Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Note
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
SigmaBroadband
Co. ("Sigma" or the "Company") was incorporated in Georgia in
October 2012. The Company has been in the development stage since
inception and has not generated any revenue to date. The Company
will be a full service, facilities-based broadband service
provider, local exchange and inter-exchange carrier serving
residential and commercial customers with a special focus on rural
areas.
Basis
of Presentation
The
accompanying unaudited financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for
interim financial information. Certain information and footnote
disclosures normally included in annual financial statements
prepared in accordance with U.S. generally accepted accounting
principles have been condensed or omitted pursuant to such
principles and regulations of the Securities and Exchange
Commission for Form 10-Q. All adjustments, consisting of normal
recurring adjustments, have been made which, in the opinion of
management, are necessary for a fair presentation of the results of
interim periods. The results of operations for such interim periods
are not necessarily indicative of the results that may be expected
for a full year because of, among other things, seasonality factors
in the retail business. The unaudited financial statements
contained herein should be read in conjunction with the audited
financial statements and notes thereto for the fiscal year ended
December 31, 2015.
Long-Lived
Assets
The
Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss is
recognized when estimated future cash flows expected to result from
the use of the asset and its eventual disposition are less than its
carrying amount. Based on this analysis an impairment loss of
$8,000,000 was recognized at December 31, 2015.
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an
arrangement exists, services have been rendered or product delivery
has occurred, the sales price to the customer is fixed or
determinable, and collectability is reasonably assured. The
following policies reflect specific criteria for the various
revenues streams of the Company:
Revenue
will be recognized at the time the product is delivered or services
are performed. Provision for sales returns will be estimated based
on the Company's historical return experience. Revenue will be
presented net of returns.
SIGMABROADBAND
CO.
Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Note
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Use of
Estimates
The
preparation of 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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those
estimates.
Segment
Information
The
Company follows Accounting Standards Codification ("ASC") 280,
"Segment Reporting". The Company currently operates in a single
segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Net
Loss Per Common Share
Basic
net (loss) income per common share is calculated using the weighted
average common shares outstanding during each reporting period.
Diluted net (loss) income per common share adjusts the weighted
average common shares for the potential dilution that could occur
if common stock equivalents (convertible debt and preferred stock,
warrants, stock options and restricted stock shares and units) were
exercised or converted into common stock. There were no common
stock equivalents at June 30, 2016 or 2015.
Income
Taxes
Deferred
income taxes are recognized for the tax consequences related to
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used
for tax purposes at each year end, based on enacted tax laws and
statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. A valuation
allowance is recognized when, based on the weight of all available
evidence, it is considered more likely than not that all, or some
portion, of the deferred tax assets will not be realized. Income
tax expense is the sum of current income tax plus the change in
deferred tax assets and liabilities.
ASC
740, Income Taxes, requires a company to first determine whether it
is more likely than not (which is defined as a likelihood of more
than fifty percent) that a tax position will be sustained based on
its technical merits as of the reporting date, assuming that taxing
authorities will examine the position and have full knowledge of
all relevant information. A tax position that meets this more
likely than not threshold is then measured and recognized at the
largest amount of benefit that is greater than fifty percent likely
to be realized upon effective settlement with a taxing
authority.
SIGMABROADBAND
CO.
Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Note
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees in
accordance with ASC 718, Compensation - Stock Compensation. ASC 718
requires all share-based compensation payments to be recognized in
the financial statements based on the fair value using an option
pricing model. ASC 718 requires forfeitures to be estimated at the
time of grant and revised in subsequent periods if actual
forfeitures differ from initial estimates.
Equity
instruments granted to non-employees are accounted for in
accordance with ASC 505, Equity. The final measurement date for the
fair value of equity instruments with performance criteria is the
date that each performance commitment for such equity instrument is
satisfied or there is a significant disincentive for
non-performance.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Fair
Value of Financial Instruments
Pursuant
to ASC No. 820. "Fair Value Measurement and Disclosures," the
Company is required to estimate the fair value of all financial
instruments included on its balance sheet as of June 30, 2016. The
Company's financial instruments consist of cash, accounts payable
and accrued expenses, loans payable - stockholders, and note
payable. The Company considers the carrying value of such amounts
in the financial statements to approximate their fair value due to
the short-term nature of these financial instruments.
Reclassifications
Certain
prior year amounts have been reclassified to conform with the
current year presentation.
Recent
Pronouncements
In May
2014, FASB and IASB issued a new joint revenue recognition standard
that supersedes nearly all GAAP guidance on revenue recognition.
The core principle of the standard is that revenue recognition
should depict the transfer of goods and services to customers in an
amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods and services. The new
standard is effective for the Company for the fiscal year beginning
January 1, 2017, and the effects of the standard on the
Company’s financial statements are not known at this
time.
SIGMABROADBAND
CO.
Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Recent Pronouncements
(continued)
In
March 2016, the FASB issued ASU 2016-03. The amendments in this
Update make the guidance in Updates 2014-02, 2014-03, 2014-07, and
2014-18 effective immediately by removing their effective dates.
The amendments also include transition provisions that provide that
private companies are able to forgo a preferability assessment the
first time they elect the accounting alternatives within the scope
of this Update. The Company is in the process of evaluating the
impact of the adoption of this ASU.
In
March 2016, the FASB issued ASU 2016-09, Stock Compensation, which
is intended to simplify several aspects of the accounting for
share-based payment award transactions. The guidance will be
effective for the fiscal year beginning after December 15, 2016,
including interim periods within that year. The Company is in the
process of evaluating the impact of the adoption of this
ASU.
In
April 2016, the FASB issued ASU 2016-10, Revenue from Contracts
with Customer, the principle of which is that a company should
recognize revenue to record the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the company expects to be entitled for the transfer of
those goods or services by applying the following
steps:
1.
Identify
the contract(s) with a customer.
2.
Identify
the performance obligations in the contract(s).
3.
Determine
the transaction price.
4.
Allocate
the transaction price to the performance obligations in the
contract.
5.
Recognize
revenue when, or as, the company satisfies a performance
obligation
The
guidance will be effective for the fiscal year beginning after
December 15, 2016, including interim periods within that year. The
Company is in the process of evaluating the impact of the adoption
of this ASU.
NOTE 2
– EQUIPMENT, NET
The
Company's furniture and equipment at June 30, 2016 and December 31,
2015 consisted of the following:
|
Telecommunications
equipment
|
$
10,000,000
|
$
10,000,000
|
|
Less:
accumulated depreciation
|
2,000,000
|
2,000,000
|
|
Less:
impairment
|
8,000,000
|
8,000,000
|
|
|
|
|
|
Total
|
$
-
|
$
-
|
SIGMABROADBAND
CO.
Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Note
3. LOANS PAYABLE - STOCKHOLDERS
At
June 30, 2016 and December 31, 2015, a stockholder and officer of
the Company was owed $22,825 and $17,538, respectively, by the
Company for funds he had advanced to pay for certain expenses. The
loan bears no interest and is payable on demand.
At
June 30, 2016 and December 31, 2015, another stockholder and
officer of the Company was owed $12,765 and $11,036, respectively,
by the Company for funds he had advanced to pay for certain
expenses. The loan bears no interest and is payable on
demand.
Note
4. NOTE PAYABLE
In
December 2013, the Company signed an agreement to purchase certain
telecommunications equipment for $10 million. The agreement called
for the Company to sign an installment agreement for $1,000,0000.
The installment agreement, as amended in November 2015, calls for
this balance to be amortized over a six year term with interest
accruing at 8% per annum. Additionally, under the terms of this
modification, payments will begin 48 months after the signing of
the original agreement (December 2013) at which time all interest
accrued until that time will be due and payable. Interest only
payments will begin in month 49 and will continue through month 72
at which time a balloon payment of the principal and any unpaid
interest will be due. At June 30, 2016 and December 31, 2015,
accrued interest on this note totaled $244,187 and $204,187,
respectively.
The
amendment stipulates that the remaining $9,000,000 owed by the
Company will be paid by the issuance of 10,000,000 shares of the
Company's preferred stock within 36 months from the date of the
amendment. The Company has not issued any shares at June 30, 2016,
under the terms of this amendment.
Note
5. STOCKHOLDERS' EQUITY
The
Company has authorized 500,000,000 shares of common stock with a
par value of $0.0001 per share. During the six months ended June
30, 2016, the Company issued 100,000 shares at $0.50 per share for
services provided to the company. At June 30, 2016, 24,724,000
shares of common stock were issued and outstanding.
In
August 2014, the Company received $20,000 in payment for 20,000
shares of common stock at $1.00 per share that are to be issued at
a future date.
During
the three months ended March 31, 2016, the company issued 100,000
shares at .50 per share for consulting services. During the three
months ended June 30, 2016, the company issued 50,000 shares to
settle $5000 dollars of account payable.
SIGMABROADBAND
CO.
Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Note
5. STOCKHOLDERS' EQUITY (continued)
The
Company has authorized 10,000,000 shares of preferred stock with no
par value. No shares were issued or outstanding at June 30, 2016 or
December 31, 2015.
Note
6. COMMITMENTS AND CONTINGENCIES
The
Company currently leases its offices on a month to month basis from
the Company's President and stockholder for $500 per
month.
Rent
expense for the six months ended June 30, 2016 and 2015, totaled
$3,000 and $3,000, respectively, and was capitalized as additional
paid-in capital.
Note
7. INCOME TAXES
The
deferred tax asset consists of the following:
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
$
1,721,000
|
$
1,676,000
|
|
Valuation
allowance
|
(1,721,000
)
|
(1,676,000
)
|
|
Deferred
tax asset, net
|
$
-
|
$
-
|
|
|
|
|
|
|
|
|
The
income tax benefit differs from the amount computed by applying the
statutory federal and state income tax rates to the loss before
income before income taxes. The sources and tax effects of the
differences are as follows:
|
|
|
|
|
|
|
|
|
Statutory
federal income tax rate
|
34
%
|
34
%
|
|
State
income taxes, net of federal taxes
|
6
%
|
6
%
|
|
Valuation
allowance
|
(40
)%
|
(40
)%
|
|
Effective
income tax rate
|
0
%
|
0
%
|
|
|
|
|
As of
June 30, 2016, the Company has an estimated net operating loss
carryforward of approximately $4,302,000. This loss will be
available to offset future taxable income. If not used, this
carryforward will begin to expire in 2033. The deferred tax asset
relating to the operating loss carryforward has been fully reserved
at June 30, 2016.
SIGMABROADBAND
CO.
Notes
to Condensed Financial Statements
June
30, 2016
(Unaudited)
Note
7. INCOME TAXES (continued)
The
Company currently has no federal or state tax examinations in
progress, nor has it had any federal or state examinations since
its inception. All of the Company's tax years are subject to
federal and state tax examinations. The Company is only subject to
state taxes in Georgia.
Note
8. BASIS OF REPORTING
The
Company's financial statements are presented on a going concern
basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of
business.
The
Company has incurred losses from inception of approximately
$4,302,000 which among other factors, raises 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
upon management's plans to raise additional capital from the sales
of stock and receiving additional loans from related
parties.
The
financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may
result from the possible inability of the Company to continue as a
going concern.
Note
9. SUBSEQUENT EVENTS
Management
evaluated all events through the date of this filing and has
identified no events that would require disclosure in these
financial statements.
