Attached files
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| EX-23.1 - EXHIBIT 23.1 - Digital Donations Technologies, Inc. | v469980_ex23-1.htm |
| Registration No. 333-214601 | |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
Amendment No. 4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
DIGITAL DONATIONS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 3577 | 47-4485832 | ||
| State or other jurisdiction | Primary Standard Industrial | (I.R.S. Employer | ||
| incorporation or organization | Classification Code Number) | Identification Number) |
68 South Service Road, Suite 100
Melville, New York 11747
| 631-465-2163 |
(Address, including zip code, and telephone number, including area code
of registrant’s principal executive offices)
Keith Orlean
68 South Service Road, Suite 100
Melville, New York 11747
| 631-465-2163 |
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copy to
Lee Cassidy, Esq.
215 Apolena Avenue
Newport Beach, California 92662
949-673-4510 949-673-4525 (fax)
Approximate Date of Commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions “large accelerated filer,” “accelerated file,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ¨ | Accelerated filed | ¨ |
| Non-accelerated filed | ¨ | Smaller reporting company | x |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
| Proposed | Proposed | |||||||||||||||
| Amount | Maximum | Maximum | Amount of | |||||||||||||
| Title of Each Class of | to be | Offering Price | Aggregate | Registration | ||||||||||||
| Securities to be Registered | Registered | Per Share | Offering Price | Fee (2) | ||||||||||||
| Common Stock held by Selling Shareholders | 9,251,920 shares | $ | 1.50 | $ | 13,877,880 | $ | 1608.45 | |||||||||
| Total | 9,251,920 shares | $ | 1.50 | $ | 13,877,880 | $ | 1608.45 | |||||||||
| (1) | There is no current market for the securities and the price at which the Shares are being offered has been arbitrarily determined by the Company and used for the purpose of computing the amount of the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. | |
| (2) | Paid by electronic transfer. |
The Company is offering shares of its common stock in a separate private placement for total proceeds to the Company of $5,000,000 (the “Private Placement”) concurrent with the completion of this Selling Shareholders’ secondary offering in reliance on the exemption from registration under Rule 506(c) of Regulation D of the Securities Act of 1933 (the “Securities Act”). To date, the Company has sold shares of its common stock under the Private Placement as follows: (1) from October 2016 to December 2016, the Company issued to one shareholder an aggregate of 1,819,963 common shares for a total of $130,000; and (2) from January 2017 to the date of this prospectus, the Company sold to two shareholders an aggregate of 2,342,954 of its common shares for a total of $184,500. None of the officers, directors or principal shareholders of the Company or any related parties shall participate in the concurrent Private Placement. There are no agreements with underwriters, placement agents or broker-dealers in place in connection with the concurrent Private Placement. The closing of this Selling Shareholders’ secondary offering is not conditioned upon the closing of such concurrent Private Placement.
EXPLANATORY NOTE
This registration statement and the prospectus therein covers the registration of 9,251,920 shares of common stock offered by the holders thereof.
The information contained in this prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission and these securities may not be sold until that registration statement becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
| PROSPECTUS | Subject to Completion, Dated June 29, 2017 |
DIGITAL DONATIONS TECHNOLOGIES, INC.
9,251,920 shares of common stock offered by selling shareholders at $1.50 per share
This prospectus relates to the offer and sale of (i) 9,251,920 shares of common stock (the “Shares”) of Digital Donations Technologies, Inc. (“DDTI” or the “Company”), $.0001 par value per share by the holders thereof who are deemed to be statutory underwriters. The shares offered by the selling shareholders (the “Shares”) will be offered at a price of $1.50 until the Company’s common stock is listed on a national securities exchange or is quoted on the OTC Bulletin Board (or a successor); after which, the selling shareholders may sell their shares at prevailing market or privately negotiated pries, including (without limitation) in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale.
The maximum number of Shares that can be sold pursuant to the terms of this offering by the selling shareholders is (in aggregate) 9,251,920 Shares. Funds received by the selling shareholders will be immediately available to such selling shareholders for use by them. The Company will not receive any proceeds from the sale of the Selling Shareholder Shares. All costs incurred in the registration of the Shares and the Selling Shareholder Shares are being borne by the Company.
The offering will terminate twenty-four (24) months from the date that the registration statement relating to the Shares is declared effective, unless earlier fully subscribed or terminated by the Company. The Company intends to maintain the current status and accuracy of this prospectus and to allow selling shareholders to offer and sell the Shares for a period of up to two (2) years, unless earlier completely sold, pursuant to Rule 415 of the General Rules and Regulations of the Securities and Exchange Commission.
Prior to this offering, there has been no public market for the Company’s common stock. No assurances can be given that a public market will develop following completion of this offering or that, if a market does develop, it will be sustained. The offering price for the Shares has been arbitrarily determined by the Company and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company. The Shares will become tradable on the effective date of the registration statement of which this prospectus is a part.
Neither the Company nor any selling shareholders has any current arrangements nor entered into any agreements with any underwriters, broker-dealers or selling agents for the sale of the Shares. If the Company or selling shareholders can locate and enter into any such arrangement(s), the Shares will be sold through such licensed underwriter(s), broker-dealer(s) and/or selling agent(s).
| Assumed Price | ||||
| To Public | ||||
| Per Common Stock Share Offered | $ | 1.50 per share | ||
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act.
The Company’s independent auditors have issued a report raising substantial doubt of the Company’s ability to continue as a going concern.
These securities involve a high degree of risk. See “RISK FACTORS” contained in this prospectus beginning on page 4.
Keith Orlean
68 South Service Road, Suite 100
Melville, New York 11747
631-465-2163
Prospectus dated June 29, 2017
TABLE OF CONTENTS
This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including “Risk Factors” and the financial statements and related notes, included elsewhere in this prospectus.
The Company
History
Digital Donations Technologies, Inc., formerly known as Fishing Ridge Acquisition Corporation (“DDTI” or the “Company”), 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. pursuant to 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.
On October 17, 2016 DDTI effected the acquisition of Digital Donations, Inc., a New York corporation (“Digital Donations”) (the “Acquisition”) as a wholly-owned subsidiary with the issuance of 79,084,807 shares of its common stock in exchange for the 79,084,807 outstanding shares of common stock of Digital Donations Inc.
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”). Throughout the disclosure contained herein, reference to the Company includes that information of its wholly-owned subsidiary, Digital Donations, as appropriate particularly in regard to financial information and operations.
The Company is located at 68 South Service Road, Suite 100, Melville, New York 11747. The Company’s main phone number is (631) 465-2163. The Company’s fiscal year end is December 31. Neither the Company nor its predecessors have filed for bankruptcy, receivership or any similar proceedings nor are in the process of filing for bankruptcy, receivership or any similar proceedings. The Company’s independent auditors have issued a report raising substantial doubt about the Company’s ability to continue as a going concern.
Business
Digital Donations Technologies, Inc. (DDTI) is an early-stage company formed to support the non-profit industry with innovative and cost effective fundraising technologies providing alternative payment and fundraising solutions giving consumers the option to make a small donation as part of a financial transaction such as at a checkout or ATM transaction. The Company is currently developing fundraising platforms which allow non-profit organizations (“NPO”), retailers and quick service restaurants to present requests for contributions to potential donors at the time such possible donors pay for goods and services at the point of sale (“POS”) at participating merchants, ATM’s, mobile devices or via the Company’s online web site.
Risks and Uncertainties facing the Company
As a development stage company, the Company has no operating history and has experienced losses since its inception. The Company’s independent auditors have issued a report questioning the Company’s ability to continue as a going concern. That is, the Company needs to create a source of revenue or locate additional financing in order to continue its developmental plans. As a development stage company, management of the Company has no prior experience in building and selling projects similar to that planned by the Company and in marketing and distributing such projects on a broad scale.
One of the biggest challenges facing the Company is the ability to raise adequate capital to develop and execute project opportunities in the nonprofit fund-raising technology industry.
Due to financial constraints, the Company has to date conducted limited operations. If the Company were unable to develop strong and reliable sources of funding for project opportunities, 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 efforts are met with customer satisfaction in the marketplace and exhibit steady adoption of its solutions amongst the potential base of customers, neither of which are currently known or guaranteed.
| - 3 - |
Trading Market
Currently, there is no trading market for the securities of the Company. The Company intends to initially apply for admission to quotation of its securities on the OTC Bulletin Board as soon as possible which may be while this offering is still in process. There can be no assurance that the Company will qualify for quotation of its securities on the OTC Bulletin Board.
The Offering
The maximum number of Shares that can be sold pursuant to the terms of this offering is 9,251,920. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier terminated by the Company.
This prospectus relates to the offer and sale of 9,251,920 shares of common stock of Digital Donations Technologies, Inc. offered by the holders thereof who are deemed to be statutory underwriters. The selling shareholders will offer their shares at a price of $1.50 until such time as the Shares are quoted on the OTC Bulletin Board and only thereafter at prevailing market or privately negotiated prices in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale or at prevailing market if a market should develop.
| Common stock outstanding before the offering | 88,957,720 | (1) | ||
| Common stock for sale by selling shareholders | 9,251,920 | |||
| Common stock outstanding after the offering | 88,957,720 | (1) | ||
| Offering Price per share | $ | 1.50 | ||
| Proceeds to the Company | $ | 0 |
(1) Based on number of shares issued or issuable as of the date of this prospectus. There are an additional 349,993 shares of common stock that have been sold and have not yet been issued, but are included in the total herein.
In the future, following the completion of this offering, the Company will most likely need to raise capital for the projects which it anticipates to develop. The Company anticipates that it may raise such capital by an offering of its shares of common stock. If the Company does effect equity offerings of its securities and if the price paid for shares offered in such an offering is less than paid by the purchasers of Shares, then such purchasers will suffer a dilution in the value of their shares. Furthermore the issuance of such additional shares may impact the ability of any investor to sell their Shares once such shares are eligible for sale. The Company cannot anticipate that it will be able to effect such additional offerings of its securities and then failure of it to do so may severely impact its available capital to develop any transportation systems or further its business plan.
A purchase of any Shares is an investment in the Company’s common stock and involves a high degree of risk. Investors should consider carefully the following information about these risks, together with the other information contained in the registration statement of which this prospectus is a part, before the purchase of any Shares. If any of the following risks actually occur, the business, financial condition or results of operations of the Company would likely suffer, the market price of the common stock would likely decline, and investors could lose all or a portion of their investment. The Company has listed the following risk factors which it believes to be those material to an investment decision in this offering.
| - 4 - |
The Company has limited operating history through its subsidiary.
The Company is a development stage company and has limited operating history. The Company is relying on management to actuate and develop its business plan through its operating subsidiary. The Company’s subsidiary has limited business history and an investor will be required to make an investment decision based largely on the management and the projected operations in light of the risks, expenses and uncertainties that may be encountered by engaging in the technological development and marketing of platforms for use in charitable donations at the time of electronic transactions.
The Company’s independent auditors have issued a report questioning the Company’s ability to continue as a going concern.
The notes contained in the financial statements of the Company’s wholly owned subsidiary, Digital Donations, for the year ended December 31, 2016 include a paragraph that explains that Digital Donations has incurred operating losses since inception and at December 31, 2016 had an accumulated deficit of $982,103 and incurred a net loss of $551,299. 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 or through the sale of its securities or through development of its operations. Due to these and other factors, the Company ’ s independent auditors have issued a report raising substantial doubt of the Company ’ s ability to continue as a going concern.
As of March 31, 2017, the Company has accumulated deficit of $1,082,972.
As of March 31, 2017, the Company had an accumulated deficit of $1,082,972 and incurred a net loss of $100,869 for the three months ended March 31, 2017. This deficit may impact on the Company in various ways including, but not limited to, making it more difficult to borrow money, sell stock or to maintain a good market price.
The Company may not be able to meet its outstanding loan obligation
The Company’s wholly-owned subsidiary executed promissory notes totaling a principal amount of $30,000, with interest at 24% per annum, payable at the time this Registration Statement is declared effective by the Securities and Exchange Commission. Interest is payable quarterly. Without the influx of additional capital, the Company will not be able to meet the payment obligations for these loans when they become due. If the Company is not able to pay such obligations nor obtain a waiver or delay, it may face serious dissolution demands.
In order to continue operations the Company has undertaken a private offering of its securities in order to raise necessary funds.
In order to raise necessary funds to continue operations and meet its obligations, the Company is offering shares of its common stock in a separate private placement for total proceeds of $5,000,000 (the “Private Placement”) concurrent with the completion of this offering in reliance on the exemption from registration under Rule 506(c) of Regulation D of the Securities Act of 1933 (the “Securities Act”). To date, the Company has sold shares of its common stock under the Private Placement as follows: (1) from October 2016 to December 2016, the Company issued to one shareholder an aggregate of 1,819,963 common shares for a total of $130,000; (2) from January 2017 to May 2017, the Company sold to two shareholders an aggregate of 2,342,954 of its common shares for a total of $184,500; and (3) from April 1 through the date of this prospectus, the Company sold to one shareholder an aggregate of 699,986 of its common shares for a total of $50,000. Assuming sale of all of the common shares offered under the Private Placement, purchasers of the Shares will experience immediate dilution in the value of their Shares. Further, there is no assurance that the Company can raise additional funds through the Private Placement and without such influx of such capital, or without capital from other sources such as loans or debt offering, the Company may not be able to continue operations.
Investors in the offering will experience immediate dilution of the value of their shares.
Purchasers of the Shares will experience immediate dilution in the value of their Shares. Dilution represents the difference between the price per share paid by investors ($1.50) and the net tangible book value per share immediately after completion of the Offering. Net tangible book value per share is the net tangible assets of the Company (total assets less total liabilities less intangible assets), divided by the number of shares of common stock outstanding. At March 31, 2017 and December 31, 2016, the Company’s net tangible per share book value was $0.0. Thus if at some other time, shares had been sold by the Company at a price less than the $1.50 paid by purchasers of the Shares or had been issued by the Company for services or as other non-cash consideration, then the value of such investor Shares immediately after purchase would be less than the purchase price. The Company has issued shares prior to the date of this prospectus at a price less than $1.50. In addition, the Company is currently offering up to 5,000,000 shares of its common stock as part of a concurrent Private Placement offering. The issuance of any shares pursuant to such Private Placement offering will immediately dilute the value of the Shares paid by investors pursuant to this prospectus. The Company may also issue shares of its common stock as a condition of a proposed asset purchase with Digital Processing Solutions. If the value of those assets are such that the value of the shares issued in exchange is less than $1.50 per share, then investors will experience additional dilution.
| - 5 - |
The offering price of the Shares has been arbitrarily determined and such price should not be used by an investor as an indicator of the fair market value of the Shares.
Currently there is no public market for the Company’s common stock. The offering price for the Shares has been arbitrarily determined and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company. Thus an investor should be aware that the offering price does not reflect the fair market price of the Shares.
In order to actuate its business plan and further develop its technology, the Company will need additional capital.
The Company will not receive any funds from the sale of the Shares offered herein and will require capital by loans, joint ventures or sale of its securities in order to execute its current business plan, namely to further develop the technology of its platforms for consumer donations at electronic transaction sites such as ATMs, checkout machines and web sites, If the Company were unable to locate such financing on terms acceptable to the Company, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan.
No assurance of commercial feasibility.
Even if the Company’s plans and projects are successfully initiated, there can be no assurance that such plans and projects will have any commercial success or advantage. Also, there is no assurance that the Company’s initiatives will perform as intended in the marketplace.
The Company’s developed software may experience unexpected “bugs” which may delay its release or impede its use.
The Company is developing its proprietary software and intends to effect beta and other testing to ensure efficient launch and usability. However, the Company’s software may experience or develop unanticipated “bugs” that would either delay its release or impede its use once released. Such delays or problems could impact the Company’s ability to generate revenue or could negatively affect any contractual relationships with users of the software.
Intellectual property and/or trade secret protection may be inadequate.
The Company has not been granted any intellectual property or trade secret protection on any aspects of its business. Although it plans on obtaining patents, copyright, trademarks and/or service marks on any of its solutions and services, there can be no assurance that the Company can obtain effective protection against unauthorized duplication or the introduction of substantially similar solutions and services.
The Company expects to enter into a transaction (the “Digital Processing Trade Dress Acquisition”) with Digital Processing Solutions, Inc., a Texas corporation (“Digital Processing Solutions”), which is a company in which the two founders of the Digital Donations, Inc. are also executive officers, directors and majority owners. Pursuant to the proposed terms of the Digital Process Trade Dress Acquisition, the Company expects to acquire the logo, trade name and trade mark of Digital Processing Solutions and expects to issue shares of its common stock in consideration for those items. The final terms of the Digital Processing Trade Dress Acquisition are still subject to negotiation. In anticipation of the Digital Processing Trade Dress Acquisition, the Company has a revocable oral licensing agreement to use the logo, trade name, trade mark and similar intellectual property of Digital Processing Solutions until the Digital Processing Trade Dress Acquisition is consummated. However, in the event that this license is revoked and the Digital Processing Trade Dress Acquisition is not consummated, such events could negatively impact the business of the Company.
There has been no prior public market for the Company’s common stock and the lack of such a market may make resale of the Shares difficult.
No prior public market has existed for the Company’s securities and the Company cannot assure any purchaser that a market will develop subsequent to this offering. The Company intends to apply for quotation of its common stock on the OTC Bulletin Board when appropriate. However, the Company does not know if it will be successful in such application, how long such application will take, or, if successful, that a market for the common stock will ever develop or continue on that or any other trading market. If for any reason a trading market for the Shares does not develop, investors may have difficulty selling their common stock should they desire to do so.
The Company’s election not to opt out of JOBS Act extended accounting transition period may not make its financial statements easily comparable to other companies.
Pursuant to the JOBS Act of 2012, as an emerging growth company the Company can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the standard for the private company. This may make comparison of the Company’s financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible as possible different or revised standards may be used.
| - 6 - |
The Company’s stock may be considered a penny stock and any investment in the Company’s stock will be considered a high-risk investment and subject to restrictions on marketability.
If the Shares commence trading, the trading price of the Company’s common stock may be below $5.00 per Share. If the price of the common stock is below such level, trading in its common stock would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended. These rules require additional disclosure by broker-dealers in connection with any trades generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per Share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser’s written consent to the transactions before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in the Company’s common stock which could impact the liquidity of the Company’s common stock.
The Board of Directors could use the issuance or designation of preferred stock to impede or discourage an acquisition of the Company that may otherwise be beneficial to some shareholders.
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 Company’s board of directors is required to make any determination to issue such preferred 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 intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or otherwise.
The Company relies on only key managers whose absence or loss could adversely affect the business.
The Company relies on the services of its two key executives. The loss of the services of either such manager could adversely affect the business.
Costs incurred because the Company is a public company may affect the Company’s profitability.
As a public company, the Company incurs significant legal, accounting, and other expenses, and the Company is subject to the rules and regulations of the Securities and Exchange Commission relating to public disclosure that generally involve a substantial expenditure of financial resources. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, requires changes in corporate governance practices of public companies. The Company expects that full compliance with such rules and regulations will significantly increase the Company’s legal and financial compliance costs and make some activities more time-consuming and costly, which may negatively impact the Company’s financial results. To the extent the Company’s earnings suffer as a result of the financial impact of the Company’s SEC reporting or compliance costs, the Company’s ability to develop an active trading market for the Company’s securities could be harmed.
The Company has a small financial and accounting organization. Being a public company strains the Company’s resources, diverts management’s attention and affects its ability to attract and retain qualified officers and directors.
As a reporting company, the Company is already subject to the reporting requirements of the Securities Exchange Act of 1934. However, the requirements of these laws and the rules and regulations promulgated thereunder entail significant accounting, legal and financial compliance costs which are potentially prohibitive to the Company as it develops its business plan, products and scope. These costs have made, and will continue to make, some activities more difficult, time consuming or costly and may place significant strain on its personnel, systems and resources.
The Company does not currently possess effective disclosure controls and procedures that are adequate for a public company.
Based upon their respective evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that, as of March 31, 2017, the existing disclosure controls and procedures of the Company were not effective. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
The Company has engaged outside accounting and finance advisors to assist the Company in better implementing effective disclosure controls and procedures.
The Company does not currently possess effective internal control over financial reporting that is adequate for a public company.
Based upon their respective evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that, as of March 31, 2017, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO 2013 Criteria). Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.
The Company has engaged outside accounting and finance advisors to assist the Company in better implementing internal control over financial reporting.
Two of the Company’s officers and directors beneficially owns a significant majority, and will continue to own a majority, of the Company’s common stock and, as a result, can exercise control over stockholder and corporate actions.
Mr. Keith Orlean, the President and a director of the Company, and Mr. Jeffrey Marder, the Chief Executive Officer and a director of the Company, are collectively the beneficial owners of a majority of the Company’s outstanding common stock and assuming sale of all the Shares, will still own a majority of the Company's then outstanding common stock upon closing of the offering. As such, they will be able to control most matters requiring approval by stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control, which in turn could have a material adverse effect on the market price of the Company’s common stock or prevent stockholders from realizing a premium over the market price for their Shares.
The Securities Exchange Act requires, among other things, that companies maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on the development of the Company’s business, financial condition and results of operations.
| - 7 - |
This prospectus contains, in addition to historical information, certain information, assumptions and discussions that may constitute forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially than those projected or anticipated. Actual results could differ materially from those projected in the forward-looking statements. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, the Company cannot assure an investor that the forward-looking statements set out in this prospectus will prove to be accurate.
Such “forward-looking statements” can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “should” or “anticipates”, or the negative thereof, or other variations thereon or comparable terminology, or by discussion of strategy. No assurance can be given that the future results covered by the forward-looking statements will be achieved. The following matters constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, which could cause actual results to vary materially from the future results covered in such forward-looking statements.
An investor should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. The Company is not under a duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.
DETERMINATION OF OFFERING PRICE
There is no public market for the Company’s common stock and the $1.50 price at which the Shares are being offered has been arbitrarily determined by the Company.
The Shares offered by the selling shareholders may be offered and sold, from time to time, by the selling shareholders described in this prospectus under the heading “Selling Shareholders” at an offering price of $1.50 per share until such time as the Shares are quoted on the OTC Bulletin Board and only thereafter may be offered at prevailing market or privately negotiated prices. The selling shareholders may sell the Shares by any means described in this prospectus under “Plan of Distribution.”
The Company does not anticipate that it will declare dividends in the foreseeable future but rather intends to use any future earnings for the development of its business. The Company’s board of directors may determine at some future date to declare dividends based on results of operations, financial condition, contractual restrictions, applicable law and other factors deemed relevant by the Board. Such dividend declaration is not currently contemplated.
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
As of March 31, 2017, we had a historical net tangible book value (deficit) of $(41,442), or $(0.00) per share of common stock, based on 88,257,734 shares of common stock issued or issuable as of that date. Our historical net tangible book value represents total tangible assets less total liabilities at March 31, 2017. From April 1, 2017 through the date of this prospectus, $50,000 through subscriptions to 699,986 shares of its common stock. As of the date of this prospectus, 88,957,720 common shares have been issued or are issuable. The shares issued by the Company and our subsidiary are included in the share count noted above (the subsidiary shares were included the shares issued to acquire 100% of the outstanding shares of the Subsidiary in our merger transaction). After adjusting for these cash proceeds, our pro forma as adjusted net tangible book value as of the date of this prospectus is $8,558 or $0.00 per share.
Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution:
| Assumed public offering price per share | $ | 1.50 | ||||||
| As adjusted pro forma tangible book value per share | $ | 0.00 | ||||||
| Increase in net tangible book value per share attributable to this offering | $ | 0.00 | ||||||
| As adjusted pro forma net tangible book value per share after this offering | $ | 0.00 | ||||||
| Dilution per share to new public investors | $ | 1.50 |
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A $1.00 increase (decrease) in the assumed initial public offering price of $1.50 per share would have no effect on the dilution per share to new investors.
The following table sets forth, on an as adjusted basis, the difference between the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid by our existing stockholders and the average price to be paid by new investors in this public offering before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, using an assumed public offering price of $1.50 per share of common stock. The total consideration paid by existing stockholders set forth below, $687,000 consists of cash consideration for our equity.
| Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
| Number | Percent | Amount | Percent | per Share | ||||||||||||||||
| Existing stockholders | 79,705,800 | 90 | % | $ | 687,000 | 5 | % | $ | 0.01 | |||||||||||
| New investors | 9,251,920 | 10 | % | $ | 13,877,880 | 95 | % | $ | 1.50 | |||||||||||
| Totals | 88,957,720 | 100.0 | % | $ | 14,564,880 | 100.0 | % | |||||||||||||
This prospectus relates to the sale of 9,251,920 outstanding shares of the Company’s common stock by the holders of those shares. The selling shareholders will offer their shares at an offering price of $1.50 per share until such time as the Shares are quoted on the OTC Bulletin Board and offered thereafter at prevailing market or privately negotiated prices including (without limitation) in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale or at prevailing market if a market should develop.
Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling shareholders in connection with sales of the common stock. The selling shareholders may from time to time offer their shares through underwriters, brokers-dealers, agents or other intermediaries. The distribution of the common stock by the selling shareholders may be effected in one or more transactions that may take place through customary brokerage channels, in privately negotiated sales; by a combination of these methods; or by other means. The Company will not receive any portion or percentage of any of the proceeds from the sale of the Shares.
General
The selling shareholders may seek an underwriter, broker-dealer or selling agent to sell the Shares. As of the date of this prospectus, no selling shareholder has entered into any arrangements with any underwriter, broker-dealer or selling agent for the sale of the Shares. The Company has no arrangements nor has entered into any agreement with any underwriters, broker-dealer or selling agents for the sale of the Shares.
The Company intends to maintain the currency and accuracy of this prospectus for a period of up to two (2) years, unless earlier completely sold, pursuant to Rule 415 of the General Rules and Regulations of the Securities and Exchange Commission.
Selling Shareholders
The selling shareholders will offer their shares at an offering price of $1.50 per share until such time as the Shares are quoted on the OTC Bulletin Board and offered thereafter at prevailing market or privately negotiated prices including (without limitation) in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale or at prevailing market prices if a market should develop. The distribution of the Selling Shareholder Shares may be effected in one or more transactions that may take place through customary brokerage channels, in privately-negotiated sales, by a combination of these methods or by other means. The selling shareholders may from time to time offer their shares through underwriters, brokers-dealers, agents or other intermediaries. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling shareholders in connection with sales of the Shares. The Company will not receive any portion or percentage of any of the proceeds from the sale of the Shares.
Of the 9,251,920 Shares included in the registration statement, of which this prospectus is a part, 7,550,000 are held by three officers of the Company.
Resales of the Securities under State Securities Laws
The National Securities Market Improvement Act of 1996 (“NSMIA”) limits the authority of states to impose restrictions upon resales of securities made pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file reports under Sections 13 or 15(d) of the Securities Exchange Act. Resales of the Shares in the secondary market will be made pursuant to Section 4(1) of the Securities Act (sales other than by an issuer, underwriter or broker).
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Capitalization
Pursuant to the Company’s certificate of incorporation and amendments thereto, the Company is authorized to issue 300,000,000 shares of common stock, par value $0.0001, of which 88,957,720 shares were outstanding as of the date of the registration statement, of which this prospectus is a part. The Company is also authorized to issue 100,000,000 share of preferred stock, par value $0.0001, of which none are designated or outstanding.
Common Stock
The Company is registering 9,251,920 shares of common stock offered for sale to the public by the holders thereof (selling shareholders) at an offering price of $1.50 per share. The selling shareholders will offer the Shares at $1.50 until such time as the Shares are quoted on the OTC Bulletin Board and offered thereafter by the selling shareholders at prevailing market or privately negotiated prices including (without limitation) in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale or at prevailing market prices if a market should develop.
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. In addition to any vote required by law, the consent of at least a majority of the holders of the then-outstanding shares of common stock is required to (I) redeem, purchase or otherwise acquire any share of common stock, (ii) increase or decrease (other than by redemption or conversion) the total number of authorized shares of common stock; or (iii) amend the Articles of Incorporation of the Company if such amendment would change any of the rights, preferences or privileges of the common stock.
Subject to preferences that may be applicable to any outstanding shares of preferred stock if any such preferred stock is designated and issued, the 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, subject to the rights of the shares of preferred stock if so designated and issued, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities including the promissory notes issued by the Company.
Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. The Company may issue additional shares of common stock which could dilute its current shareholder’s share value.
Preferred Stock
Shares of preferred stock may be issued from time to time in one or more series as may be determined by the board of directors. The voting powers and preferences, the relative rights of each series, and the qualifications, limitations, and restrictions on such preferred stock shall be established by the board of directors, except that no holder of preferred stock shall have preemptive rights.
Admission to Quotation on the OTC Bulletin Board
If and when the Company meets the qualifications, it intends to apply for quotation of its securities on the OTC Bulletin Board. There is no assurance that the Company will ever meet such qualifications. The OTC Bulletin Board differs from national and regional stock exchanges in that it (1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers and (2) securities admitted to quotation are offered by one or more broker-dealers rather than the “specialist” common to stock exchanges. To qualify for quotation on the OTC Bulletin Board, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing.
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Penny Stock Regulation
Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on national securities exchanges or listed on the Nasdaq Stock Market, provided that current price and volume information with respect to transactions in such securities are provided by the exchange or system. The penny stock rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Because of these penny stock rules, broker-dealers may be restricted in their ability to sell the Company’s common stock. The foregoing required penny stock restrictions will not apply to the Company’s common stock if such stock reaches and maintains a market price of $5.00 per share or greater.
Dividends
The Company has not paid any dividends to date. The Company intends to employ all available funds for the growth and development of its business, and accordingly, does not intend to declare or pay any dividends in the foreseeable future.
THE BUSINESS AND BUSINESS PLAN
Business Operations and Business Plan
Digital Donations is headquartered in Melville, New York. Digital Donations will provide alternative and new fundraising solutions for NPOs and businesses 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 will provide payment processing solutions that connect charities and foundations with the consumer and corporate America. The Digital DonationsÔ platform will be available for integration at point of sale payment systems, ATMs, e-commerce, mobile devices (MYGIV) and interactive rewards crowdfunding (CROWDGIV).
Through the process of integrating a donation request as part of a financial transaction, retailers, e-tailers and service providers will have the ability to create a new cause marketing program or enhance their existing strategy. In addition, the Digital Donation platform will have 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 will allow consumers to make charitable donations as part of a financial transaction. The cornerstone of the business is the Digital Donations fundraising platform that will allow 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 will be for amounts called micro donations (under $10) and will have the ability to reach large segments of the population.
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The Digital Donations software automates the solicitation, collection, payment and reporting of these donations for non – profit organizations. We expect that our software can be integrated into new or existing payment processing platforms and can also 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 will be 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.
Digital Donation Technology Platform
We expect that 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 will present 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: Our point of sale technology will provide 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 will allow charities to present requests for support to potential donors as such potential donors pay for goods and services purchased from merchant. Our Point of Sale Program is currently in development.
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. Our ATM Fundraising technology is currently operational and the Company has been generating revenue from this service.
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. Our myGIV mobile app is currently operational and is expected to generate revenue in the second fiscal quarter of 2017, pending the expansion of sales and marketing.
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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 a future expansion of 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.
Our CROWDGIV platform is currently operational and is expected to generate revenue in the second fiscal quarter of 2017, pending the expansion of sales and marketing.
Additional Products in Development
PAYGIV (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.
PAYGIV 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.
PAYGIV 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 |
Cause Marketing Products and Services
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 |
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Credit Card Payment and Electronic Check 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. DDI began recognizing revenue from these fees beginning in late January 2016. As of March 30, 2017, all of the revenue generated by DDI were from these fees.
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.
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, through 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, through its subsidiary Digital Donations, Inc., entered into a renewable three-year license agreement with Nautilus whereby the Company granted Nautilus the non-exclusive license to use the Company’s fundraising software technology and the Company’s trademark for ATM locations and ATM distributors.
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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, through 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.
GEOCommerce. is completely transforming digital advertising and mobile commerce by bridging online to offline marketing and mobile transaction data with unmatched precision. Their engagement solutions connect marketers to a targeted customer across all devices based on intelligent, exact-location audience targeting through the use of patent-pending technologies that create a precise link between a range of online and offline identifiers. Our joint marketing agreement will further enhance nonprofits and for profit engagement with donors.
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 and electronic check processing fees and products and services provided through the Pledge.
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. Credit card processing revenues are generated by the company acting as a broker of these services for one or multiple processors. The terms of these agreements provide for a wholesale cost of every transaction that is then resold to merchants or businesses that pay a rate that is above the cost. The company then receives the agreed upon profit margin for the length of the contract which is typically 3 years. Check processing follows a similar process except in our current contract we are paid the full cost of the transaction and are then billed for the wholesale price at the end of the billing cycle. Our profit is the difference of the amount charged to the business less the pre-negotiated cost.
Donation processing revenues are generated through contracts with nonprofit organizations that use our fundraising technology. 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.
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 |
| · | Electronic Check processing |
Expected Future Sources of Revenue:
| · | PAYGIV Mobile Wallet (in development) |
| · | Digital Donations Point of Sale Program (in development) |
| · | MYGIV Mobile App |
| · | E-commerce Donation Checkout (in development) |
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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 todays 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 Verison, 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.”
Proposed Acquisitions and Related Matters
The Company expects to enter into a transaction (the “Digital Processing Trade Dress Acquisition”) with Digital Processing Solutions, Inc., a Texas corporation (“Digital Processing Solutions”), which is a company in which the two founders of the Digital Donations, Inc. are also executive officers, directors and majority owners. Pursuant to the proposed terms of the Digital Process Trade Dress Acquisition, the Company expects to acquire the logo, trade name and trade mark of Digital Processing Solutions and expects to issue shares of its common stock in consideration for those items. The final terms of the Digital Processing Trade Dress Acquisition are still subject to negotiation. In anticipation of the Digital Processing Trade Dress Acquisition, the Company has a revocable oral licensing agreement to use the logo, trade name, trade mark and similar intellectual property of Digital Processing Solutions until the Digital Processing Trade Dress Acquisition is consummated.
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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 Company 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 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 (described below), there were 5,500,000 shares of common stock of the Company issued and outstanding. As of the date of this registration statement, there are 88,957,720 shares of the Company’s common stock outstanding.
Acquisition
On October 17, 2016, the Company acquired all 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. Pursuant to the Acquisition, all the outstanding shares of Digital Donations, 79,084,807 shares, were exchanged for 79,084,807 shares of the Company’s common stock.
Employees
The Company has two executive officers and no employees. The Company ’ s wholly-owned subsidiary, Digital Donations, has two full time employees, one of whom is Keith Orlean, the President, director and shareholder of the Company and the other which is an employee of Mr. Orlean.
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.
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.
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Jumpstart Our Business Startups Act
In April, 2012, the Jumpstart Our Business Startups Act (“JOBS Act”) was enacted into law. The JOBS Act provides, among other things: Exemptions for emerging growth companies from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies; Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934; Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings; Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and Exemption from registration by a non-reporting company offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and such sales are exempt from state law registration, documentation or offering requirements. In general, under the JOBS Act a company is an emerging growth company if its initial public offering (“IPO”) of common equity securities was effected after December 8, 2011 and the company had less than $1 billion of total annual gross revenues during its last completed fiscal year. A company will no longer qualify as an emerging growth company after the earliest of
(i) the completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more,
(ii) the completion of the fiscal year of the fifth anniversary of the company’s IPO;
(iii) the company’s issuance of more than $1 billion in nonconvertible debt in the prior three-year period; or
(iv) the company becoming a “larger accelerated filer” as defined under the Securities Exchange Act of 1934.
The Company meets the definition of an emerging growth company will be affected by some of the changes provided in the JOBS Act and certain of the new exemptions. The JOBS Act provides additional new guidelines and exemptions for non-reporting companies and for non-public offerings. Those exemptions that impact the Company are discussed below. Financial Disclosure. The financial disclosure in a registration statement filed by an emerging growth company pursuant to the Securities Act of 1933 will differ from registration statements filed by other companies as follows:
(i) audited financial statements required for only two fiscal years;
(ii) selected financial data required for only the fiscal years that were audited;
(iii) executive compensation only needs to be presented in the limited format now required for smaller reporting companies. (A smaller reporting company is one with a public float of less than $75 million as of the last day of its most recently completed second fiscal quarter)
However, the requirements for financial disclosure provided by Regulation S-K promulgated by the Rules and Regulations of the SEC already provide certain of these exemptions for smaller reporting companies. The Company is a smaller reporting company.
Currently a smaller reporting company is not required to file as part of its registration statement selected financial data and only needs audited financial statements for its two most current fiscal years and no tabular disclosure of contractual obligations.
The JOBS Act also exempts the Company’s independent registered public accounting firm from complying with any rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) after the date of the JOBS Act’s enactment, except as otherwise required by SEC rule.
The JOBS Act also exempts an emerging growth company from any requirement adopted by the PCAOB for mandatory rotation of the Company’s accounting firm or for a supplemental auditor report about the audit.
Internal Control Attestation. The JOBS Act also provides an exemption from the requirement of the Company’s independent registered public accounting firm to file a report on the Company’s internal control over financial reporting, although management of the Company is still required to file its report on the adequacy of the Company’s internal control over financial reporting.
Section 102(a) of the JOBS Act goes on to exempt emerging growth companies from the requirements in 1934 Act § 14A(e) for companies with a class of securities registered under the 1934 Act to hold shareholder votes for executive compensation and golden parachutes.
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Other Items of the JOBS Act. The JOBS Act also provides that an emerging growth company can communicate with potential investors that are qualified institutional buyers or institutions that are accredited to determine interest in a contemplated offering either prior to or after the date of filing the respective registration statement. The Act also permits research reports by a broker or dealer about an emerging growth company regardless if such report provides sufficient information for an investment decision. In addition the JOBS Act precludes the SEC and FINRA from adopting certain restrictive rules or regulations regarding brokers, dealers and potential investors, communications with management and distribution of a research reports on the emerging growth company IPO.
Section 106 of the JOBS Act permits emerging growth companies to submit 1933 Act registration statements on a confidential basis provided that the registration statement and all amendments are publicly filed at least 21 days before the issuer conducts any road show. This is intended to allow the emerging growth company to explore the IPO option without disclosing to the market the fact that it is seeking to go public or disclosing the information contained in its registration statement until the company is ready to conduct a road show.
Election to Opt Out of Transition Period. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a 1933 Act registration statement declared effective or do not have a class of securities registered under the 1934 Act) are required to comply with the new or revised financial accounting standard.
The JOBS Act provides a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of the transition period.
Legal Proceedings
There are no pending, threatened or actual legal proceedings in which the Company is a party.
Agreement with Tiber Creek Corporation
The Company entered into an agreement with Tiber Creek Corporation (“Tiber Creek”) whereby Tiber Creek would provide assistance in effecting transactions for the Company to become a public company, including the preparation and filing a registration statement with the Securities and Exchange Commission, advise and assistance on listing its securities on a trading exchange, assistance in establishing and maintaining relationships with market makers and broker-dealers and assistance in other transactions, marketing and corporate structure activities available at that time.
Reports to Security Holders
In July 2015, the Company (as Fishing Ridge Acquisition Corporation) filed a Form 10-12G general registration of securities pursuant to the Securities Exchange Act of 1934 and is a reporting company pursuant such Act and files with the Securities and Exchange Commission quarterly and annual reports and management shareholding information. The Company intends to deliver a copy of its annual report to its security holders, and will voluntarily send a copy of the annual report, including audited financial statements, to any registered shareholder who requests the same.
The Company’s documents filed with the Securities and Exchange Commission may be inspected at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 0001644825.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.
Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to our anticipated revenues, gross margin and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity, and financing sources. This forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include those relating to our liquidity requirements, the continued growth of the software industry, the success of our product development, marketing and sales activities, vigorous competition in the software industry, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or global economic conditions, the inherent uncertainty and costs of prolonged arbitration or litigation, and changes in federal or state tax laws or the administration of such laws.
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Overview
The Company is a development stage company and was incorporated in the State of Delaware in May 2015. As of the periods from inception, through the date of this quarterly report, the Company did not generate any revenue and incurred minimal expenses and operating losses, as part of its development stage activities. At March 30, 2017, the Company (through its wholly-owned subsidiary) experienced a net loss of $(100,869), has an accumulated deficit of $(1,082,972) and total liabilities of $102,095.
As the result of the acquisition of Digital Donations, Inc. 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 Company anticipates that it would need a minimum of approximately $1,150,000 over the next 12 months to bring the company’s products to market within that time frame. Specifically, in order for the Company to fully implement it plans it expects that it will need: (1) $250,000 for the ongoing design and development of new and existing Digital Donations technology, (2) $150,000 for marketing and consulting expenses, (3) $500,000 to hire key personnel and (4) $250,000 for operating expenses. The Company’s executive officers and several of its current shareholders have expressed a willingness and plan to continue to fund the Company’s operations during the next 12 months or until the Company can generate an ongoing source of capital sufficient to independently continue its operations, however, the Company cannot guarantee that it will receive the minimum needed to fund its operations and development for the remainder of 2017.
The Company’s independent auditors have expressed substantial doubt as to the ability of the Company to continue as a going concern. Unless the Company is able to generate sufficient cash flow from operations and/or obtain additional financing, there is a substantial doubt as to the ability of the company to continue as a going concern.
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 financial statements contained in this registration statement, 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 years ended December 31, 2016 and December 31, 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 years ended December 31, 2016 and 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 $36,000 in professional fees related to the costs incurred for financial statement audits, 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. In 2015 the Company issued approximately 2.6 million shares of its common stock to an individual for services rendered by that individual. The Company recorded stock based compensation of approximately $185,500 based on that issuance.
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. 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 included in this filing) sometime in 2017.
Overview for the year ended December 31, 2016.
The Company expects that going forward it will significantly increase the level of operations. In January 2016, the Company began generating revenues from credit card processing and check processing services provided to its clients both in and outside 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, specifically for ATM fundraising. Nominal amounts of revenue were generated in 2016 during early stage implementation and test of the platform with cooperating ATM owners. The Company expects to begin heavily marketing those first technologies into the marketplace sometime in 2017 as capital availability allows and expects to continue to work on development of the suite of NPO platform technologies going forward in 2017 and beyond.
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The Company continues to have only two employees and incurred approximately $167,000 of payroll related costs in 2016. Additionally, the Company engaged various independent contractors and temporary help for various functions including accounting, software development and IT administration. Cost for those contract services amounted to approximately $87,000 in 2016, including approximately $21,500 for accounting, $18,600 for software development and $35,000 for IT administration and services. The Company incurred approximately $42,000 in legal and professional fees related to the costs incurred primarily for financial statement audits and general legal work performed.
In addition to the costs noted above the Company incurred stock based compensation expense of approximately $154,000 due to the issuance of approximately 2,162,000 shares of its common stock to various individuals for services rendered.
Year Ended December 31, 2016 compared with Year Ended December 31, 2015
As noted above, the Company did not commence principal operations until after June 30, 2015, so the results of operations for the year ended December 31, 2015 are not directly comparable. The discussion below therefore concentrates on activities during the year ended December 31, 2016.
Gross Revenues. No revenues were generated during 2015. Gross revenues in 2016 totaled $141,636 and were primarily from the processing of credit card and electronic check payments made to clients. As noted above, the Company completed initial development of the first NPO Platform technology in mid-2016 and generated nominal revenue, approximately $4,000, from limited first stage implementation and tests of the platform with select ATM owners. The Company expects to begin a major sales and marketing program of that product sometime in 2017 as capital becomes available.
Residuals and commissions. Since no revenue was generated in 2015 there was no corresponding residual or commission expense in that year. Such expense totaled $28,970 for the year ended December 31, 2016, and consists primarily of payments made for electronic check processing services. Residuals paid to ATM owners and manufacturers were $1,657 and are the contractual payments due for the use of the Company’s NPO platform on the related ATM machines. The residuals are based on a percentage of the donation made via the ATM.
Payroll expense. Salaries and wages expenses consist primarily of salaries for one executive and one administrative staff, which amounted to approximately $166,600 and $45,650, included related taxes, for the years ended December 31, 2016 and 2015, respectively. The Company’s two employees were hired in the fourth quarter of 2015. In the fourth quarter of 2016, the Company 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.
Stock based compensation. In 2016 and 2015, respectively, the Company issued 2,162,021 and 2,597,871 shares of its common stock to various individual for services rendered. The Company recorded stock based expense of $154,433 and $185,566 in 2016 and 2015, respectively.
Sales and marketing. No sales and marketing expense was incurred in 2015. In 2016, the Company recorded sales and marketing expense of $122,970. It consisted primarily of funds spent to develop a plan of distribution for our crowdfunding and mobile fundraising platform, the creation and design of the user interface and collateral materials.
Professional Fees. Professional fees increased $48,051, or 134%, to $84,019 for the year ended December 31, 2016 from $35,968 for the year ended December 31, 2015, and related to the increase in costs of financial statement audits and filings with the Securities and Exchange Commission, contract accounting services and general legal work performed. 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.
Software development costs. Software and development costs increased $9,220, or 98%, for the year ended December 31, 2016 from $9,387 for the year ended December 31, 2015, and consists 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 software development costs as they are incurred. The Company expects that its software development activities will increase in future periods as revenues provide the funding needed to assist the development work needed to bring products to market.
IT and software. No IT and software expense was incurred in 2015. For the year ended December 31, 2016, IT and software expense totaled $54,230 and consisted primarily of third party administrative support of the computer and IT needs of the Company, various hardware and software purchases and leases and SaaS fees. The Company expects this expense to grow substantially as it implements its business plan and operating capital becomes available.
Depreciation expense. The Company recorded no depreciation expense in 2015 as it had not yet acquired any depreciable assets. In the year ended December 31, 2016, the Company purchased $13,228 of point-of-sales terminals for an NPO client per the agreement with that NPO. The Company generates revenue from transactions entered on those terminals. The Company set a useful life of three years for those terminals and, accordingly, recorded $2,378 of depreciation expense in 2016.
Corporate and office. Corporate and office expense increased $29,985, or 106%, for the year ended December 31, 2016 from $28,185 for the year ended December 31, 2015, and consists primarily of corporate office rent and utility expense, and other corporate office related costs. The Company expects these costs to increase in future periods as it continues to expand its operations.
Quarter Ended March 31, 2017 Compared to the Quarter Ended March 31, 2016
Gross Revenues. During the three months ended March 31, 2017, the Company generated gross revenues totaling $31,912, compared to $32,360 in gross revenue for the comparable quarter of 2016. The revenue for the current period was generated primarily through agreements to process customer’s credit card and electronic check payments received.
Commissions and Residuals. During the three months ended March 31, 2017, the Company paid $7,803 to third parties in sales related commissions and residuals, compared to $5,538 for the same period of 2016. These costs represent the fees the Company incurs to third party providers to perform the electronic processing of the payments and distribution of the funds to all appropriate parties.
Operating Expenses. Operating expenses increased $24,197, or 24%, to $123,178 in the first quarter of 2017 from $98,981 in last year’s first quarter due primarily to an increase in sales and marketing expense of $19,878, an increase of 128% over the same period of 2016. In addition, our professional fees increased 113% in the quarter ended March 31, 2017 compared to the quarter ended March 31, 2016, to $20,080 compared to $9,413. This was the result of the Company becoming a public reporting entity upon the recapitalization and merger with Digital Donations Technologies, Inc. in the fourth quarter of 2016. We expect our professional fees to grow as our Company grows in future periods. These increases were offset by a decrease of 35% in our IT and software development costs. Also, our corporate and office increased by 79% in the quarter ended March 31, 2017 compared to the quarter ended March 31, 2016. Along with professional fees, we expect our corporate overhead costs to increase we strive to grow our Company in future period. Offsetting these increases, in the quarter ended March 31, 2017, we held off production of certain of our software platform development platforms due to a lack of working capital and as a result our costs in this area decreased 35% in the 2017 first quarter compared to the first quarter of 2016.
Net Loss. During the quarter ended March 31, 2017, the Company posted a net loss of $(100,869), compared to a net loss of $(72,159) for the quarter ended March 31, 2016. The $28,710 increase in the loss is primarily the result of the increase in sales and marketing expense noted above.
Critical Accounting Policies
The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. There have been no material changes to the Critical Accounting Policies outlined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
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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 electronic 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 electronic 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 Registration Statement and in the notes to the financial statements, the Company has incurred operating losses, and at March 31, 2017, has a working capital deficiency of approximately $50,890. 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, 2016 and 2015 regarding concerns about the Company’s ability to continue as a going concern.
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. If the Company cannot continue as a going concern, its stockholders may lose their entire investment.
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Cash Flows From Operating Activities. Net cash used by operating activities was $117,958 in the three months ended March 31, 2017 compared to $70,298 in the same period of 2016. Uses of cash during the first quarter of 2017 included a net loss of $100,869 adjusted for noncash depreciation expense of $1,102. The net loss in the first quarter of 2016 was $72,159 and was adjusted for a noncash depreciation charge of $60 during the period. Other sources and uses of cash involved changes in operating assets and liabilities, including a decrease in trade accounts receivable in 2017 of $293, compared to an increase of $9,040 during the same period of 2016, and a decrease in accounts payable and accrued expenses of $18,484 in 2017, compared to an increase $6,411 during the same period of 2016.
Cash Flows From Investing Activities. No cash was provided or used by investing activities during the first quarter of 2017. For the three months ended March 31, 2016, cash was used to purchase equipment totaling $2,168, and $5,900 of cash was used to repay an advance from a related party.
Cash Flows From Financing Activities. Cash provided from financing activities was $134,500 and $75,000 in the first quarter of 2017 and 2016, respectively.
Current Financial Condition. As of March 31, 2017 the Company had a cash balance of $40,162, compared to $23,620 as of March 31, 2016. The Company continues to raise funds under its $5 million private placement offering. For the period from April 1, 2017 through the date of this prospectus, the Company raised a further $50,000 under the private placement at approximately $0.07143 per share. While the Company believes it will be able to raise funds in order to meet the operating cash flow needs of the Company in 2017, there are no firm commitments as of the date of this filing.
Promissory Notes
On August 15, 2016, the Company’s wholly-owned subsidiary executed a promissory note in the amount of $25,000 payable in full 180 days from date of execution at an annual interest rate of 24% payable in two quarterly installments commencing on date of execution. This note has been extended by the lender to mature at the time our S-1 registration statement is declared effective by the Securities and Exchange Commission.
On October 12, 2016, the Company’s wholly-owned subsidiary executed a promissory note in the amount of $5,000 payable in full 180 days from date of execution at an annual interest rate of 24% payable in two quarterly installments commencing on date of execution. This note has been extended by the lender to mature at the time our S-1 registration statement is declared effective by the Securities and Exchange Commission.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its 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.
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.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past ten years:
• Been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
• Had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
• Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
• Been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
• Been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
• Been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any
• Registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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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 Donations Ô 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 Donations Ô platform.
| - 24 - |
Kenneth P. Murphy, Jr.
Mr. Murphy brings 33 years of 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.
Summary Compensation
The Company has not paid any executive compensation. In 2016 and 2015, Keith Orlean received compensation of $131,000 and $39,000, respectively, 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.
| - 25 - |
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) CEO and Treasurer | 37,500,000 | 43 | % | |||||
| Jeffrey Marder, Director (2) President | 37,500,000 | 43 | % | |||||
| Kenneth Murphy, Jr. Vice President, Operations Manager | 500,000 | Less than 1 | % | |||||
| Vitalya Chukas | ||||||||
| > 5% Shareholder | 5,227,005 | 6.06 | % | |||||
| All Officers and directors as a Group (3 persons) | 75,500,000 | 87.5 | % | |||||
| (1) | Based on 88,957,720 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
James Cassidy, a partner in the law firm which acts as counsel to the Company, is the sole owner and director of Tiber Creek Corporation which owns 250,000 shares of the Company’s common stock. Tiber Creek has received consulting fees of $50,000 to date from the Company and also holds shares in the Company. Tiber Creek and its affiliate, MB Americus LLC, a California limited liability company, each currently hold 250,000 shares in the Company. James Cassidy and James McKillop, who is the sole officer and owner of MB Americus, LLC, were both formerly officers and directors of the Company. As the organizers and developers of Fishing Ridge Acquisition Corporation, Mr. Cassidy and Mr. McKillop were involved with the Company prior to the Acquisition. In particular, Mr. Cassidy provided services to the Company without charge, including preparation and filing of the charter corporate documents and preparation of the instant registration statement.
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.
During 2014 and 2015, Digital Donations, Inc. advanced funds on a net basis to Digital Processing Solutions, Inc., a Texas corporation, which is a company in which the two founders of the Digital Donations, Inc. are also executive officers, directors and 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 created and purchased the logo, trade name and trade mark that the Company now uses from the related entity noted above. However, because of serious financial issues suffered by the related entity, the only other product developed outside of the creation and purchase of the logo, trade name and trade mark, was the development of a Point of Sale technology and product that ultimately was discontinued in 2014 since the standard that it was based on became obsolete, and this technology and product will not be used by the Company nor will it be acquired by the Company. The Company expects to enter into a transaction with Digital Processing Solutions, Inc. to acquire the logo, trade name and trade mark and expects to issue shares of its common stock 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.
The Company is registering for offer and sale by existing holders thereof 9,251,920 shares of common stock held by such shareholders. The Company will not receive any proceeds from the sale of the Selling Shareholder Shares. The selling shareholders have no agreement with any underwriters with respect to the sale of the Selling Shareholder Shares. The selling shareholders, who are deemed to be statutory underwriters, will offer their shares at a price of $1.50 per share, until the close of the Offering.
The selling shareholders may from time to time offer the Selling Shareholder Shares through underwriters, dealers or agents, which may receive compensation in the form of underwriting discounts, concessions or commissions from them and/or the purchasers of the Selling Shareholder Shares for whom they may act as agents. Any agents, dealers or underwriters that participate in the distribution of the Selling Shareholder Shares may be deemed to be “underwriters” under the Securities Act and any discounts, commissions or concessions received by any such underwriters, dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act.
| - 26 - |
The following table sets forth ownership of shares held by each person who is a selling shareholder.
| Before Offering | After Offering | |||||||||||||||||||
| Number of | Shares | Number of | ||||||||||||||||||
| Shares | Percent of | Offered | Shares | Percent of | ||||||||||||||||
| Name | Owned | Class (1) | for Sale | Owned | Class (1) | |||||||||||||||
| Roger Bomgaars | 55,000 | * | 5,500 | 49,500 | * | |||||||||||||||
| AD Johnson | 5,000 | * | 500 | 4,500 | * | |||||||||||||||
| Arthur Priver | 85,000 | * | 8,500 | 76,500 | * | |||||||||||||||
| Bill Humbert | 50,000 | * | 5,000 | 45,000 | * | |||||||||||||||
| Charles Wood | 15,000 | * | 1,500 | 13,500 | * | |||||||||||||||
| Daniel Lazuran | 350,000 | * | 35,000 | 315,000 | * | |||||||||||||||
| Danny Votra | 500,000 | * | 50,000 | 450,000 | * | |||||||||||||||
| David Greenbaum | 62,500 | * | 6,250 | 56,250 | * | |||||||||||||||
| George Kreis | 50,000 | * | 5,000 | 45,000 | * | |||||||||||||||
| George Thompson | 5,000 | * | 500 | 4,500 | * | |||||||||||||||
| Glenn Charlesworth | 500,000 | * | 50,000 | 450,000 | * | |||||||||||||||
| MNTR, Inc. | 2,271,768 | * | 141,270 | 2,130,499 | * | |||||||||||||||
| James Rees | 100,000 | * | 10,000 | 90,000 | * | |||||||||||||||
| James Stockos | 1,000 | * | 100 | 900 | * | |||||||||||||||
| Steve Mandy | 26,000 | * | 2,600 | 23,400 | * | |||||||||||||||
| Vernon McMath | 2,500 | * | 250 | 2,250 | * | |||||||||||||||
| Jeff Chang | 2,500 | * | 250 | 2,250 | * | |||||||||||||||
| Jeff Glattstein | 25,000 | * | 2,500 | 22,500 | * | |||||||||||||||
| Jeff Marder | 37,500,000 | 43 | % | 3,750,000 | 33,750,000 | 44 | % | |||||||||||||
| Joseph Kerin | 25,000 | * | 2,500 | 22,500 | * | |||||||||||||||
| Keith Orlean | 37,500,000 | 43 | % | 3,750,000 | 33,750,000 | 44 | % | |||||||||||||
| Leslie Riehm | 250,000 | * | 25,000 | 225,000 | * | |||||||||||||||
| Lynn Otto | 150,000 | * | 15,000 | 135,000 | * | |||||||||||||||
| Pat Doran | 25,000 | * | 2,500 | 22,500 | * | |||||||||||||||
| Kenneth Paul Murphy | 500,000 | * | 50,000 | 450,000 | * | |||||||||||||||
| Pensco Trust | 40,000 | * | 4,000 | 36,000 | * | |||||||||||||||
| Perry Nolte | 5,000 | * | 500 | 4,500 | * | |||||||||||||||
| Peter Gremelion | 20,000 | * | 2,000 | 18,000 | * | |||||||||||||||
| Ralf Vogler | 27,500 | * | 2,750 | 24,750 | * | |||||||||||||||
| Reynold Laguerre | 4,000 | * | 400 | 3,600 | * | |||||||||||||||
| Robert Dasch | 5,000 | * | 500 | 4,500 | * | |||||||||||||||
| Steve Danielson | 2,500 | * | 250 | 2,250 | * | |||||||||||||||
| Stephen Itkin | 250,000 | * | 25,000 | 225,000 | * | |||||||||||||||
| Vitalya Chukas | 5,227,005 | 6.1 | % | 784,050 | 4,442,955 | 5.8 | % | |||||||||||||
| Wesley Zmolek | 20,000 | * | 2,000 | 18,000 | * | |||||||||||||||
| Vincent DiCostanza | 100,000 | * | 10,000 | 90,000 | * | |||||||||||||||
| Robert Anderson | 5,000 | * | 500 | 4,500 | * | |||||||||||||||
| Herman Rosenberg | 2,500 | * | 250 | 2,250 | * | |||||||||||||||
| James Cassidy (2) | 250,000 | * | 250,000 | 0 | ||||||||||||||||
| James McKillop (3) | 250,000 | * | 250,000 | 0 | ||||||||||||||||
| 86,264,773 | 9,251,920 | 77,012,853 | ||||||||||||||||||
| * | Less than 1%. |
| (1) | Based on 88,957,720 shares outstanding as of the date of this prospectus. |
| (2) | Includes 250,000 shares held by Tiber Creek Corporation, a Delaware corporation, which provided certain services to the Company as discussed herein. Mr. Cassidy is the president and sole shareholder of Tiber Creek Corporation. Mr. Cassidy is a promoter of the Company. |
| (3) | Includes 250,000 shares held by MB Americus, LLC, a California limited liability company. Mr. McKillop also works with Tiber Creek Corporation from time to time. Mr. McKillop is an officer and the sole shareholder of MB Americus, LLC. Mr. McKillop is a promoter of the Company. |
DESCRIPTION OF SECURITIES
Capitalization
Pursuant to the Company’s certificate of incorporation and amendments thereto, the Company is authorized to issue 300,000,000 shares of common stock, par value $0.0001, of which 88,957,720 shares are outstanding as of the date of the registration statement, of which this prospectus is a part. The Company is also authorized to issue 100,000,000 share of preferred stock, par value $0.0001, of which none have been designated or issued.
Common Stock
The Company is registering 9,251,920 shares of common stock offered for sale the holders thereof (selling shareholders) at an offering price of $1.50 per share.
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. In addition to any vote required by law, the consent of at least a majority of the holders of the then-outstanding shares of common stock is required to (i) redeem, purchase or otherwise acquire any share of common stock, (ii) increase or decrease (other than by redemption or conversion) the total number of authorized shares of common stock; or (iii) amend the Articles of Incorporation of the Company if such amendment would change any of the rights, preferences or privileges of the common stock.
| - 27 - |
Subject to preferences that may be applicable to any outstanding shares of preferred stock, the 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, subject to the rights of the shares of preferred stock, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.
Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. The Company may issue additional shares of common stock which could dilute its current shareholder’s share value.
In the case of dissolution of the Company, the shares of common stock are subordinate to the payment of the Company’s outstanding debts, including repayment of its current promissory notes.
Preferred Stock
The Company has 100,000,000 authorized undesignated shares of preferred stock. As of date hereof, no designation of any series of preferred stock has been created and no shares issued. The board of directors is has the authority to effect a series of preferred stock and designate the rights and preferences thereto.
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.
Admission to Quotation on the OTC Bulletin Board
If and when the Company meets the qualifications, it intends to apply for quotation of its securities on the OTC Bulletin Board. There is no assurance that the Company will ever meet such qualifications. The OTC Bulletin Board differs from national and regional stock exchanges in that it (1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers and (2) securities admitted to quotation are offered by one or more broker-dealers rather than the “specialist” common to stock exchanges. To qualify for quotation on the OTC Bulletin Board, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing. In addition, the Company must make available adequate current public information as required by applicable rules and regulations.
| - 28 - |
If the Company is not able to qualify for quotation on the OTC Bulletin Board or for other reasons, the Company may elect to have its securities initially traded in the OTC Markets Group Inc. (formerly the Pink OTC Markets, aka the “Pink Sheets”). The OTC Markets Group Inc. is the largest electronic marketplace for broker-dealers to trade unlisted stocks. In general there is greater liquidity for traded securities on the OTC Bulletin Board. It is not possible to predict where, if at all, the securities of the Company will be traded following the effectiveness of this registration statement.
Penny Stock Regulation
Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on national securities exchanges or listed on the Nasdaq Stock Market, provided that current price and volume information with respect to transactions in such securities are provided by the exchange or system. The penny stock rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Because of these penny stock rules, broker-dealers may be restricted in their ability to sell the Company’s common stock. The foregoing required penny stock restrictions will not apply to the Company’s common stock if such stock reaches and maintains a market price of $5.00 per share or greater.
Transfer Agent
Olde Monmouth Stock Transfer, Inc., Atlantic Highlands, New Jersey, serves as transfer agent for the Company’s wholly-owned subsidiary and the Company anticipates it will serve as transfer agent for the Company.
Dividends
The Company has not paid any dividends to date.
Cassidy & Associates, Beverly Hills, California (“Cassidy & Associates”), has given its opinion as attorneys-at-law regarding the validity of the issuance of the Shares offered by the Company. A member of the law firm of Cassidy & Associates is an officer and director of Tiber Creek Corporation and may be considered the beneficial owner of the 250,000 shares of common stock of the Company owned by Tiber Creek Corporation.
Interest of Counsel
Cassidy & Associates, counsel for the Company, who has given an opinion upon the validity of the securities being registered and upon other legal matters in connection with the registration or offering of such securities, had, or is to receive in connection with the offering, a substantial interest in the Company and was connected with the Company through Fishing Ridge Acquisition Corporation. James Cassidy, a partner of Cassidy & Associates, was a director and officer of Fishing Ridge Acquisition Corporation prior to its change of control.
L J Soldinger Associates, LLC, Deer Park, Illinois an independent registered public accounting firm, has audited the consolidated balance sheets of Digital Donations Technologies, Inc. as of December 31, 2016 and December 31, 2015, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2016 and 2015.. The Company has included such financial statements in the prospectus and elsewhere in the registration statement in reliance on the report of L J Soldinger Associates LLC, given their authority as experts in accounting and auditing.
| - 29 - |
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.
| - 30 - |
| F-1 |
DIGITAL DONATIONS TECHNOLOGIES, INC. & SUBSIDIARY
Condensed Consolidated Balance Sheets
| March 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | * | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 40,162 | $ | 23,620 | ||||
| Accounts receivable - Trade | 11,043 | 11,336 | ||||||
| Total Current Assets | 51,205 | 34,956 | ||||||
| FIXED ASSETS | ||||||||
| Equipment | 13,228 | 13,228 | ||||||
| Accumulated depreciation | (3,480) | (2,378) | ||||||
| Fixed Assets, net | 9,748 | 10,850 | ||||||
| TOTAL ASSETS | $ | 60,953 | $ | 45,806 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 10,539 | $ | 15,147 | ||||
| Accrued liabilities | 61,556 | 75,432 | ||||||
| Note payable | 30,000 | 30,000 | ||||||
| Total Current Liabilities | 102,095 | 120,579 | ||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred Stock, $0.001 par value; 100,000,000 shares authorized at March 31, 2017 and December 31, 2016; 0 shares issued and outstanding as of March 31, 2017 and December 31, 2016. | - | - | ||||||
| Common stock - $0.0001 par value; 300,000,000 shares authorized at March 31, 2017 and December 31, 2016; 88,257,734 and 86,614,766 shares issued, issuable and outstanding at March 31, 2017 and December 31, 2016, respectively. | 8,826 | 8,662 | ||||||
| Additional paid-in capital | 1,033,004 | 898,668 | ||||||
| Accumulated deficit | (1,082,972) | (982,103) | ||||||
| Total Stockholders’ Deficit | (41,142) | (74,773) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 60,953 | $ | 45,806 | ||||
The accompanying notes are an integral part of these condensed financial statements.
* Derived from audited information
| F-2 |
DIGITAL DONATIONS TECHNOLOGIES, INC. & SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| REVENUES | ||||||||
| Payment processing income | $ | 30,719 | $ | 32,360 | ||||
| Service fee income | 1,193 | - | ||||||
| Total Gross Revenues | 31,912 | 32,360 | ||||||
| Residuals and commissions | 7,803 | 5,538 | ||||||
| Net Revenues | 24,109 | 26,822 | ||||||
| OPERATING EXPENSES | ||||||||
| Payroll expenses | 41,671 | 39,806 | ||||||
| Stock based compensation | - | 4,430 | ||||||
| Sales and marketing | 35,456 | 15,578 | ||||||
| Professional fees | 20,080 | 9,413 | ||||||
| Software development fees | - | 7,495 | ||||||
| IT and software | 8,597 | 13,134 | ||||||
| Depreciation expense | 1,102 | 60 | ||||||
| Corporate and office | 16,272 | 9,065 | ||||||
| Total Operating Expenses | 123,178 | 98,981 | ||||||
| OPERATING LOSS | (99,069) | (72,159) | ||||||
| OTHER INCOME AND EXPENSES | ||||||||
| Interest expense | (1,800) | - | ||||||
| Total Other Income and Expense | (1,800) | - | ||||||
| LOSS BEFORE INCOME TAXES | (100,869) | (72,159) | ||||||
| Provision for income taxes | - | - | ||||||
| NET LOSS | $ | (100,869) | $ | (72,159) | ||||
| Basic and Diluted | ||||||||
| Loss per share | $ | (0.00) | $ | (0.00) | ||||
| Weighted average shares outstanding | 86,900,472 | 74,889,498 | ||||||
| Pro forma information (Unaudited) | ||||||||
| Net loss from operations | $ | (72,159) | ||||||
| Pro forma income tax benefit | 24,500 | |||||||
| Pro forma net loss | $ | (47,659) | ||||||
| PRO FORMA BASIC AND DILUTED LOSS PER SHARE | $ | (0.00) | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-3 |
DIGITAL DONATIONS TECHNOLOGIES, INC. & SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (100,869) | $ | (72,159) | ||||
| Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities: | ||||||||
| Depreciation | 1,102 | 60 | ||||||
| Stock based compensation | - | 4,430 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 293 | (9,040) | ||||||
| Accounts payable and accrued expenses | (18,484) | 6,411 | ||||||
| Net Cash Used in Operating Activities | (117,958) | (70,298) | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchases of equipment | - | (2,168) | ||||||
| (Advances to)/Repayments from Related Parties, net | - | (5,900) | ||||||
| Net Cash Used in Investing Activities | - | (8,068) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Common stock issued for cash | 134,500 | 75,000 | ||||||
| Net Cash Provided by Financing Activities | 134,500 | 75,000 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $ | 16,542 | $ | (3,366) | ||||
| CASH AND CASH EQUIVALENTS, beginning of period | 23,620 | 48,080 | ||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | 40,162 | $ | 44,714 | ||||
| Cash paid for interest | $ | 500 | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-4 |
| DIGITAL DONATIONS TECHNOLOGIES, INC. |
| Notes to Unaudited Condensed Consolidated Financial Statements |
| March 31, 2017 |
Note 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Digital Donations Technologies, Inc. (formerly Fishing Ridge Acquisition Corporation) ("DDTI") was incorporated on May 21, 2015 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.
The Company intends to develop and distribute creative and innovative fund raising technology and provide payment processing solutions connecting charities and foundations with the consumer and corporate America. The Company anticipates developing fund raising solutions that will expand and enhance the way charities and foundations reach donors. The Company perceives that through the process of integrating a donation request as part of a financial transaction, retailers, e-tailers, ATM owners and service providers will have the ability to create new, or enhance existing, cause marketing programs.
RECAPITALIZATION
On October 17, 2016, DDTI entered into a merger with Digital Donations, Inc. (the “Company” and post-merger, the “Company” represents the combined entity), which has resulted in the combination of the Company with DDTI through the issuance of 79,084,807 shares of DDTI common stock to the shareholders of the Company on a one-for-one basis 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. The Company has accounted for this merger as a recapitalization, as DDTI at the time of the merger was a public shell company, with only nominal assets and no operations of its own. The financial statements presented herein are that of Digital Donations, Inc. from its inception through the date of the merger, at which point the net assets of DDTI were included and the equity section restated to that of the DDTI. From the date of the merger and thereafter, these financial statements represent the financial position and results of operations of the consolidated entity.
BASIS OF PRESENTATION AND CONSOLIDATION
The condensed consolidated balance sheet as of March 31, 2017 and the condensed consolidated statements of operations and cash flows for the three month periods ended March 31, 2017 and 2016 have been prepared by the Company without audit. The condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements as of that date, but does not include all required year-end disclosures. In the opinion of management, such statements include all adjustments considered necessary to present fairly the Company’s financial position as of March 31, 2017 and December 31, 2016, and its results of operations and cash flows for all periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2016.
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017.
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 March 31, 2017, the Company had an accumulated deficit of $1,082,972 and a cash balance of $40,162. During the three months ended March 31, 2017 and the year ended December 31, 2016, respectively, the Company incurred net losses of $100,869 and $551,299, negative cash flows from operating activities of $117,958 and $360,332 and had shareholders’ deficits of $(41,142) and $(74,773). 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 until such time as the Company can reach profitability. Through June 5, 2017, the Company had raised $50,000 in private placement subscriptions. 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.
| F-5 |
| DIGITAL DONATIONS TECHNOLOGIES, INC. |
| Notes to Unaudited Condensed Consolidated Financial Statements |
| March 31, 2017 |
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
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less.
INCOME TAXES
From its inception through the date of the merger, Digital Donations, Inc. was taxed as an S Corporation under the Internal Revenue Code of the United States. As such, its income or losses were passed through to its shareholders and therefore the benefits of losses or the liability for any taxes due from income was the responsibility of the Company’s shareholders and not the Company. Upon completion of the merger, the status of the Company automatically changed to that of a C Corporation and thus from that day forward, the Company is responsible for all tax liabilities incurred or benefits obtained.
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2017 and December 31, 2016, 100% of the net deferred tax assets recorded were fully allowed for due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
LOSS PER COMMON SHARE
Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of March 31, 2017 and 2016, respectively, there were no outstanding dilutive securities.
Note 2. NOTES PAYABLE
In August, 2016, the Company entered into a note agreement with an investor and received gross proceeds of $25,000. The note bears interest at the rate of 24% per annum, matures 180 days after issuance and is unsecured.
In October, 2016, the Company entered into a second note agreement with the same investor and received gross proceeds of $5,000. The note bears interest at the rate of 24% per annum, matures 180 days after issuance and is unsecured.
In February 2017, the Company and the holder entered into a verbal agreement such that maturity was extended until such time as the Company files an S-1 registration statement that is declared effective.
| F-6 |
| DIGITAL DONATIONS TECHNOLOGIES, INC. |
| Notes to Unaudited Condensed Consolidated Financial Statements |
| March 31, 2017 |
Note 3. STOCKHOLDER’S DEFICIT
COMMON STOCK
During the first three months of 2017 the Company raised $134,500 in cash proceeds through private placement subscriptions to 1,642,968 shares of the Company’s common stock by two different individuals. Of the total, 1,602,968 shares were sold for $0.07143 a share and 40,000 shares were sold for $0.50 a share
During the three months ended March 31, 2016, the Company raised $75,000 in cash proceeds through private placement subscriptions at $0.07143 per share and agreed to issue 1,049,979 shares of the Company’s common stock to one individual.
Note 4. RELATED PARTY TRANSACTIONS
In the three months ended March 31, 2016, the entity was further advanced funds from a related party, but the related party was able to repay all of the 2016 advances plus an additional $9,245 which the Company has shown as a reduction of its general and administrative expense, as at December 31, 2016, the Company had fully reserved all previous advances by the related party.
Prior to the incorporation of the Company, the founders created and purchased the logo, trade name and trade mark that the Company now uses from the related entity noted above. However, because of serious financial issues suffered by the related entity, the only other product developed outside of the creation and purchase of the logo, trade name and trade mark, was the development of a Point of Sale technology and product that ultimately was discontinued in 2014 since the standard that it was based on became obsolete, and this technology and product will not be used by the Company nor will it be acquired by the Company. In 2017 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.
Note 5. SUBSEQUENT EVENTS
From April 1 through June 5, 2017, the Company sold to one shareholder an aggregate of 699,986 of its common shares for a total of $50,000. As of the date of this filing, 699,986 shares of that aggregate amount were issuable.
| F-7 |
| Digital Donations Technologies, Inc. |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Digital Donations Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Digital Donations Technologies, Inc. as of December 31, 2016 and December 31, 2015, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2016 and 2015. Digital Donations Technologies, 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 Technologies, Inc. as of December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for the years ended December 31, 2016 and 2015, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 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 1. 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 | |
| May 19, 2017 |
| F-8 |
Digital Donations Technologies, Inc. & Subsidiary
Consolidated Balance Sheets
December 31,
| 2016 | 2015 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 23,620 | $ | 48,080 | ||||
| Accounts receivable - Trade | 11,336 | - | ||||||
| Total Current Assets | 34,956 | 48,080 | ||||||
| Fixed Assets | ||||||||
| Equipment | 13,228 | - | ||||||
| Accumulated depreciation | (2,378 | ) | - | |||||
| Fixed Assets, net | 10,850 | - | ||||||
| Total Assets | $ | 45,806 | $ | 48,080 | ||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 15,147 | $ | 8,535 | ||||
| Accrued liabilities | 75,432 | 37,408 | ||||||
| Note Payable | 30,000 | - | ||||||
| Advance from shareholder | - | 5,901 | ||||||
| Total Current Liabilities | 120,579 | 51,844 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Deficit | ||||||||
| Preferred Stock, $0.001 par value; 100,000,000 shares authorized at December 31, 2016 and 2015; 0 shares issued and outstanding as of December 31, 2016 and 2015. | - | - | ||||||
| Common Stock, $0.0001 par value; 300,000,000 shares authorized at December 31, 2016 and 2015; 86,614,766 and 74,390,337 shares issued, issuable and outstanding at December 31, 2016 and 2015, respectively | 8,662 | 74,390 | ||||||
| Additional paid-in capital | 898,668 | 352,650 | ||||||
| Accumulated deficit | (982,103 | ) | (430,804 | ) | ||||
| Total Stockholders' Deficit | (74,773 | ) | (3,764 | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | 45,806 | $ | 48,080 | ||||
The accompanying notes are an integral part of these financial statements.
| F-9 |
Digital Donations Technologies, Inc. & Subsidiary
Consolidated Statements of Operations
| For the Year Ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| Gross Revenues | ||||||||
| Payment processing income | $ | 137,620 | $ | - | ||||
| Service fee income | 4,016 | |||||||
| Total Gross Revenues | 141,636 | - | ||||||
| Residuals and commissions | 28,970 | |||||||
| Net Revenues | 112,666 | - | ||||||
| Operating Expenses | ||||||||
| Payroll expenses | 166,659 | 45,645 | ||||||
| Stock based compensation | 154,433 | 185,566 | ||||||
| Sales and marketing | 122,970 | - | ||||||
| Professional fees | 84,019 | 35,968 | ||||||
| Software development costs | 18,607 | 9,387 | ||||||
| IT and software | 54,230 | - | ||||||
| Depreciation expense | 2,378 | - | ||||||
| Corporate and office | 58,170 | 28,185 | ||||||
| Total Operating Expenses | 661,466 | 304,751 | ||||||
| Operating Loss | (548,800 | ) | (304,751 | ) | ||||
| Other Income and Expense | ||||||||
| Other income | 68 | - | ||||||
| Interest expense | (2,567 | ) | - | |||||
| Total Other Income and Expense | (2,499 | ) | - | |||||
| Income before income tax | (551,299 | ) | (304,751 | ) | ||||
| Income taxes | - | - | ||||||
| Net Loss | $ | (551,299 | ) | $ | (304,751 | ) | ||
| Pro forma information (Unaudited) | ||||||||
| Net loss from operations | $ | (551,299 | ) | $ | (304,751 | ) | ||
| Pro forma income tax benefit | 187,400 | 67,000 | ||||||
| Pro forma net loss | $ | (363,899 | ) | $ | (237,751 | ) | ||
| Pro forma basic and diluted loss per share | $ | (0.00 | ) | $ | 0.00 | |||
| Pro forma basic and diluted | ||||||||
| Weighted average shares outstanding | 77,927,711 | 71,175,150 | ||||||
The accompanying notes are an integral part of these financial statements.
| F-10 |
Digital Donations Technologies, Inc. & Subsidiary
Statements of Stockholders' Equity (Deficit)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid in | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | 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 | - | |||||||||||||
| 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 | ) | |||||||||||||
| Issuance of common stock in Digital Donations, Inc. | 2,882,442 | 2,882 | 202,118 | - | 205,000 | |||||||||||||||
| Non-employee stock compensation | 2,162,021 | 272 | 154,161 | - | 154,433 | |||||||||||||||
| Recapitalization of Digital Donations Technologies, Inc. | 5,500,000 | (69,051 | ) | 69,908 | - | 857 | ||||||||||||||
| Issuance of common stock in Digital Donations Technologies, Inc. | 1,679,966 | 168 | 119,832 | - | 120,000 | |||||||||||||||
| Net Loss | - | - | - | (551,299 | ) | (551,299 | ) | |||||||||||||
| Balance, December 31, 2016 | 86,614,766 | $ | 8,661 | $ | 898,669 | $ | (982,103 | ) | $ | (74,773 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
| F-11 |
Digital Donations Technologies, Inc. & Subsidiary
Statement of Cash Flows
| For the Years Ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | (551,299 | ) | $ | (304,751 | ) | ||
| Adjustments to reconcile net loss to Net cash used in operating activities | ||||||||
| Depreciation | 2,378 | |||||||
| Stock based compensation | 154,433 | 185,566 | ||||||
| Impairment of related party advances | - | 23,621 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (11,337 | ) | ||||||
| Accounts payable and accrued expenses | 45,493 | 45,943 | ||||||
| Net Cash Used in Operating Activities | (360,332 | ) | (49,621 | ) | ||||
| Investing Activities | ||||||||
| Purchases of equipment | (13,228 | ) | - | |||||
| (Advances to)/Repayments from Related Parties, net | (5,900 | ) | (23,621 | ) | ||||
| Net Cash Used in Investing Activities | (19,128 | ) | (23,621 | ) | ||||
| Financing Activities | ||||||||
| Proceeds from/(Repayments to) shareholder advances, net | - | (751 | ) | |||||
| Proceeds from short term borrowings | 30,000 | - | ||||||
| Dividends | - | (50,000 | ) | |||||
| Proceeds from sale of common stock | 325,000 | 176,500 | ||||||
| Issuance costs paid | - | (5,026 | ) | |||||
| Net Cash Provided by Investing Activities | 355,000 | 120,723 | ||||||
| Net Increase in Cash and Cash Equivalents | (24,460 | ) | 47,481 | |||||
| Cash and Cash Equivalents, beginning of year/period | 48,080 | 599 | ||||||
| Cash and Cash Equivalents, end of year/period | $ | 23,620 | $ | 48,080 | ||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
| F-12 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Digital Donations Technologies, Inc. (formerly Fishing Ridge Acquisition Corporation) ("DDTI") was incorporated on May 21, 2015 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. DDTI has been in the developmental stage since inception and its operations to date have been limited to issuing shares to its original shareholders, filing a registration statement on Form 10 and effecting a change in control.
On January 7, 2016, DDTI effected a change in control by effecting the following transactions:
DDTI redeemed an aggregate of 19,500,000 of the then 20,000,000 shares of outstanding common.
James M. Cassidy resigned as DDTI's president, secretary and director and James McKillop resigned as DDTI's vice president and director.
Keith Orlean and Jeffrey Marder were named directors of DDTI and Mr. Orlean was appointed Chief Executive Officer and Treasurer of DDTI and Mr. Marder was appointed President of DDTI.
On January 8, 2016 DDTI issued an aggregate of 5,000,000 shares of its common stock as follows:
| 2,500,000 shares | Keith Orlean | |
| 2,500,000 shares | Jeffrey Marder |
RECAPITALIZATION
On October 17, 2016, DDTI entered into a merger with Digital Donations, Inc. (the “Company” and post-merger, the “Company” represents the combined entity), which has resulted in the combination of the Company with DDTI through the issuance of 79,084,807 shares of DDTI common stock to the shareholders of the Company on a one-for-one basis 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. The Company has accounted for this merger as a recapitalization, as DDTI at the time of the merger was a public shell company, with only nominal assets and no operations of its own. The financial statements presented herein are that of Digital Donations, Inc. from its inception through the date of the merger, at which point the net assets of DDTI were included and the equity section restated to that of the DDTI. From the date of the merger through December 31, 2016, these financial statements represent the financial position and results of operations of the consolidated entity.
The Company intends to develop and distribute creative and innovative fund raising technology and provide payment processing solutions connecting charities and foundations with the consumer and corporate America. The Company anticipates developing fund raising solutions that will expand and enhance the way charities and foundations reach donors. The Company perceives that through the process of integrating a donation request as part of a financial transaction, retailers, e-tailers, ATM owners and service providers will have the ability to create new, or enhance existing, cause marketing programs.
BASIS OF PRESENTATION AND CONSOLIDATION
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”).
The accompany consolidated financial statements include the accounts of Digital Donations Technologies, Inc. and its wholly owned subsidiary, Digital Donations, Inc. All material intercompany accounts, transactions and profits have been eliminated in consolidation.
| F-13 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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, 2016, the Company had an accumulated deficit of $982,103 and a cash balance of $23,620. During the year ended December 31, 2016, the Company incurred a net loss of $551,299, negative cash flows from operating activities of $360,332 and had shareholders’ equity (deficit) of $(74,773). 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 May 12, 2017, had raised $177,000 (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.
REVENUE RECOGNITION
The Company recognizes revenue from the sale of products and services in accordance with ASC 605,"Revenue Recognition."
The Company recognizes revenue from services only when all of the following criteria have been met:
| i) | Persuasive evidence for an agreement exists; | |
| ii) | Service has been provided; | |
| iii) | The fee is fixed or determinable; and, | |
| iv) | Collection is reasonably assured. |
In 2016, the Company’s revenue was predominantly derived from the brokerage of customer accounts to transaction processors in the credit card point of sale and ATM industry. Because of this, the Company does not report revenue gross with costs associated with those revenues in its operating expenses, but combines those costs and reports its revenue net of those costs, because the Company does not actually perform the services underlying the processing of those transactions.
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
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentrations of credit risks, consist principally of cash and trade accounts receivable. 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.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is generally computed using the straight-line method over the estimated useful lives of the related assets. As of December 31, 2016, our assets lives are three to five years for office equipment, including POS terminals. Maintenance, repairs and minor renewals are expensed as incurred; improvements are capitalized. On a continuing basis, the Company reviews the carrying value of property and equipment for impairment. If events or changes in circumstances were to indicate that an asset carrying value may not be recoverable, a write-down of the asset would be recorded through a charge to operations. Depreciation expense for the years ended December 2016 and 2015 was $2,378 and $0, respectively.
SHARE BASED COMPENSATION
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, "Equity – Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
| F-14 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
INCOME TAXES
From its inception through the date of the merger, Digital Donations, Inc. was taxed as an S Corporation under the Internal Revenue Code of the United States. As such, its income or losses were passed through to its shareholders and therefore the benefits of losses or the liability for any taxes due from income was the responsibility of the Company’s shareholders and not the Company. Upon completion of the merger, the status of the Company automatically changed to that of a C Corporation and thus from that day forward, the Company is responsible for all tax liabilities incurred or benefits obtained.
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2016 100% of the net deferred tax assets recorded were fully allowed for due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
LOSS PER COMMON SHARE
Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of December 31, 2016, there were no outstanding dilutive securities.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional costs are expensed as incurred. Advertising and promotional costs totaled $97,941 and $1,832 for the years ended December 31, 2016 and 2015, respectively.
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 if the Company obtains the committed funding necessary to see the project through completion. As such, there are no capitalized software development costs on the accompanying balance sheets, as the Company has not yet received the committed funding necessary to see its software projections through to their completion.
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, accounts payable and note payable approximate their fair values at December 31, 2016 and 2015 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 above, the Company filed to be taxed as a Subchapter S Company with the Internal Revenue Service. Upon closing of the merger, 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.
| F-15 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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 inception of the Company. This presentation reflects the Company generating current deferred tax asset for losses during the period.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU was issued to simplify goodwill impairment by removing the second step of the goodwill impairment test. This standard is required to be adopted by the Company as of March 1, 2020. The Company does not expect adoption of this guidance will have a material impact on the Company's consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU was issued to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance will be effective for the Company as of March 1, 2018. The Company does not expect adoption of this guidance will have a material impact on the Company's consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effective for the Company as of March 1, 2018, and requires a retrospective transition method. The Company does not expect adoption of this guidance will have a material impact on the Company's consolidated financial statements.
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.
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.
| F-16 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
NOTE 2. INCOME TAXES
There is no current or deferred income tax expense or benefit for the years ended December 31, 2016 or 2015.
The Company records deferred income taxes under applicable tax laws using rates for the years in which the taxes are expected to be paid. Deferred income taxes reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets may not be realized. The Company did not record an income tax provision for all periods presented due to its expected benefits from net operating losses being completely offset by valuation allowances.
The items causing this difference for the periods ended December 31, 2016 and 2015 are as follows.
| 2016 | 2015 | |||||||
| Tax benefit at U.S. and state statutory rates | $ | 187,400 | $ | 103,600 | ||||
| less: portion of income flowing directly to former shareholders of Digital Donations, Inc. | (176,200 | ) | (103,600 | ) | ||||
| less: valuation allowance | (11,200 | ) | - | |||||
| Tax benefit, net | $ | — | $ | — | ||||
At December 31, 2016, the Company has estimated net operating loss carryforwards for federal income tax purposes of approximately $32,950. The actual amount of net operating losses will be determined at the time the Company’s tax returns are filed. The Company made no payments for income taxes for the years ended December 31, 2016 and 2015.
Deferred tax assets were comprised of the following as of December 31, 2016:
| Current deferred tax asset | $ | - | ||
| NOL carryforward | 11,200 | |||
| Long-term deferred tax asset | 11,200 | |||
| Total deferred tax asset | 11,200 | |||
| Less valuation allowance | (11,200 | ) | ||
| Net deferred tax asset | $ | - |
No amounts have been included in the table above for 2015 because prior to the recapitalization of Digital Donations Technologies, Inc., the financial statements presented herein are those of Digital Donations, Inc., which was taxed under the Internal Revenue Code of the United States as an S Corporation and therefore all of its income or losses passed through to its shareholders and therefore Digital Donations, Inc. was not responsible for the income tax liability or could benefit from any deferred or current income tax assets.
Neither the Company nor its subsidiary have filed tax returns for either 2015 or 2016. The Company expects to file all of its past due returns for 2015 and the 2016 returns, which are under extension, in 2017. No taxes, penalties or interest will be due because of the losses incurred from inception, or because the subsidiary is considered a 'pass through' entity as noted above.
| F-17 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
NOTE 3. NOTES PAYABLE
In August, 2016, the Company entered into a note agreement with an investor and received gross proceeds of $25,000. The note bears interest at the rate of 24% per annum, matures 180 days after issuance and is unsecured.
In October, 2016, the Company entered into a second note agreement with the same investor and received gross proceeds of $5,000. The note bears interest at the rate of 24% per annum, matures 180 days after issuance and is unsecured.
In 2017, the Company and the holder entered into a verbal agreement such that maturity was extended until such time as the Company files an S-1 registration statement that is declared effective.
NOTE 4. STOCKHOLDERS’ EQUITY (DEFICIT)
At December 31, 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 $0.0001 per share) of common stock. The total number of shares of common stock issued, issuable and outstanding at December 31, 2016 and 2015 was 86,614,766 and 74,390,337, respectively. No shares of preferred stock have been issued as of December 31, 2016.
COMMON STOCK
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. Those shares were issued in 2016.
In July 2015, the Company sold stock to an investor at $0.50 per share for cash proceeds of $12,500. Those shares were issued in 2016 with a correction as the original issuance was recorded at $1.00 per share
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. Those additional shares were issued in 2016.
In 2016, the Company sold stock to an investor at $0.0714 per share for cash proceeds of $325,000. As of December 31, 2016, the Company had issued 4,199,916 shares and was obligated to issue an additional 349,993 shares to the investor. Those additional shares were issued in 2017.
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.
| F-18 |
Digital Donations Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
SHARE BASED PAYMENTS
In 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 2015 raises noted above of $0.0714 per share. Total compensation expense recorded in 2015 was $185,566.
In 2016, the Company issued a total of 2,162,021 shares as compensation to non-employees for consulting services performed. The Company recorded compensation expense at a share price based on the 2016 private placement raises noted above of $0.0714 per share. Total compensation expense recorded in 2016 was $154,433.
DIVIDENDS
In December 2015, the Company made a payment on behalf of the founders of the Company and has treated that payment as a dividend.
NOTE 5. 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. In 2016, the entity was further advanced funds, but was able to repay all of the 2016 advances plus an additional $9,245 which the Company has shown as a reduction of its general and administrative expense.
Prior to the incorporation of the Company, the founders created and purchased the logo, trade name and trade mark that the Company now uses from the related entity noted above. However, because of serious financial issues suffered by the related entity, the only other product developed outside of the creation and purchase of the logo, trade name and trade mark, was the development of a Point of Sale technology and product that ultimately was discontinued in 2014 since the standard that it was based on became obsolete, and this technology and product will not be used by the Company nor will it be acquired by the Company. In 2017 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.
NOTE 6. COMMITMENTS AND CONTINGENCIES
In January 2016, the Company took over the office lease from a related party. That lease ended on January 31, 2016. During the remainder of 2016, the Company occupied that office under a month to month rental under the terms of the old related party lease. On February 1, 2017, the Company entered into its own two year lease with the landlord for the existing space. Total rent expense incurred in 2016 was approximately $39,800.
NOTE 7. SUBSEQUENT EVENTS
From January 1 through May 19, 2017, the Company sold to two shareholders an aggregate of 2,272,955 of its common shares for a total of $179,500. As of the date of this filing, 832,983 shares of that aggregate amount were issuable.
| F-19 |
PART II
Item 13. Other expenses of Issuance and Distribution
The following table sets forth the Company’s expenses in connection with this registration statement. All of the listed expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission.
| Registration Fees | $ | 1608.45 | ||
| Edgarizing fees | $ | 1,500 | ||
| Transfer agent fees | $ | 2,000 | ||
| Accounting fee | $ | 10,000 | ||
| Legal fees | $ | 26,000 |
Item 14. Indemnification of Directors and Officers
The Company’s Certificate of Incorporation, By-Laws and other contracts provide for indemnification of its officers, directors, agents, fiduciaries and employees. These provisions allow the Company to pay for the expenses of these persons in connection with legal proceedings brought because of the person’s position with the Company, if the person is not ultimately adjudged liable to the Company for misconduct in the action. Generally, no indemnification may be made where the person has been determined to have intentionally, fraudulently or knowingly violated the law.
The Company does not believe that such indemnification affects the capacity of such person acting as officer, director or control person of the Company.
Item 15. 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(a)(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 the following shares of common stock:
The Company issued 10,000,000 shares on its formation in May 2015 to each of James Cassidy and James McKillop of which all but 500,000 shares were redeemed pro rata.
As part of a change in control of the Company, on January 8, 2016 the Company issued 5,000,000 shares of its common stock to
| Keith Orlean | 2,500,000 shares | |||
| Jeffrey Marder | 2,500,000 shares |
In October, 2016, the Company issued 79,084,807 shares of its common stock to 38 shareholders of Digital Donations, Inc. as part of a one-for-one stock exchange in exchange for the shares Digital Donations, Inc. held by each of them.
From October 2016 to December 2016, the Company issued to one shareholder an aggregate of 1,819,963 common shares for a total of $130,000 pursuant to a private placement offering.
From January 2017 to May 2017, the Company sold to two shareholders an aggregate of 2,342,954 of its common shares for a total of $229,500 pursuant to a private placement offering. As of the date of this filing, 349,993 shares of that aggregate amount were issuable.
From April 1 through June 5, 2017, the Company sold to one shareholder an aggregate of 699,986 of its common shares for a total of $50,000 pursuant to a private placement offering. As of the date of this filing, 699,986 shares of that aggregate amount were issuable.
Item 16. Exhibits and Financial Statement Schedules.
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)
| 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) |
| 5.1 | Opinion of Counsel on legality of securities being registered (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.1 | Form of Services Agreement by and between DDI and United Charitable dated June 2014 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.2 | Form of Strategic Partnership Agreement by and between DDI and Triton Manufacturing dated November 2015 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.3 | Form of Customer Referral Agreement by and between DDI and WorldPay US, Inc. dated July 2015 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.4 | Form of License and Intellectual Property Agreement by and between DDI and Nautilus Hyosung America, Inc. dated February 2015 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.5 | Form of Engagement Agreement by and between DDI and Tiber Creek Corporation dated December 2015 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.6 | Form of Promissory Note by and between DDI and M. Kimberly Rupert dated August 2016 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.7 | Form of Promissory Note by and between DDI and M. Kimberly Rupert dated October 2016 (filed as an exhibit to the Form S-1/A, filed January 18, 2017) |
| 10.8 | Form of Term Sheet by and between Digital Donations Technologies, Inc. and Digital Processing Solutions, Inc. (filed as an exhibit to the Form S-1/A, filed March 24, 2017) |
| 10.9 | Form of Joint Marketing Agreement by and between Digital Donations Technologies, Inc. and GEOCommerce, Inc. dated March 2017 (filed as an exhibit to the Form S-1/A, filed June 9, 2017) |
| 23.1* | Consent of Independent PCOAB public accounting firm. |
| 23.2 | Consent of Attorney (filed as part of Exhibit 5.1) |
| * | Filed herewith |
Item 17. Undertakings
Pursuant to Rule 415 under the Securities Act of 1933 (as amended and updated from time to time)
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sales securities, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any additional material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time to be the initial bona fide offering thereof.
(3). To remove from registration by means of a post-effective amendment any of the securities that remain unsold at the termination of the offering.
(4). That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of securities:
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to this offering, other than registration statements relying on Rule 403B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5). That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser.:
i Any preliminary prospectus or prospectus of the undersigned registrant relating to this offering required to be filed pursuant to Rule 424;
ii. Any free writing prospectus relating to this offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Undertaking Request for acceleration of effective date or filing of registration statement becoming effective upon filing.
The undersigned registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant 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. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Melville, New York on June 29, 2017.
| DIGITAL DONATIONS TECHNOLOGIES, INC. | |
| /s/ Keith Orlean | |
| Chief Executive Officer and Treasurer |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
| Signature | Capacity | Date | ||
| /s/ Keith Orlean | Director | June 29, 2017 | ||
| Keith Orlean | ||||
| /s/ Jeffrey Marder | Director | June 29, 2017 | ||
| Jeffrey Marder |