UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended: June 30, 2015

 

OR

 

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

 

For the transition period from __________ to __________

 

Commission File No. 000-33383

 

SPORTS FIELD HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		98-0357690
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

 

4320 Winfield Road, Suite 200

Warrenville, IL 60555

(Address of principal executive offices)

 

978-914-7570

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

As of August 15, 2015, there were 13,297,275 shares outstanding of the registrant’s common stock.

  

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18
Item 4.	Controls and Procedures.	18
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	18
Item 1A.	Risk Factors.	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	18
Item 3.	Defaults Upon Senior Securities.	18
Item 4.	Mine Safety Disclosures.	18
Item 5.	Other Information.	18
Item 6.	Exhibits.	19
Signatures		20

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

SPORTS FIELD HOLDINGS, INC.

 

Condensed consolidated balance sheets as of June 30, 2015 (unaudited) and December 31, 2014	2
Condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014 (unaudited)	3
Condensed consolidated statements of cash flows for the six months ended June 30, 2015 and 2014 (unaudited)	4
Notes to consolidated financial statements	5 - 10

 

 

SPORTS FIELD HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2015				2014
		(unaudited)
ASSETS
Current assets
Cash		$	261,298			$	523,492
Accounts receivable			85,042				–
Costs and estimated earnings in excess of billings			44,765				–
Inventory			69,166				131,455
Prepaid expenses and other current assets			19,265				2,640
Debt issuance costs, net			36,033				–
Total current assets			515,569				657,587
Property, plant and equipment, net			99,651				114,102
Deposits			8,507				8,507
Total assets		$	623,727			$	780,196
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses		$	775,789			$	394,419
Billings in excess of costs and estimated earnings			40,709				20,500
Provision for estimated losses on uncompleted contracts			232,957				–
Convertible notes payable, net of debt discount of $36,033			413,967				–
Total liabilities			1,463,422				414,919
Stockholders' equity
Preferred stock, $0.00001 par value; 20,000,000 shares authorized, none issued and outstanding			–				–
Common stock, $0.00001 par value; 250,000,000 shares authorized, 13,570,275 and 13,545,275 issued and outstanding as of June 30, 2015 and December 31, 2014, respectively			136				135
Additional paid in capital			7,394,202				7,301,003
Common stock subscription receivable			(4,500	)			(4,500	)
Accumulated deficit			(8,229,533	)			(6,931,361	)
Total stockholders' equity (deficit)			(839,695	)			365,277
Total liabilities and stockholders' equity (deficit)		$	623,727			$	780,196

 

See the accompanying notes to these condensed consolidated financial statements

 

 

SPORTS FIELD HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Revenue
Contract revenue		$	896,034			$	203,452			$	1,413,894			$	322,085
Total revenue			896,034				203,452				1,413,894				322,085
Cost of sales
Contract cost of sales			1,069,352				249,793				1,471,090				342,891
Total cost of sales			1,069,352				249,793				1,471,090				342,891
Gross profit (loss)			(173,318	)			(46,341	)			(57,196	)			(20,806	)
Operating expenses
Selling, general and administrative			772,876				539,374				1,214,598				1,398,044
Depreciation			7,225				25,771				14,451				52,823
Separation expense			–				228,414				–				228,414
Total operating expenses			780,101				793,559				1,229,049				1,679,281
Net loss from operations			(953,419	)			(839,900	)			(1,286,245	)			(1,700,087	)
Other income (expense)
Interest, net			(15,042	)			(5,126	)			(11,927	)			(15,722	)
Forfeit on deposit of land			–				–				–				(25,000	)
Net loss before income taxes			(968,461	)			(845,026	)			(1,298,172	)			(1,740,809	)
Provision for income taxes			–				–				–				–
Net loss		$	(968,461	)		$	(845,026	)		$	(1,298,172	)		$	(1,740,809	)
Net loss per common share, basic		$	(0.07	)		$	(0.06	)		$	(0.10	)		$	(0.13	)
Net loss per common share, diluted		$	(0.07	)		$	(0.06	)		$	(0.10	)		$	(0.13	)
Weighted average common shares outstanding, basic			13,557,473				13,451,476				13,552,568				13,066,185
Weighted average common shares outstanding, diluted			13,557,473				13,451,476				13,552,568				13,066,185

 

See the accompanying notes to these condensed consolidated financial statements

 

 

SPORTS FIELD HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

		Six Months Ended June 30,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,298,172	)		$	(1,740,809	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			14,451				52,823
Amortization of debt issuance costs			8,967				-
Amortization of debt discount			8,967				-
Forfeit on deposit of land option			-				25,000
Loss on disposal of property, plant and equipment			-				31,547
Loss on settlement of related party loans receivable and payable			-				4,767
Common stock issued for employee separation			-				192,100
Common stock and options issued to consultants and employees			48,200				420,000
Changes in operating assets and liabilities:
Cash overdraft			-				(6,727	)
Accounts receivable			(85,042	)			(63,559	)
Prepaid expenses			(16,625	)			298
Inventory			62,289				(3,224	)
Accounts payable			381,370				(480,827	)
Costs and estimated earnings in excess of billings			(44,765	)			(207,276	)
Billings in excess of costs and estimated earnings			20,209				(39,843	)
Provision for estimated losses on uncompleted contracts			232,957				-
Increase in due from related party			-				(324	)
Net cash used in operating activities			(667,194	)			(1,816,054	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions			-				(350,000	)
Deposit on lease			-				(6,417	)
Deposit on land option			-				(25,000	)
Purchase of equipment			-				(18,888	)
Net cash used in investing activities			-				(400,305	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of convertible notes			450,000				-
Debt issuance costs			(45,000	)			-
Repayments of promissory notes			-				(391,183	)
Proceeds from common stock subscriptions			-				4,304,373
Repayments of notes payable			-				(23,591	)
Proceeds of related party advances			-				26,202
Net cash provided by financing activities			405,000				3,915,801
Increase (decrease) in cash			(262,194	)			1,699,442
Cash, beginning of period			523,492				475
Cash, end of period		$	261,298			$	1,699,917
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	-			$	15,722
Taxes		$	-			$	-
Non cash investing and financing activities:
Cancellation of founders shares		$	-			$	37
Shares added though acquisitions		$	-			$	15
Conversion of notes and accrued interest into common stock		$	-			$	333,688
Forgiveness of officer accrued salaries		$	-			$	81,279
Debt discount paid in the form of common shares		$	45,000			$	-
Stock issuance costs paid in the form of warrants		$	-			$	204,759

 

See the accompanying notes to these condensed consolidated financial statements

 

 

SPORTS FIELD HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 1 - DESCRIPTION OF BUSINESS

 

Sports Field Holdings, Inc. (“the Company”, “Sports Field Holdings”, “we”, “our”, or “us”) is a Nevada corporation engaged in product development, engineering, manufacturing, and the construction, design and building of athletic facilities, as well as supplying its own proprietary high end synthetic turf products to the sports industry.  The Company was formed September 7, 2012. Effective September 7, 2012, the Company acquired all of the membership interests and operations of Sports Field Contractors, LLC, an Illinois limited liability company formed July 7, 2011 in exchange for 6,225,000 shares of the Company’s common stock. The former members of Sports Field Contractors, LLC owned all the Company’s common stock after the acquisition. All equity accounts have been retrospectively recast as a result of the acquisition.

 

The Company, through its wholly owned subsidiaries, is a product development, engineering, manufacturing and construction company that designs, engineers and builds athletic facilities, as well as supplies its own proprietary technologically advanced, synthetic turf products to the industry. The Company is headquartered at 4320 Winfield Road, Suite 200, Warrenville, IL 60555.

 

On May 13, 2014, The Board of Directors ratified the incorporation of Sports Field Engineering, Inc. and Athletic Construction Enterprises, Inc., which became subsidiaries of the Company.

 

On June 16, 2014, Anglesea Enterprises (“Anglesea”), Inc. a Nevada corporation , Anglesea Enterprises Acquisition Corp, a Nevada corporation and wholly owned subsidiary of Anglesea (“Merger Sub”), Sports Field Holdings, Inc. (“Sports Field”), Leslie Toups and Edward Mass Jr., as individuals (the “Majority Shareholders”), entered into an Acquisition Agreement and Plan of Merger (the “Agreement”) pursuant to which Sports Field was merged with and into the Merger Sub, with Sports Field surviving as a wholly owned subsidiary of Anglesea (the “Merger”). The transaction (the “Closing”) took place on June 16, 2014 (the “Closing Date”). Anglesea acquired, through a reverse triangular merger, all of the outstanding capital stock of Sports Field in exchange for issuing Sports Field’s shareholders the same number of shares of Anglesea’s common stock. Immediately after the Merger was consummated, and further to the Agreement, the majority shareholders and certain affiliates of Anglesea cancelled a total of 64,500,000 shares of the Anglesea’s common stock held by them (the “Cancellation”). In consideration of the cancellation of such common stock, Sports Field paid the Majority Shareholders an aggregate of $365,000 and released the other affiliates from certain liabilities. In addition, the Company has agreed to spinout to the Majority Shareholders any and all assets and liabilities related to the Anglesea’s website development business within 30 days after the closing. As a result of the Merger and the Cancellation, the Sports Field Shareholders became the majority shareholders of the Company.

 

Upon completion of the Merger, on June 16, 2014, Anglesea merged with Sports Field in a shortform merger transaction (the “Short Form Merger”) under Nevada law. Upon completion of the Short Form Merger, Anglesea became the parent company of the Sports Field’s wholly owned subsidiaries, Sports Field Contractors LLC, Sports Field Engineering, Inc. and Athletic Construction Enterprises, Inc. In connection with the Short Form Merger, Angelsea changed its name to Sports Field Holdings, Inc.

 

Our condensed consolidated financial statements include the accounts of Sports Field Holdings, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

 

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 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 (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The condensed consolidated balance sheet as of December 31, 2014 contained herein has been derived from audited financial statements.

 

Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of results that may be expected for the year ending December 31, 2015. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2014.

 

 

Revenues and Cost Recognition

 

Revenues from construction contracts are included in contract revenue in the consolidated statements of operations and are recognized under the percentage-of-completion accounting method. The percent complete is measured by the cost incurred to date compared to the estimated total cost of each project. This method is used as management considers expended cost to be the best available measure of progress on these contracts, the majority of which are completed within one year, but may occasionally extend beyond one year. Inherent uncertainties in estimating costs make it at least reasonably possible that the estimates used will change within the near term and over the life of the contracts.

 

Contract costs include all direct material and labor costs and those indirect costs related to contract performance and completion. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. General and administrative costs are charged to expense as incurred.

 

Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined.

 

Costs and estimated earnings in excess of billings are comprised principally of revenue recognized on contracts (on the percentage-of-completion method) for which billings had not been presented to customers because the amounts were not billable under the contract terms at the balance sheet date. In accordance with the contract terms, any unbilled receivables at period end will be billed subsequently. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based compensation.

 

Stock-Based Compensation

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the condensed consolidated statements of operations as compensation or other expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued.

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit.

  

Net Income (Loss) Per Common Share

 

The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, “Earnings Per Share” (“ASC 260-10”). Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year.  Diluted net income (loss) per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the period. For the six months ended June 30, 2015, the Company had 500,000 and 57,500 potentially outstanding shares of common stock from warrants and options, respectively, excluded from the diluted net loss per share calculation because they were anti-dilutive. For the six months ended June 30, 2014, the Company had 500,000 potentially outstanding shares of common stock from warrants excluded from the diluted net loss per share calculation because they were anti-dilutive.

 

Significant Customers

 

At June 30, 2015, the Company had one customer representing 96% of the total accounts receivable balance.

 

At December 31, 2014, the Company had no customers representing at least 10% of the total accounts receivable balance.

 

For the three months ended June 30, 2015, the Company had two customers that represented 74% and 16% of the total revenue and for the three months ended June 30, 2014, the Company had two customers that represented 57% and 33% of the total revenue.

 

For the six months ended June 30, 2015, the Company had two customers that represented 45% and 49% of the total revenue and for the six months ended June 30, 2014, the Company had four customers that represented 36%, 16%, 16% and 21% of the total revenue.

 

 

Recent Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. On July 9th the effective date was delayed one year by a vote by the FASB. Public business entities, certain not-for-profit entities, and certain employee benefit plans would apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application would be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-12, Compensation-Stock Compensation . The amendments in this update apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF-13D-Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the effects of ASU 2014-12 on the condensed consolidated financial statements.

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of Financial Statements-Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on the condensed consolidated financial statements.

 

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest-Imputation of Interest. To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this update. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-250-Interest-Imputation of Interest (Subtopic 835-30), which has been deleted. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on the condensed consolidated financial statements.

 

NOTE 3 - GOING CONCERN

 

As reflected in the accompanying condensed consolidated financial statements, the Company has a cash balance of $261,298 and a working capital deficit of $947,853. Furthermore, the Company had a net loss and net cash used in operations of $1,298,172 and $667,194, respectively, for the six months ended June 30, 2015 and an accumulated deficit totaling $8,229,533. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The ability of the Company to continue its operations as a going concern is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including but not limited to term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.

 

 

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 4 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROCESS

 

Following is a summary of costs, billings, and estimated earnings on contracts in process as June 30, 2015 and December 31, 2014:

  

		June 30,				December 31,
		2015				2014
Costs incurred on contracts in progress		$	2,313,452			$	927,601
Estimated earnings (losses)			(412,515	)			(207,601	)
			1,900,937				720,000
Less billings to date			(2,129,838	)			(740,500	)
		$	(228,901	)		$	(20,500	)

 

The above accounts are shown in the accompanying consolidated balance sheet under these captions at June 30, 2015 and December 31, 2014:

 

		June 30,				December 31,
		2015				2014
Costs and estimated earnings in excess of billings		$	44,765			$	-
Billings in excess of costs and estimated earnings			(40,709	)			(20,500	)
Provision for estimated  losses on uncompleted contracts			(232,957	)			-
		$	(228,901	)		$	(20,500	)

 

Warranty Costs

 

During the six months ended June 30, 2015 the Company incurred costs of approximately $206,000 relating to the installation of materials by a subcontractor that has been released from the Company. The Company has implemented policies and procedures to avoid these costs in the future. The Company generally provides a warranty on the products installed for up to 8 years with certain limitations and exclusions based upon the manufacturer’s product warranty; therefore the Company does not believe a warranty reserve is required as of June 30, 2015.

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE

 

On May 7, 2015, the Company issued unsecured convertible promissory notes in an aggregate principal amount of $450,000 to three accredited investors through a private placement. The notes bear interest at 9% per annum and mature on February 1, 2016 unless the notes are converted into common stock if the Company undertakes a qualified offering of securities of at least $2,000,000 (the “Qualified Offering”). The principal of the notes are convertible into shares of common stock at a conversion price that is the lower of $1.00 per share or the price per share offered in a Qualified Offering. In order to induce the investors to invest in the notes, one of the Company’s shareholders assigned an aggregate of 45,000 shares of his common stock to such investors. The Company recorded a $45,000 debt discount relating to the 45,000 shares of common stock issued with an offsetting entry to additional paid in capital. The debt discount shall be amortized to interest expense over the life of the notes. The outstanding principal balance on the notes at June 30, 2015 was $450,000.

 

NOTE 6 - STOCKHOLDERS EQUITY (DEFICIT)

 

There is not yet a viable market for the Company’s common stock to determine its fair value, therefore management is required to estimate the fair value to be utilized in the determining stock-based compensation costs. In estimating the fair value, management considers recent sales of its common stock to independent qualified investors and other factors. Considerable management judgment is necessary to estimate the fair value.  Accordingly, actual results could vary significantly from management’s estimates.

 

 

Stock-Based Compensation

 

On April 1, 2015, 20,000 restricted shares were granted to a certain employee with a fair value of $20,000. The restricted shares vest over a one year period - 25% three months from the date of issue and the remaining shares vesting quarterly until the end of the term. The Company has recorded $5,000 in stock–based compensation expense for the three months ended June 30, 2015 for the shares that have vested, which is a component of general and administrative expenses in the Condensed Consolidated Statement of Operations.

 

The Company uses the Black-Scholes option pricing model to determine the fair value of the options and warrants granted. In applying the Black-Scholes option pricing model to options warrants granted, the Company used the following weighted average assumptions:

 

		For The Six Months Ended June 30,
		2015				2014
Risk free interest rate			1.47-1.83	%			1.49-1.64	%
Dividend yield			0.00	%			0.00	%
Expected volatility			45	%			45	%
Expected life in years			5				5
Forfeiture Rate			0.00	%			0.00	%

 

Since the Company has no trading history, volatility was determined by averaging volatilities of comparable companies.

  

The following is a summary of the Company’s stock option activity during the six months ended June 30, 2015:

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life
Outstanding - January 1, 2015			-			$	-				-
Granted			230,000				1.07				4.85
Exercised			-				-
Forfeited/Cancelled			-				-
Outstanding - June 30, 2015			230,000			$	1.07				4.60
Exercisable - June 30, 2015			57,500			$	1.07				4.60

 

At June 30, 2015, the total intrinsic value of options outstanding and exercisable was $0.

 

Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $23,201 and $0 for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, the remaining balance of unamortized expense is $67,749 and is expected to be amortized over a remaining period of 1.50 years.

 

Stock Warrants

 

The following is a summary of the Company’s stock warrant activity during the six months ended June 30, 2015:

 

		Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life
Outstanding - January 1, 2015			500,000			$	1.00				4.09
Granted			-				-				-
Exercised			-				-
Forfeited/Cancelled			-				-
Outstanding - June 30, 2015			500,000			$	1.00				3.59
Exercisable - June 30, 2015			500,000			$	1.00				3.59

 

At June 30, 2015, the total intrinsic value of warrants outstanding and exercisable was $0.

 

 

NOTE 7 - RELATED PARTY TRANSACTIONS

 

Jeromy Olson, the Chief Executive Officer of the Company, owns 33.3% of a sales management and consulting firm, NexPhase Global that provides sales services to the Company. Consulting expenses pertaining to the firm’s services were $40,000 and $80,000 for the three and six months ended June 30, 2015, respectively. Included in consulting expense for the three and six months ended June 30, 2015 were 10,000 and 20,000 shares of common stock valued at $10,000 and $20,000, respectively, issued to Nexphase Global.

 

Consulting expenses pertaining to the firm’s services were $92,000 and $92,000 for the three and six months ended June 30, 2014, respectively. Included in consulting expense for the three and six months ended June 30, 2014 were 70,000 shares of common stock valued at $70,000 issued to Nexphase Global.

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

Director Agreement

 

On January 29, 2015, the Company entered into a director agreement (“Director Agreement”) with Tracy Burzycki, concurrent with Ms. Burzycki’s appointment to the Board of Directors of the Company (the “Board”) effective January 29, 2015. The Director Agreement may, at the option of the Board, be automatically renewed on such date that Ms. Burzycki is re-elected to the Board. Pursuant to the Director Agreement, Ms. Burzycki is to be paid a stipend of $1,000 per meeting of the Board, which shall be contingent upon her attendance at the meetings being in person, rather than via telephone or some other electronic medium. Additionally, Ms. Burzycki received non-qualified stock options to purchase 200,000 common shares at an exercise price of $1.00 per share. The options shall vest in equal amounts over a period of two years at the rate of 25,000 shares per quarter on the last day of each such quarter, commencing in the first quarter of 2015. The total grant date value of the options was $82,140.

 

Litigation

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not party to any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Operating Leases

 

Rent expense was $12,017 and $14,408 for the six months ended June 30, 2015 and 2014, respectively.

 

Future minimum payments of the Company’s leases are as follows:

 

2015 (remainder of year)		$	14,996
2016			26,141
2017			6,563
		$	47,700

 

NOTE 9 - SUBSEQUENT EVENTS

 

On August 19, 2015 (the “Initial Closing Date”), we entered into a Securities Purchase Agreement (the “Agreement”) with a private investor (the “Investor”). Under the Agreement, the Investor agreed to purchase convertible debentures in the aggregate principal amount of up to $450,000 (together the “Debentures” and each individual issuance a “Debenture”), bearing interest at a rate of 0% per annum, with maturity on the thirty-six (36) month anniversary of the respective date of issuance.

 

On the Initial Closing Date, we issued and sold to the Investor, and the Investor purchased from us, a first Debenture in the principal amount of $150,000 for a purchase price of $135,000. The Agreement provides that, subject to our compliance with certain conditions to closing, at the request of the Company and approval by the Investor, (i) we will issue and sell to the Investor, and the Investor will purchase from us, a second Debenture in the principal amount of $150,000 for a purchase price of $135,000 and (ii) thereafter, we will issue and sell to the Investor, and the Investor will purchase from us, a third Debenture in the principal amount of $150,000 for a purchase price of $135,000.

 

We will use the proceeds from the Debentures for general working capital purposes.

 

The principal amount of the Debentures can be converted at the option of the Investor into shares of our common stock at a conversion price per share of $1.00 until the six month anniversary of each closing date.  If the Debenture is not repaid within six months, the Investor will be able to convert such Debenture at a conversion price equal to 65% of the lowest closing bid price for our common stock during the previous 20 trading days, subject to the terms and conditions contained in the Debenture. If the Debentures are repaid within 90 days of the date of issuance, there is no prepayment penalty or premium.  Following such time, a prepayment penalty or premium will apply.  As part of the transaction, we agreed to pay the Investor $5,000 and issue 25,000 shares of our Common Stock for certain due diligence and other transaction related costs.

 

The Debentures are issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and therefore are not registered under the Securities Act.

 

The descriptions of the Agreement and the Debentures set forth above are qualified in their entirety by reference to the full extent of such documents.

 

 

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

  

This quarterly report on Form 10-Q and other reports filed by Sports Field Holdings, Inc. (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Business Overview

 

Sports Field Holdings, Inc. is a product development, engineering, manufacturing and construction company that designs and builds athletic facilities, as well as supplies its own proprietary high end synthetic turf products to the sports industry. 

 

According to the Synthetic Turf Council, in 2012, over 1000 new synthetic turf athletic fields were installed and in 2013 that estimate jumped to nearly 1300 and continues to climb every year. Much of this demand has been driven by the ever increasing shortfall of available play hours on athletic surfaces across the United States. The San Francisco Department of Parks and Recreation recently transitioned the majority of their grass fields to synthetic surfaces and was able to accommodate an additional 90,000 play hours per year. Additionally, due to the severe drought conditions in the Southwestern and Western United States, explosive growth in the synthetic turf market is occurring. Athletic fields, parks, playgrounds, residential and other traditionally grass covered areas are being replaced with synthetic surfaces. The state of California has used rebates to induce residents and public entities to transition away from natural grass in an effort to conserve water. Public and private schools, municipal parks and recreation departments, nonprofit and for profit sports venue businesses, residential and commercial landscaping have begun making the transition to synthetic turf products due to the spiraling costs associated with maintaining natural grass athletic fields, the demand for increased playing time, shortage of water as a resource, durability of the playing surface and the ability to play on that surface in any weather condition.

 

As synthetic turf athletic fields and synthetic turf have truly become a viable alternative to natural grass fields, there are a number of technical issues that have arisen through the development of turf and the systems designed around its installation. Sports Field has focused on addressing the main technical issues that still remain with synthetic turf athletic fields and synthetic turf. These include issues such as the safety of the materials used to infill the turf system, appropriate and high functioning drainage capacity and cost saving construction methods.

 

 

The technical issues mentioned above are magnified when athlete performance is considered. To exclude crumb rubber and maintain acceptable Gmax measurements to avoid concussive injuries can be difficult. Utilizing higher face weight synthetic materials, shock pads and innovative infill materials, Sports Field can now deliver high performance products without sacrificing athlete safety.

 

Summary of Statements of Operations for the Three Months Ended June 30, 2015 and 2014:

 

		Three Months Ended
		June 30, 2015				June 30, 2014
Revenue		$	896,034			$	203,452
Gross profit (loss)		$	(173,318	)		$	(46,341	)
Operating expenses		$	780,101			$	793,559
Net loss from operations		$	(953,419	)		$	(839,900	)
Other income (expense)		$	(15,042	)		$	(5,126	)
Net loss		$	(968,461	)		$	(845,026	)
Loss per common share - basic and diluted		$	(0.07	)		$	(0.06	)

 

Bookings/Backlog

 

Sales contracts signed for the three months ended June 30, 2015 were approximately $2,031,000 compared to $1,037,000 in sales contracts signed for the three months ended June 30, 2014, an increase of $994,000. This resulted in a backlog of approximately $2,371,000 as of June 30, 2015 compared to $834,000 as of June 30, 2014. Although timing for completion of the backlog varies depending on the job and can be as long as one year, we believe a significant portion of our current backlog will be completed within the next four months. Included in the backlog are all executed sales contracts, less any amounts which have been previously billed or recognized as a component of our percentage-of-completion calculations. Management utilizes the backlog to assist it in gauging projected revenues and profits; however, it does not provide an assurance of future achievement of revenues or profits as, for example, sales contract cancellations or job delays are possible.

 

Revenue

 

Revenue was $896,034 for the three months ended June 30, 2015, as compared to $203,452 for the three months ended June 30, 2014, an increase of $692,582. The increase in revenue is primarily attributable to the Company’s execution of its 2014 sales and marketing initiatives including the hiring a professional sales team in April 2014. The substantial increase in revenue was due to the subsequent capture of several large sales contracts with substantial work completed on two of those projects in the first and second quarter of 2015.

 

Gross Profit (Loss)

 

The Company generated a gross profit (loss) of $(173,318), resulting in a negative gross profit margin of (19.3%), during the three months ended June 30, 2015 as compared to a gross profit (loss) of $(46,341) and a negative gross profit margin of (22.8%) during the three months ended June 30, 2014. Negative gross profit percentage decreased from (22.8%) for the three months ended June 30, 2014 to (19.3%) for the three months ended June 30, 2015. The Company recorded a projected loss on a project started during the 2^nd quarter of 2015 of approximately $222,000 during the three months ended June 30, 2015. This increased loss was due to a historical project that was bid at lower than current acceptable margins. The Company has put in procedures to ensure all future bids are submitted at acceptable profit margins.

 

 

Operating Expenses

 

Operating expenses for the three months ended June 30, 2015, were $780,101, compared to $793,559 for the three months ended June 30, 2014, a decrease of $13,458. In the current period the Company incurred warranty costs which that company believes will not be recurring and commission costs that were not incurred in the prior comparable period. In the prior period, the Company incurred costs in conjunction with the Company becoming a publically traded company that were not incurred in the current comparable period.

 

Other Income (Expenses)

 

Other income (expenses) for the three months ended June 30, 2015, were $(15,042), as compared to $(5,126) for the three months ended June 30, 2014. The increase is primarily attributable to an increase in interest expense recorded on convertible notes issued during the current period.

 

Net Loss

 

The net loss for the three months ended June 30, 2015 was $968,461, or a basic and diluted loss per share of $0.07, as compared to a net loss of $845,026, or a basic and diluted loss per share of $0.06, for the three months ended June 30, 2014. This net loss is attributed directly to losses from a legacy project that was bid and implemented by the prior management team and extremely aggressive project bids from prior management that were issued to build fields in strategic geographic locations. Since the hiring of our new Director of Project Management we have eliminated such bidding practices.

 

Summary of Statements of Operations for the Six Months Ended June 30, 2015 and 2014:

 

		Six Months Ended
		June 30, 2015				June 30, 2014
Revenue		$	1,413,894			$	322,085
Gross profit (loss)		$	(57,196	)		$	(20,806	)
Operating expenses		$	1,229,049			$	1,679,281
Net loss from operations		$	(1,286,245	)		$	(1,700,087	)
Other income (expense)		$	(11,927	)		$	(40,722	)
Net loss		$	(1,298,172	)		$	(1,740,809	)
Loss per common share - basic and diluted		$	(0.10	)		$	(0.13	)

 

Bookings/Backlog

 

Sales contracts signed for the six months ended June 30, 2015 were approximately $3,735,000 compared to $1,046,000 in sales contracts signed for the six months ended June 30, 2014, an increase of $2,689,000. This resulted in a backlog of approximately $2,371,000 as of June 30, 2015 compared to $463,000 as of June 30, 2014. Although timing for completion of the backlog varies depending on the job mix and can be as long as one year, we believe a significant portion of our current backlog will be completed within the next four months. Included in the backlog are all executed sales contracts, less any amounts which have been previously billed or recognized as a component of our percentage-of-completion calculations. Management utilizes the backlog to assist it in gauging projected revenues and profits; however, it does not provide an assurance of future achievement of revenues or profits as, for example, sales contract cancellations or job delays are possible.  

 

Revenue

 

Revenue was $1,413,894 for the six months ended June 30, 2015, as compared to $322,085 for the six months ended June 30, 2014, an increase of $1,091,809. The increase in revenue is primarily attributable to the Company’s execution of its 2014 sales and marketing initiatives including the hiring a professional sales team in April 2014. The substantial increase in revenue was due to the subsequent capture of several large sales contracts with substantial work completed on two of those projects in the first and second quarter of 2015.

 

 

Gross Profit (Loss)

 

The Company generated a gross profit (loss) of $(57,196), resulting in a negative gross profit margin of (4.0%), during the six months ended June 30, 2015 as compared to a gross profit (loss) of $(20,806) and a negative gross profit margin of (6.5%) during the six months ended June 30, 2014. Negative gross profit percentage decreased from (6.5%) for the six months ended June 30, 2014 to (4.0%) for the six months ended June 30, 2015. The Company recorded projected losses on two projects starting during the 1^st and 2^nd quarters of 2015 of approximately $246,000 during the six months ended June 30, 2015. This increased loss was due to a historical project that was bid at lower than current acceptable margins. The Company has put in procedures to ensure all future bids are submitted at acceptable profit margins.

 

Operating Expenses

 

Operating expenses for the six months ended June 30, 2015, were $1,229,049, compared to $1,679,281 for the six months ended June 30, 2014, a decrease of $450,232. In the current period the Company incurred warranty costs and commission costs that were not incurred in the prior comparable period. In the prior period, the Company incurred costs in conjunction with the Company becoming a publically traded that were not incurred in the current comparable period.

 

Other Income (Expenses)

 

Other income (expenses) for the six months ended June 30, 2015, were $(11,927), as compared to $(40,722) for the six months ended June 30, 2014. The decrease is primarily attributable to the $25,000 expense for the forfeiture on a deposit related to prior management’s decision to purchase land during the six months ended June 30, 2014.The decrease was partially offset due to an increase in interest expense recorded on convertible notes issued during the current period. 

 

Net Loss

 

The net loss for the six months ended June 30, 2015 was $1,298,172, or a basic and diluted loss per share of $0.10, as compared to a net loss of $1,740,809, or a basic and diluted loss per share of $0.13, for the six months ended June 30, 2014. The decrease in the net loss is primarily attributable to the Company incurring costs in conjunction with the Company’s plans to go public that were not incurred in the current comparable period the positive impact was minimized by the afore mentioned warranty costs and decrease in gross profit margin during the current period as discussed above.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at June 30, 2015, compared to December 31, 2014:

 

		June 30, 2015				December 31, 2014				Increase/ (Decrease)
Current Assets		$	515,569			$	657,587			$	(142,018	)
Current Liabilities		$	1,463,422			$	414,919			$	1,048,503
Working Capital (Deficit)		$	(947,853	)		$	242,668			$	(1,190,521	)

 

At June 30, 2015, we had working capital deficit of $947,853 as compared to a working capital of $242,668 at December 31, 2014, a decrease of $1,190,521. The decrease in working capital is primarily attributable to the continued operating losses for the six months ended June 30, 2015.

 

Net Cash

 

Net cash used in operating activities for the six months ended June 30, 2015 and 2014 was $667,194 and $1,816,054, respectively. The decrease in the net cash used for operating activities is primarily attributable to the decrease in the net loss for the six months ended June 30, 2015 of $1,298,172 as compared to the net loss for the six months ended June 30, 2014 of $1,740,809. Furthermore, during the six months ended June 30, 2014, the Company used some of the net proceeds received from the private placement of common stock to reduce its accounts payable.

 

 

Net cash used in investing activities during the six months ended June 30, 2015 was $0 compared to $400,305 for the six months ended June 30, 2014. The decrease is primarily attributable to $350,000 in merger related acquisition costs and $25,000 for the forfeiture on a deposit to purchase land during the six months ended June 30, 2014. 

 

Financings

 

Net cash provided by financing activities for the six months ended June 30, 2015 and 2014 was $405,000 and $3,915,801, respectively. During the six months ended June 30, 2015, the Company received $450,000 in gross proceeds from the issuance of convertible notes and paid $45,000 in debt issuance costs relating to the notes. During the six months ended June 30, 2014, the Company received approximately $4.3 million in net proceeds received from a private placement of its common stock and repaid $391,183 in promissory notes and accrued interest on those notes.

 

Going Concern

 

As reflected in the accompanying condensed financial statements, the Company has cash balance of $261,298 and a working capital deficit of $947,853. Furthermore, the Company had a net loss and net cash used in operations of $1,298,172 and $667,194, respectively, for the six months ended June 30, 2015 and an accumulated deficit totaling $8,229,533. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The ability of the Company to continue its operations as a going concern is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.

 

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2015 and December 31, 2014, the Company had no off-balance sheet arrangements.

 

Critical Accounting Policies

 

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

Revenue and Cost Recognition

 

Revenues from construction contracts are included in contract revenue in the consolidated statements of operations and are recognized under the percentage-of-completion accounting method. The percent complete is measured by the cost incurred to date compared to the estimated total cost of each project. This method is used as management considers expended cost to be the best available measure of progress on these contracts, the majority of which are completed within one year, but may occasionally extend beyond one year. Inherent uncertainties in estimating costs make it at least reasonably possible that the estimates used will change within the near term and over the life of the contracts.

 

 

Contract costs include all direct material and labor costs and those indirect costs related to contract performance and completion. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. General and administrative costs are charged to expense as incurred.

 

Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined.

 

Costs and estimated earnings in excess of billings are comprised principally of revenue recognized on contracts (on the percentage-of-completion method) for which billings had not been presented to customers because the amount were not billable under the contract terms at the balance sheet date. In accordance with the contract terms, any unbilled receivables at period end will be billed subsequently. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized.  

 

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 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.

 

The Company’s significant estimates and assumptions include accounts receivable allowance for doubtful accounts, percentage of completion revenue recognition method, the useful life of fixed assets and assumptions used in the fair value of stock-based compensation. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

 

Stock-Based Compensation 

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued.

  

Fair Value of Financial Instruments

 

Accounting Standards Codification subtopic 825-10, “Financial Instruments” (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.  All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

 

Recent Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. On July 9th the effective date was delayed one year by a vote by the FASB. Public business entities, certain not-for-profit entities, and certain employee benefit plans would apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application would be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-12, Compensation- Stock Compensation . The amendments in this update apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF-13D-Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the effects of ASU 2014-12 on the condensed consolidated financial statements.

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of Financial Statements- Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on the condensed consolidated financial statements.

 

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest-Imputation of Interest. To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this update. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-250-Interest-Imputation of Interest (Subtopic 835-30), which has been deleted. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on the condensed consolidated financial statements.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

Pursuant to Rule 13a- 15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.

 

(b) Changes in Internal Control over Financial Reporting.

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Except as set forth below we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

The Company is engaged in an administrative proceeding against a former employee who was terminated from his positions with the Company for cause on May 12, 2014. The former employee has claimed he is due between $24,000 and $48,000 in unpaid wages. The Company believes this claim to be unfounded and is continuing to vigorously defend itself.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on April 15, 2015.

 

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

 

There were no unregistered sales of equity securities for the quarter ended June 30, 2015 that were not otherwise disclosed or required to be reported on a Current Report on Form 8-K. 

 

Item 3. Defaults Upon Senior Securities.

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

On August 19, 2015 (the “Initial Closing Date”), we entered into a Securities Purchase Agreement (the “Agreement”) with a private investor (the “Investor”). Under the Agreement, the Investor agreed to purchase convertible debentures in the aggregate principal amount of up to $450,000 (together the “Debentures” and each individual issuance a “Debenture”), bearing interest at a rate of 0% per annum, with maturity on the thirty-six (36) month anniversary of the respective date of issuance.

 

On the Initial Closing Date, we issued and sold to the Investor, and the Investor purchased from us, a first Debenture in the principal amount of $150,000 for a purchase price of $135,000. The Agreement provides that, subject to our compliance with certain conditions to closing, at the request of the Company and approval by the Investor, (i) we will issue and sell to the Investor, and the Investor will purchase from us, a second Debenture in the principal amount of $150,000 for a purchase price of $135,000 and (ii) thereafter, we will issue and sell to the Investor, and the Investor will purchase from us, a third Debenture in the principal amount of $150,000 for a purchase price of $135,000.

 

We will use the proceeds from the Debentures for general working capital purposes.

 

The principal amount of the Debentures can be converted at the option of the Investor into shares of our common stock at a conversion price per share of $1.00 until the six month anniversary of each closing date.  If the Debenture is not repaid within six months, the Investor will be able to convert such Debenture at a conversion price equal to 65% of the lowest closing bid price for our common stock during the previous 20 trading days, subject to the terms and conditions contained in the Debenture. If the Debentures are repaid within 90 days of the date of issuance, there is no prepayment penalty or premium.  Following such time, a prepayment penalty or premium will apply.  As part of the transaction, we agreed to pay the Investor $5,000 and issue 25,000 shares of our Common Stock for certain due diligence and other transaction related costs.

 

The Debentures are issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and therefore are not registered under the Securities Act.

 

The descriptions of the Agreement and the Debentures set forth above are qualified in their entirety by reference to the full extent of such documents.

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2		Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase *
101.DEF		XBRL Taxonomy Extension Definition Linkbase *
101.LAB		XBRL Taxonomy Extension Label Linkbase *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase *

 

* Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	SPORTS FIELD HOLDINGS, INC.
Date: August 19, 2015	By:	/s/ Jeromy Olson
	Name:	Jeromy Olson
	Title:	Chief Executive Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer)

 

 

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