc.:

 

We have audited the accompanying balance sheets of Digital Donations, Inc. as of December 31, 2015 and December 31, 2014, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2015 and for the period from inception on March 10, 2014 through December 31, 2014. Digital Donations, Inc. management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Digital Donations, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the year ended December 31, 2015 and for the period from inception on March 10, 2014 through December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred losses from operations since inception and is dependent upon access to additional external financing. These conditions raise substantial doubt concerning its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ L J Soldinger Associates, LLC
Deer Park, Illinois
October 17, 2016

 

 

Digital Donations, Inc

 

Balance Sheets

 

December 31,		2015				2014
Assets
Current Assets
Cash and cash equivalents		$	48,080			$	599
Total Current Assets			48,080				599
Total Assets		$	48,080			$	599
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable		$	8,535			$	-
Accrued liabilities			37,408				-
Advances from stockholder			5,901				6,652
Total Current Liabilities			51,844				6,652
Commitments and Contingencies			-				-
Stockholders’ Equity (Deficit)
Preferred Stock, $0.001 par value; 100,000,000 and 0 shares authorized at December 31, 2015 and 2014, respectively; 0 shares issued and outstanding as of December 31, 2015 and 2014			-				-
Common Stock, $0.001 par value at December 31, 2015 and 2014; 300,000,000 shares authorized at December 31, 2015 and 2014; 74,390,337 and 300,000,000 shares issued, issuable and outstanding at December 31, 2015 and 2014, respectively			74,390				300,000
Additional paid-in capital			352,650				-
Accumulated deficit			(430,804	)			(306,053	)
Total Stockholders’ Equity (Deficit)			(3,764	)			(6,053	)
Total Liabilities and Stockholders’ Equity (Deficit)		$	48,080			$	599

 

See accompanying notes to financial statements.

 

 

Digital Donations, Inc.

 

Statements of Operations

 

		Year Ended December 31, 2015				Period from March 10, 2014 (inception) to December 31, 2014
Operating Expenses
Payroll expenses		$	45,645			$	-
Legal and professional fees			35,968				-
Software development costs			9,387				-
General and administrative			213,751				7,053
Total Operating Expenses			304,751				7,053
Net Loss		$	(304,751	)		$	(7,053	)
Pro forma information (Unaudited)
Net loss from operations		$	(304,751	)		$	(7,053	)
Pro forma income tax benefit			103,600				2,400
Pro forma net loss		$	(201,151	)		$	(4,653	)
Pro forma basic and diluted loss per share		$	(0.00	)		$	(0.00	)
Pro forma basic and diluted
Weighted average shares outstanding			71,175,150				71,000,000

 

See accompanying notes to financial statements.

 

 

Digital Donations, Inc.

 

Statements of Stockholders’ Equity (Deficit)

 

																		Total Stockholder’s
		Common Stock								Additional Paid in				Accumulated				Equity
		Shares				Amount				Capital				Deficit				(Deficit)
Balance, March 10, 2014 (inception)			-			$	-			$	-			$	-			$	-
Issuance of common stock to founders			300,000,000				300,000				-				(299,000	)			1,000
Net loss			-				-				-				(7,053	)			(7,053	)
Balance, December 31, 2014			300,000,000				300,000				-				(306,053	)			(6,053	)
Cancellation of founders shares			(230,000,000	)			(230,000	)							230,000				-
Issuance of common stock			1,792,466				1,792				174,708				-				176,500
Costs of issuance			-				-				(5,026	)			-				(5,026	)
Non-employee stock compensation			2,597,871				2,598				182,968				-				185,566
Dividend			-				-				-				(50,000	)			(50,000	)
Net loss			-				-				-				(304,751	)			(304,751	)
Balance, December 31, 2015			74,390,337			$	74,390			$	352,650			$	(430,804	)		$	(3,764	)

 

See accompanying notes to financial statements.

 

 

Digital Donations, Inc.

 

Statements of Cash Flows

 

		Year Ended December 31, 2015				Period from March 10, 2014 (inception) to December 31, 2014
Operating Activities
Net loss		$	(304,751	)		$	(7,053	)
Adjustments to reconcile net loss to
Net cash used in operating activities
Stock based compensation			185,566				-
Impairment of related party advances			23,621				6,416
Changes in operating assets and liabilities:
Accounts payable and accrued expenses			45,943				-
Net Cash Used in Operating Activities			(49,621	)			(637	)
Investing Activities
(Advances to)/Repayments from Related Parties, net			(23,621	)			(6,416	)
Net Cash Used in Investing Activities			(23,621	)			(6,416	)
Financing Activities
Proceeds from/(Repayments to) shareholder advances, net			(751	)			6,652
Dividends			(50,000	)			-
Proceeds from sale of common stock			176,500				1,000
Issuance costs paid			(5,026	)			-
Net Cash Provided by Investing Activities			120,723				7,652
Net Increase in Cash and Cash Equivalents			47,481				599
Cash and Cash Equivalents, beginning of year/period			599				-
Cash and Cash Equivalents, end of year/period		$	48,080			$	599
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-

 

See accompanying notes to financial statements.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

1.

Organization and Nature of Operations

 

Description of Business

 

Digital Donations, Inc. (the “Company”) was incorporated on March 10, 2014, under the laws of the State of New York. The business purpose of the Company is to continuously develop alternative payments and fundraising solutions that allow consumers to make a small donation as part of a financial transaction. The Company is currently developing proprietary fundraising platforms which allow non-profit organizations (“NPO” or “NPOs”) to present requests for support to potential donors, as they pay for goods and services purchased at the point of sale (“POS”) at participating merchants, ATM’s, mobile devices or via the Company’s website online.

 

2.

Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Going Concern

 

The Company has incurred operating losses since inception as it has sought to develop alternative payments and fundraising solutions to its target market. As of December 31, 2015, the Company had an accumulated deficit of $430,804 and a cash balance of $48,080. During the year ended December 31, 2015, the Company incurred a net loss of $304,751, negative cash flows from operating activities of $49,621 and had shareholders’ equity (deficit) of $(3,764). These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to fund future operations through additional financing from investors and/or lenders, and through October 17, had raised $205,000 (see Note 5). However, there can be no assurance that the Company will be successful in raising the additional funds needed. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents.

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to concentrations of credit risks, consist principally of cash and advances due from a related party. The Company’s cash and cash equivalents are held at one U.S. commercial bank. The Company has not experienced any losses to date related to its cash and cash equivalents.

 

Start-up Costs

 

In accordance with Accounting Standards Codification (“ASC”) 720-15-20, Start-up Costs, the Company expenses all costs incurred in connection with the start-up and organization of the Company.

 

Income Taxes

 

On January 1, 2015, the Company filed an election with the United States Treasury to be taxed under the Subchapter S provisions of Chapter 1 of the Internal Revenue Code, whereby all income and losses pass through to the shareholders. Accordingly, the Company does not record any tax asset or provision, either current or deferred.

 

Advertising and Promotional Costs

 

Advertising and promotional costs are expensed as incurred. Advertising and promotional costs totaled $1,832 and $0 for the year ended December 31, 2015 and the period from March 10, 2014 (inception) to December 31, 2014, respectively. The costs are included in other operating expenses in the accompanying statements of operations.

 

Software Development Costs

 

Software development costs are expensed as incurred until a product’s technological feasibility has been established. Any cost incurred after establishment of the products technological feasibility until its general release are capitalized. Through December 31, 2015, none of the software in development has reached a stage of technological feasibility and, accordingly, none has been released. As such, there are no capitalized software development costs on the accompanying balance sheets.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

Fair Value of Financial Instruments

 

ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes, and prioritizes, three levels of inputs that may be used to measure fair value:

 

·

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

·

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

·

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, due from related party, and accounts payable approximate their fair values at December 31, 2015 and 2014 due to their short-term nature and management’s belief that their carrying amounts approximate the amount for which the assets could be sold or the liabilities could be settled.

 

Pro Forma Financial Information

 

As discussed in above, the Company filed to be taxed as a Subchapter S Company with the Internal Revenue Service. Upon closing of the Merger (see Note 5), its tax status will change to that of a corporation. The change will result in the post-merger company becoming obligated for the tax liabilities for the portion of income generated subsequent to the date of the merger, whereas the previous income and associated liability was passed through to the Company shareholders.

 

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Number 1B.2 “Pro Forma Financial Statements and Earnings per Share” (“SAB 1B.2”), pro forma information on the face of the income statement has been presented which reflects the pro forma impact as if the Company had changed its tax status and capital structure at the commencement of operations on March 10, 2014 and was therefore subject to income taxes. This presentation reflects the Company generating current deferred tax asset for losses during the period presented and having the preferred shares outstanding that were given as consideration for the merger.

 

Recent Accounting Pronouncements

 

In April 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), which adds further guidance on identifying performance obligations and improving the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The amendments are effective for private companies for annual periods beginning after December 31, 2018, however early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-10.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. ASU 2016-02 is effective for annual periods beginning after December 15, 2019. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact of adopting this ASU.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under U.S. GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, U.S. GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. This standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is currently evaluating the impact of adopting this ASU.

 

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”). The amendments in ASU 2014-10 remove the definition of a development stage entity from the Master Glossary of the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flow, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer in a development stage that in prior years it had been in the development stage.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application is permitted. Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company elected to early adopt ASU 2014-10, effective for the period ended December 31, 2014.

 

3.

Stockholders’ Equity (Deficit)

 

At December 31, 2015, the Company has authorized 400,000,000 shares of capital stock, consisting of 100,000,000 shares (par value of $0.001 per share) of preferred stock and 300,000,000 shares (par value of $0.001 per share) of common stock. The total number of shares of common stock issued, issuable and outstanding at December 31, 2015 and 2014 was 74,390,337 and 300,000,000, respectively.

 

At inception, the Company had 2,000 shares of common stock authorized with a par value of $0.01. In March 2014, the Company issued 2,000 shares of common stock at $0.50 per share to the two founders of the Company for gross proceeds of $1,000 in cash. On February 23, 2015, the Company amended its Certificate of Organization with the State of New York to increase the number of shares of authorized common stock from 2,000 to 300,000,000 and change the par value from $0.01 to $0.001, as well as authorize 100,000,000 shares of preferred stock. Also included in the amendment to the articles of incorporation was a 150,000:1 forward stock split of the common stock of the Company. The Company has shown the effect of the forward stock split and change in par value as if they had occurred at inception.

 

Immediately after the February 23, 2015 change was made to the articles of incorporation, the two founders cancelled 230,000,000 shares of their common stock.

 

In July 2015, the Company sold stock to an investor at $0.44 per share for cash proceeds of $44,000. As of December 31, 2015 those share are issuable.

 

In July 2015, the Company sold stock to an investor at $1.00 per share for cash proceeds of $12,500. As of December 31, 2015 those share are issuable.

 

In September 2015, the Company issued 349,993 shares of common stock of the Company at $0.0714 per share for cash proceeds of $25,000.

 

In December 2015, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $95,000. As of December 31, 2015, the Company had issued 769,985 shares and was obligated to issue an additional 559,988 shares to the investor.

 

The issuances described above were offered to accredited investors as defined in Rule 501 and subject to exemptions provided under Rule 506 of Regulation D of the Securities and Exchange Acts.

 

In October and December 2015, the Company issued a total of 2,597,871 shares as compensation to non-employees for consulting services performed. The Company recorded compensation expense at a share price based on the September and December 2015 raises noted above of $0.0714 per share. Total compensation expense recorded in 2015 was $185,566.

 

In December 2015, the Company made a payment on behalf of the founders of the Company and has treated that payment as a dividend.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

4.

Related Party Transactions

 

During 2014 and 2015, Digital Donations, Inc. advanced funds on a net basis to a company in which the two founders of the Digital Donations, Inc. are also majority owners. As of December 31, 2014, the Company had advanced, net, approximately $6,400. As of December 31, 2015, the Company further advanced on a net basis approximately $23,600. The related entity during this period was under significant liquidity pressures and in 2016, the owners of the related entity decided to begin winding down the entity. Because of this, the Company fully impaired the net advances as of December 31, 2015 and 2014, which resulted in impairment expenses of the same amount noted above being recorded within the general and administrative expense line item on the statement of operations for the years ended December 31, 2015 and 2014.

 

Prior to the incorporation of the Company, the founders began work in the related entity noted above on what later was incorporated into Digital Donations, Inc. As part of that beginning work, they created and purchased the logo, trade name and trade mark that the Company now uses. However, because of the serious financial issues with the related entity, no work outside of the creation and purchase of the logo, trade name and trade mark ever commenced in the related entity. In 2016 the Company expects to enter into a transaction with the related entity to acquire the logo, trade name and trade mark and expects to issue its equity in consideration for those items due to the current liquidity situation of the Company. Because the intangible items will be purchased from a related entity, the Company will record the intangible assets purchased at the historical cost incurred by the related entity to acquire those intangibles as the purchase price.

 

During 2014 the founders of the Company made unsecured, non-interest bearing advances to the Company that totaled $6,652 as of December 31, 2014. During 2015, the Company made net repayments totaling $751 against those advances and as of December 31, 2015 the balance owed was $5,901. No amounts have been imputed as interest in these financial statements as the amount would be immaterial.

 

5.

Subsequent Events

 

In 2016 through October 17, 2016, the Company raised gross cash proceeds of $205,000 through the issuance of its common stock in private placements to accredited investors. The Company will issue 2,869,942 shares of its common stock for the funds received.

 

In March 2016, the Company issued 62,021 shares to non-employee consultants in exchange for services rendered to the Company.

 

In August 2016 and October 2016, the Company issued two promissory notes in the amount of $25,000 and $5,000 respectively, upon its receipt of $25,000 and $5,000 in cash, respectively, from the lender. The promissory notes are unsecured, bear interest payable quarterly at the rate of 24 percent per annum and mature 180 days after issuance.

 

In late December 2015, the Company entered into a contract with a significant NPO to broker credit card processing services to that NPO. As part of the Contract, the NPO was required to use equipment provided by contractors specified by DDI, of which, shipment of the equipment began in early 2016. In the last week of January 2016, the Company began recording revenue for brokering credit card transactions to the NPO. During the first half of 2016, the Company further expanded its product offerings by also entering into new contracts to broker the processing of checks.

 

 

Digital Donations, Inc.

 

Notes to Financial Statements

 

On October 7, 2016, the Board of Directors of the Company authorized the issuance of 2,100,000 shares of the Company’s common stock to 8 individuals. The shares were meant to be originally issued at founding as founders shares, but were not authorized until the board meeting noted herein.

 

On October 17, 2016, the Company entered into an Acquisition Agreement with Digital Donations Technologies, Inc. (“DDTI”), in which DDTI will issue 79,084,807 of its common shares to the shareholders of the Company in exchange for 100% of the then issued and outstanding shares of the Company’s common stock, and at which time the Company became a wholly owned subsidiary of DDTI. At the time of the transaction, DDTI was a reporting public shell corporation as defined by the US Securities and Exchange Commission. The effect of this transaction will be that the financials of the Company will become those of DDTI from the date of the transaction forward. In addition, the merger resulted in the cancellation of the Company’s status with the Internal Revenue Service as an S Corporation and the Company is now a C corporation, which means that on a go-forward basis, income earned by the Company will be taxed at the corporation level and not passed through to shareholders.