The accompanying notes are an integral part
of these unaudited financial statements.
The accompanying notes are an integral part
of these unaudited financial statements.
The accompanying notes are an integral part
of these unaudited condensed interim financial statements.
Notes to Unaudited Condensed Financial Statements
NOTE 1 - ORGANIZATION AND DESCRIPTION
OF BUSINESS
Motivating the Masses, Inc. (the “Company”)
was incorporated under the laws of the state of Nevada on September 2, 1998. Lisa S. Nichols founded the Company for the purpose
of providing high quality resources for business coaching, and professional and management development techniques both on the local
and national scale.
The Company’s products and services revolve
around the personal life-coaching program written and developed by its CEO Lisa Nichols. The program sells as a package of books
and DVD’s at the Company’s local and national training seminars, and on the Company’s website. The Company has
contract rights to the sales of the product. The Company recently developed additional digital content from these programs that
it plans to sell on-line beginning in Q4.
The Company, through its CEO and a core team
of coaches, also provides training and development programs through local and national seminars, on-site employee training, public
and private speaking engagements, and customized life-coaching programs.
Our services are grouped into two disciplines:
Business Segment and Personal Segment. The following summarizes the key service offerings in each segment.
Business Segment
Executive Consulting Services
focus
on a client’s specific goals and are delivered by our highly experienced team of consultants. Consulting services are
delivered in a variety of formats including online, one-day VIP days and six-session consulting programs.
Global Leadership Program (GLP)
is a
12-month program with group consulting that is designed to help participants expand their influence, sales skills and incomes.
14K Club
is a 8-month Mastermind Program
which includes intensive branding, content, sales & marketing training both via a 12-module course taught online and culminating
in a 2-Day Live event.
Speak and Write to Make Millions
is a live training program offered over two days and teaches attendees how to speak powerfully, to write best sellers, and
to increase their income.
Keynotes/Speaking Fees
are generated
through personal speaking by our consultants at major industry events as well as private gatherings.
These events also provide
us with opportunities to promote our capabilities and product/service offerings.
Personal Segment
Transformational Consulting
is geared
toward personal development, and is provided over six sessions in a 12-week period.
Abundance Now
is a 12-part online course
that includes 12 video modules featuring Lisa Nichols and workbooks for each module.
Abundance Now Live Event
is a live training
program offered over two days connected to Lisa Nichols’ book
Abundance Now.
Retreat
is an intimate, up-close
and personal four-day adventure with Lisa Nichols. The program is designed for executives and entrepreneurs ready to take a big
step in their lives, to enhance their happiness and income.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
These unaudited condensed
interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments of a normal recurring nature and considered necessary for a fair presentation of
its financial condition and results of operations for the interim periods presented in this Quarterly Report on Form 10-Q have
been included. Operating results for the interim periods are not necessarily indicative of financial results for the full year.
These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and
notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities
and Exchange Commission (“SEC”) on April 18, 2016. In preparing these unaudited condensed interim financial statements,
management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date
of the unaudited condensed interim financial statements and the reported amount of revenues and expenses during the reporting periods.
MOTIVATING THE MASSES, INC.
Notes to Unaudited Condensed Financial Statements
Use of estimates
The preparation of unaudited condensed interim
financial statements in conformity with 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 unaudited condensed interim financial
statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ
from those estimates. Such estimates include management’s assessments of the carrying value of certain assets, useful lives
of assets, and related depreciation and amortization methods applied.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash and accounts receivable. During the nine months period
ended September 30, 2016, the Company may have had cash deposits that exceeded Federal Deposit Insurance Corporation (“FDIC”)
insurance limits. The Company maintains its cash balances at high quality financial institutions to mitigate this risk. The Company
performs ongoing credit evaluations of its customers and generally does not require collateral. The Company records an allowance
for doubtful accounts in accordance with the procedures discussed below. Past-due amounts are written off against the allowance
for doubtful accounts when collections are believed to be unlikely and all collection efforts have ceased.
Cash and cash equivalents
The Company considers all highly liquid investments
with an original maturity of 90 days or less when purchased to be cash equivalents. As of September 30, 2016 and December 31, 2015,
the Company had no cash equivalents.
Fair value of financial instruments
The Company follows the provisions of FASB
ASC 820 (the “Fair Value Topic”), which defines fair value, establishes a framework for measuring fair value under
GAAP, and expands disclosures about fair value measurements.
The Fair Value Topic defines fair value as
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It
requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. It also establishes
a fair value hierarchy, which prioritizes the valuation inputs into six broad levels.
The following fair value hierarchy is used
to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
A) Market approach—Uses prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated
by pricing guides, sale transactions, market trades, or other sources;
B) Cost approach—Based on the amount
that currently would be required to replace the service capacity of an asset (replacement cost); and
C) Income approach—Uses valuation techniques to convert future
amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques,
and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate
market interest rate.
Level 1: Quoted market prices available
in active markets for identical assets or liabilities as of the reporting date. An active market for an asset or liability is a
market in which transactions for the asset or liability occur with significant frequency and volume to provide pricing information
on an ongoing basis.
MOTIVATING THE MASSES, INC.
Notes to Unaudited Condensed Financial Statements
Level 2: Observable inputs other than
Level 1 inputs. Example of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted
prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based
on the Company’s assessment of the assumptions that are market participants would use in pricing the asset or liability.
The carrying amount of
the Company’s financial assets and liabilities, such as cash, accounts payable, accrued expenses, and deferred revenue approximate
their fair value because of the short maturity of those instruments.
The Company had no assets and/or liabilities
measured at fair value on a recurring basis at September 30, 2016 and December 31, 2015, respectively, using the market and income
approaches.
Accounts Receivable and Allowance for
Doubtful Accounts
Accounts receivable related to the products
and services sold are recorded at the time revenue is recognized, and are presented on the balance sheet net of allowance for doubtful
accounts. The ultimate collection of the receivable may not be known for several months after services have been provided and billed.
Property and Equipment
Property and equipment are recorded at cost.
Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred.
Depreciation is computed by the straight-line method over the assets estimated useful life of three (3) years for equipment, five
(5) years for automobile, and seven (7) years for furniture and fixtures. Upon sale or retirement of property and equipment, the
related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
Impairment of long-lived assets
The Company follows paragraph ASC350 of the
FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, such as intellectual property,
are required to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable.
The Company assesses the recoverability of
its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group
of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any,
is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the
asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined
to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book
values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company determined that there were no impairments
of long-lived assets as of September 30, 2016 and December 31, 2015.
Commitments and contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Liabilities for loss contingencies arising
from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has
been incurred and the amount of the assessment can be reasonably estimated.
Revenue recognition
The Company follows paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or
realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
(i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer,
(iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. In addition, the Company records
allowances for accounts receivable that are estimated to not be collected.
MOTIVATING THE MASSES, INC.
Notes to Unaudited Condensed Financial Statements
A portion of the Company’s revenues are
from coaching and/or training services provided under contracts that are greater than one month in length. These contracts are
billed in total at the onset of the contract period, and to the extent that billings exceed revenue earned, the Company will record
such amount as deferred revenue until the revenue is earned. We recognize revenue on these contracts in the period the coaching
and/or training services are provided under the contract. Expenses associated with providing the coaching and/or training services
are recognized in the period the services are provided which coincides with when the revenue is earned. Revenue associated with
the Company’s live events is recognized in the month of the corresponding event. Revenue associated with the Company’s
on-line digital content is recognized at the time of purchase.
Income taxes
The Company follows Section 740-10-30 of the
FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the fiscal year in which the temporary differences are expected to be recovered or settled. Deferred
tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will
not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The Company adopted section 740-10-25 of the
FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty in income taxes. Section 740-10-25
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on
the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section
740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures. The Company had no material adjustments to its assets and/or liabilities for unrecognized
income tax benefits according to the provisions of Section 740-10-25.
At December 31, 2015, the Company had net operating
loss carryforwards of approximately $4,585,839 that may be offset against future taxable income from the year 2015 to 2035. The
net change in the valuation allowance for the year ended December 31, 2015 was an increase of $451,700.
Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting
Standards Codification No. 718,
Compensation – Stock Compensation
. Under FASB Accounting Standards
Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on
the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required
to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards,
share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant
at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option
grant. As of September 30, 2016, the Company did not have any share-based compensation arrangements.
Equity instruments (“instruments”)
issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards
Codification No. 718. FASB Accounting Standards Codification No. 505,
Equity Based Payments to Non-Employees
defines
the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance
commitment, as defined, is reached; or (b) the earlier of (i) the non-employee performance is complete, or (ii) the instruments
are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each
particular grant as defined in the FASB Accounting Standards Codification.
Net income (loss) per share
The Company computes basic and diluted earnings
per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic earnings per share is computed
by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding
during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share are computed by dividing
net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the
period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of
the first day of the year for any potentially diluted debt or equity.
MOTIVATING THE MASSES, INC.
Notes to Unaudited Condensed Financial Statements
There were no potentially dilutive shares outstanding
as of September 30, 2016 and December 31, 2015.
Subsequent events
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company has determined that,
other than listed in Note 9, no material subsequent events exist through the date of this filing..
Recently issued accounting pronouncements
We have decided to take advantage of the exemptions
provided to emerging growth companies under the JOBS Act and as a result our financial statements may not be comparable to
companies that comply with public company effective dates. We may take advantage of exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies, including not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, delay compliance with new or revised accounting
standards that have different effective dates for public and private companies until they are made applicable to private companies.
Company management does not believe that any
other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
unaudited condensed financial statements.
NOTE 3 - GOING CONCERN
These unaudited condensed financial statements
have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company's ability
to continue as a going concern is contingent upon its ability to achieve and maintain profitable operations, and the Company’s
ability to raise additional capital as required.
These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management has taken certain actions and continues to implement changes designed
to improve the Company’s consolidated financial results and operating cash flows. The actions involve certain cost-saving
initiatives and growing strategies, including (a) product expansion, (b) optimizing online sales, (c) maximizing media opportunities,
and (d) lowering operating expenses. Management believes these actions will enable the Company to improve future profitability
and cash flow. As a result, these unaudited condensed financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
NOTE 4 – PROPERTY AND EQUIPMENT
Fixed assets, stated at cost, less accumulated
depreciation at September 30, 2016 and December 31, 2015, consisted of the following:
|
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
|
Equipment
|
|
$
|
62,577
|
|
|
$
|
60,073
|
|
|
Furniture & Fixtures
|
|
|
24,670
|
|
|
|
25,910
|
|
|
Less: Accumulated Depreciation
|
|
|
(69,783
|
)
|
|
|
(60,172
|
)
|
|
Net Fixed Assets
|
|
$
|
17,464
|
|
|
$
|
25,810
|
|
Depreciation expense
Depreciation expense for the nine months ended
September 30, 2016 and September 30, 2015 was $9,610 and $10,362, respectively.
MOTIVATING THE MASSES, INC.
Notes to Unaudited Condensed Financial Statements
NOTE 5 – DEFERRED REVENUES
A portion of the Company’s revenues are
from coaching and/or training services provided under contracts that are greater than one month in length. These contracts are
billed in total at the onset of the contact period, and to the extent that billings exceed revenue earned, the Company will record
such amount as deferred revenue until the revenue is earned. We recognize revenue on these contracts in the period the coaching
and/or training services are provided under the contract. Expenses associated with providing the coaching and/or training services
are recognized in the period the services are provided which coincides with when the revenue is earned.
As of September 30, 2016 and December 31, 2015,
the Company had deferred revenues balance of $1,170,870 and $1,572,644, respectively.
NOTE 6 – COMMITMENTS & CONTINGENCIES
Employment Agreement
On May 1, 2016, the Company executed employment
agreements with Lisa Nichols, Chief Executive Officer, and Susie Carder [Please see Note 9], Chief Operating Officer, who also
serve on the Company’s Board of Directors. Each employment agreement is for one year starting January 1, 2016. Pursuant to
their employment agreements, Ms. Nichols shall receive an annual salary of $225,000 and Ms. Carder an annual salary of $200,000.
On October 12, 2015, the Company entered into an employment agreement with Scott Ryder as the Company’s Chief Financial Officer.
Pursuant to his employment agreement, Mr. Ryder receives an annual salary of $150,000. The employment agreements for the officers
stipulate a potential bonus at the discretion of the Board of Directors. In the three months ended September 30, 2016, the Company
did not pay any bonuses to its officers.
Lease
The Company currently occupies office space
at 5950 La Place Court, Carlsbad, California. In July of 2016, the Company signed a sixty-five (65) calendar month lease for the
office space starting July 25, 2016, for $13,347 a month for the first year, $13,748 a month for the second year, $14,160 a month
for the third year, $14,586 a month for the fourth year, $15,022 a month for the fifth year, and $15,473 for months 61 to 65. For
months two (2) through eleven (11), the rent shall be abated in the amount of $6,674.
Minimum future lease payments under the agreement
are as follows:
|
2017
|
|
$
|
122,131
|
|
|
2018
|
|
$
|
167,036
|
|
|
2019
|
|
$
|
172,050
|
|
|
2020
|
|
$
|
177,212
|
|
|
2021
|
|
$
|
182,519
|
|
NOTE 7 – RELATED PARTY TRANSACTIONS
Employment Agreements
On May 1, 2016, the Company
executed employment agreements with its three officers, two of whom also make up the Board of Directors. Further details are described
in Note 6.
NOTE 8 – STOCKHOLDERS’ EQUITY
Common and Preferred Shares Authorized
Preferred Stock - There are 1,000,000 shares
of authorized preferred stock, par value $0.001 per share, with no shares of preferred stock issued or outstanding.
Common Stock – The Company has 75,000,000
shares of authorized common stock, par value $0.001 per share, with
14,750,734
and 16,481,812
issued and outstanding as of September 30, 2016 and December 31, 2015, respectively. Each holder of common stock is entitled to
one vote for each share held. During the nine month period ended September 30, 2016, the Company issued 27,619 shares as a stock
dividend to current shareholders as loyalty shares based on their investment on March 31, 2015 at fair value, repurchased 258,697
shares of its common stock, and 1,500,000 shares were returned that were originally issued for services rendered.
MOTIVATING THE MASSES, INC.
Notes to Unaudited Condensed Financial Statements
NOTE 9 – SUBSEQUENT EVENTS
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company has determined that,
other than listed below, no material subsequent events exist through the date of this filing.
On October 15, 2016, the Board of Directors awarded a cash bonus
of $37,500 to Scott Ryder.
On October 17, 2016, Susie Carder tendered
her resignation as President and Chief Operating Officer of the Company. Ms. Carder remains a director of the Company. Ms. Carder’s
resignation as an officer of the Company was not a result of any disagreements with the Company regarding its the operations, policies
or practices. On the same day, the Company and Ms. Carder entered into an independent contractor agreement regarding Ms. Carder’s
role as a consultant to the Company.
PART I.
