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EX-32 - CERTIFICATION - Poverty Dignified, Inc.povd_ex32.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: November 30, 2016

 

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

 

For the transition period from: ____________ to _____________

 

Comission file number: 000-55558

 

Poverty Dignified, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

46-3754609

(State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification Number)

 

10617 Kettering Drive, Suite 219

Charlotte, NC 28226

Telephone No.: (719) 761-1869

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

  

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Check whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 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 x (Not required by smaller reporting companies)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting Company.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting Company

x

(Do not check if a 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 o No x

 

As of January 12, 2017, there were 8,035,515 shares of the registrant's common stock issued and outstanding.

 

 
 
 

 

Poverty Dignified, Inc.

 

Quarterly Report on Form 10-Q

Table of Contents

 

Page
Number

PART I FINANCIAL INFORMATION

Item 1

Financial Statements

3

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3

Quantitative and Qualitative Disclosures About Market Risk

17

Item 4

Controls and Procedures

17

PART II OTHER INFORMATION

Item 1

Legal Proceedings

19

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

19

Item 3

Defaults Upon Senior Securities

19

Item 4

Mine Safety Disclosures

19

Item 5

Other Information

19

Item 6

Exhibits

20


 
2
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PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

Poverty Dignified, Inc.

Consolidated Balance Sheets

 

 

 

November 30,
2016

 

 

August 31,
2016

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash 

 

$52,225

 

 

$20,557

 

Prepaid inventory

 

 

110,970

 

 

 

110,970

 

Prepaid expenses and other current assets

 

 

21,134

 

 

 

13,493

 

Total current assets

 

 

184,329

 

 

 

145,020

 

Property and equipment, net

 

 

141

 

 

 

275

 

Total assets

 

$184,470

 

 

$145,295

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$83,092

 

 

$80,557

 

Notes payable - related party

 

 

241,147

 

 

 

340,195

 

Accrued payroll expenses

 

 

547,701

 

 

 

477,533

 

Accrued expenses

 

 

3,475

 

 

 

4,607

 

Deferred revenue

 

 

219,847

 

 

 

210,612

 

Due to officer

 

 

5,364

 

 

 

5,497

 

Total current liabilities

 

 

1,100,626

 

 

 

1,119,001

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Preferred stock par value $.0001: 10,000,000 shares authorized; no shares issued and outstanding

 

 

-

 

 

 

-

 

Common stock par value $.0001: 100,000,000 shares authorized; 7,927,515 and 7,328,848 shares issued and outstanding as of November 30, 2016 and August 31, 2016

 

 

799

 

 

 

733

 

Additional paid in capital

 

 

7,723,132

 

 

 

7,274,198

 

Accumulated deficit

 

 

(8,630,746)

 

 

(8,244,672)

Accumulated other comprehensive loss

 

 

(9,341)

 

 

(3,965)

Total stockholders' equity (deficit)

 

 

(916,156)

 

 

(973,706)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

 

$184,470

 

 

$145,295

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
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Poverty Dignified, Inc.

Consolidated Statements of Operations

Unaudited

 

 

 

Three Months Ended

 

 

 

November 30,
2016

 

 

November 30,
2015

 

 

 

 

 

 

 

 

Franchise revenue

 

$3,613

 

 

$-

 

 

 

 

 

 

 

 

 

 

Franchise and operating expenses

 

 

 

 

 

 

 

 

Franchise expenses

 

 

17,081

 

 

 

-

 

Research and development

 

 

306

 

 

 

7,500

 

Professional fees

 

 

57,907

 

 

 

4,906

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

 

 

 

 

 

 

Payroll

 

 

155,623

 

 

 

130,972

 

Advertising

 

 

49,003

 

 

 

-

 

Travel

 

 

69,953

 

 

 

1,820

 

Other

 

 

39,814

 

 

 

11,642

 

Total general and administrative

 

 

314,393

 

 

 

144,434

 

 

 

 

 

 

 

 

 

 

Total franchise and operating expenses

 

 

389,687

 

 

 

156,840

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(386,074)

 

$(156,840)

 

 

 

 

 

 

 

 

 

Net loss per common share

 

 

 

 

 

 

 

 

 

-Basic and diluted

 

$(0.05)

 

$(0.02)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

-Basic and diluted

 

 

7,628,182

 

 

 

7,038,180

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
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Poverty Dignified, Inc.

Consolidated Statement of Changes in Stockholders' Equity (Deficit)

Unaudited

 

 

 

Common Stock

 

 

Additional

 

 

 

 

Accumulated
Other

 

 

Total
Stockholders'

 

 

 

Number of
Shares

 

 

Amount

 

 

Paid In
Capital

 

 

Accumulated
Deficit

 

 

Comprehensive
Loss

 

 

Equity
(Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at August 31, 2016

 

 

7,328,848

 

 

$733

 

 

$7,274,198

 

 

$(8,244,672)

 

$(3,965)

 

$(973,706)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock 

 

 

598,667

 

 

 

66

 

 

 

448,934

 

 

 

-

 

 

 

-

 

 

 

449,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(386,074)

 

 

-

 

 

 

(386,074)
Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,376)

 

 

(5,376)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at November 30, 2016

 

 

7,927,515

 

 

$799

 

 

$7,723,132

 

 

$(8,630,746)

 

$(9,341)

 

$(916,156)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
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Poverty Dignified, Inc.

Consolidated Statements of Cash Flows

Unaudited

 

 

Three Months Ended

 

 

 

November 30,
2016

 

 

November 30,
2015

 

 

 

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net loss

 

$(386,074)

 

$(156,840)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

134

 

 

 

133

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(7,641)

 

 

3,648

 

Accounts payable

 

 

2,535

 

 

 

(2,554)

Accrued payroll expenses

 

 

70,168

 

 

 

127,208

 

Accrued expenses

 

 

(1,132)

 

 

(754)

Deferred revenue

 

 

9,235

 

 

 

-

 

Net cash used in operating activities

 

 

(312,775)

 

 

(29,159)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Proceeds from notes payable - related party

 

 

-

 

 

 

31,184

 

Payments on notes payable - related party

 

 

(99,048)

 

 

-

 

Advances from (payments to) officer, net

 

 

(133)

 

 

(1,345)

Issuance of common stock 

 

 

449,000

 

 

 

-

 

Net cash provided by financing activities

 

 

349,819

 

 

 

29,839

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency translation

 

 

(5,376)

 

 

-

 

 

 

 

 

 

 

 

 

 

Net increase in cash 

 

 

31,668

 

 

 

680

 

Cash - beginning of period

 

 

20,557

 

 

 

573

 

Cash - end of period

 

$52,225

 

 

$1,253

 

 

 

 

 

 

 

 

 

 

Supplementary Disclosure Of Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$5,851

 

 

$1,282

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
6
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Poverty Dignified, Inc.

Notes to Unaudited Consolidated Financial Statements

November 30, 2016

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

  

Poverty Dignified, Inc. was incorporated in the State of Nevada on September 27, 2013, and is headquartered in Charlotte, North Carolina. The Company established itself as a business incubation company developing micro-franchise business concepts designed to affect the individual, community and local economy in rural and peri-urban areas across the globe. My Power Solutions, Inc., a wholly-owned subsidiary of Poverty Dignified, Inc., was incorporated in the State of Nevada on March 13, 2014 as a franchise business opportunity with Franchise Disclosure Documents for franchise sales in both the United States and South African markets. Africhise, Inc., a Delaware Corporation, was formed on August 28, 2015 and is the franchise management arm of My Power Solutions, Inc's franchise operations in Africa. These entities are collectively referred herein to as Poverty Dignified, or the Company.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they may not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

 

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s Form 10-K, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the year ended August 31, 2016. The interim results for the three months ended November 30, 2016 are not necessarily indicative of results for the full fiscal year.

 

The unaudited consolidated financial statements include the accounts of Poverty Dignified, Inc., My Power Solutions, Inc. and Africhise, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Going Concern and Management’s Plans

 

The accompanying 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. As of November 30, 2016, the Company had cash of $52,225; working capital deficit of $916,297 and a stockholders’ deficit of $916,156. The Company has incurred net losses from start-up costs and minimal operations since inception to November 30, 2016 and continues to expend cash in order to accomplish its business objectives. Based on the Company’s current progress in its business plan, it has not successfully implemented its plan to mitigate the going concern issue. Specifically, the Company has only sold three units, only one for which revenue has been recognized, and has not been effective in reducing operational expenses. As a result, as of November 30, 2016, these issues raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company's primary source of operating funds since inception has been equity financings through a private placement. In its private placement memorandum dated January 2014 and closed November 2014, the Company raised $1,182,180 for its operations, research and development, and marketing of its franchise opportunities. Additionally, the Company has borrowed funds from a related party for working capital purposes and $241,147 remains outstanding under notes payable to this related party at November 30, 2016.

 

 
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NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)

 

Going Concern and Management’s Plans (continued)

 

The Company needs to sell additional franchises or raise additional capital, reduce expenses and curtail cash outflows in order to be able to accomplish its business plan. In the interim, the Company will accrue for management salaries and defer certain payments until the franchise sales are finalized and will continue to borrow funds from affiliates as needed. Additionally, funds to equip franchise units are not expended until franchise agreements are executed and payment is received from the franchisee. Through November 30, 2016, we have sold three franchises. The Company has completed the services required to recognize revenue on one of the franchise units. As such, the Company has recognized franchise revenue of $123,000 and associated franchise expenses of $121,468 from inception through November 30, 2016. For certain portions of the three franchise units for which the Company has not completed the services required to recognize the associated revenue, the Company has deferred revenue of $219,847 at November 30, 2016. The Company’s long-term liquidity depends upon its ability to generate revenues from the sale of additional franchises. We estimate that it will require approximately 10 operational franchises for us to achieve profitability within the next 12 months. Management believes that it will be successful in closing the necessary franchise sales; however, no assurance can be provided that the Company will be able to do so.

 

The Company also has the ability to sell Master Franchise Agreements for various territories throughout Africa, which could generate sufficient cash to fund working capital needs. Poverty Dignified, Inc. is an "Incubation" company. The Company is constantly incubating other business concepts and technologies that will be wholly owned subsidiaries of Poverty Dignified. These concepts could contribute to the overall profitability of Poverty Dignified, Inc. and allow the necessary funds to be in place to offset any additional costs from the operations of My Power Solutions, Inc.

 

Poverty Dignified, Inc. currently has open a Private Investment in Public Equity transaction, in which the Company is offering 1,000,000 unregistered shares to accredited investors at a discounted price of $0.75 per share to raise an additional $750,000 of growth capital. During the second or third quarter of fiscal year 2017, Poverty Dignified, Inc. plans to ask for approval for a secondary offering. Upon approval, the Company plans to register 1,000,000 shares in an S-1 registration. Once "effective" by the SEC, these shares will be made available to the public market.

 

Risks and Uncertainties

 

The Company currently has franchise operations in South Africa and continues to explore other market opportunities in South Africa and Kenya. Poverty Dignified’s activities are subject to significant risks and uncertainties, including failing to secure funding to operationalize the franchise business concept.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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, disclosure of contingent assets and liabilities, and reported amounts of expenses in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Prepaid Inventory

 

Prepaid inventory consists of amounts paid in advance to a supplier for products related to the sale of franchise units that have not been received or for which the Company nor the franchisee have taken ownership.

 

Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consist of payments primarily related to a professional fee retainer, payroll advance and short-term deposits.

 

 
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Property and Equipment, Net

 

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally between three and five years. As of November 30, 2016 and August 31, 2016, property and equipment solely consists of computers. Accumulated depreciation as of November 30, 2016 and August 31, 2016 was $1,467 and $1,333, respectively and depreciation expense for each of the three month periods ended November 30, 2016 and 2015 was $134 and $133, respectively.

 

Accrued Expenses

 

Accrued expenses are recorded when incurred and primarily consist of accrued interest on notes payable and amounts due for supplies and travel. Accrued payroll consists of salary amounts earned but deferred by the Company's management team.

 

Revenue Recognition

 

The Company recognizes revenue once pervasive evidence that an agreement exists; the product and/or service have been rendered; the fee is fixed and determinable; and collection of the amount due is reasonably assured. Our franchise-related revenue is comprised of three separate and distinct earnings processes: area development fees, initial franchise fees, and continuing royalty payments.

 

Our area development fee consists of an initial, non-refundable payment of $15,000 per unit to be developed in consideration for the services we perform in preparation of executing each area development agreement. $5,000 of this initial area development fee relates to services, which include, but are not limited to, conducting market and territory analysis, are completed prior to our execution of the area development agreement and receipt of the corresponding area development fee. As a result, we recognize this portion of the area development fee as revenue upon receipt. The remaining $10,000 is allocated to the opening of the franchise and is recognized in accordance with our revenue recognition policy on initial franchise fee revenue noted below. As of November 30, 2016, the Company had not executed any area development agreements.

 

The Company executes franchise agreements that set the terms of its arrangement with each franchisee. The franchise agreements require the franchisee to pay an initial, non-refundable fee of $15,000. Initial franchise fee revenue from the sale of a franchise is recognized when the Company has substantially performed or satisfied all of its material obligations relating to the sale. Substantial performance has occurred when the Company has (a) performed substantially all of its initial services required by the franchise agreement, such as assistance in site selection, personnel training and implementation of an accounting and quality control system; and (b) completed all of its other material pre-opening obligations. Additionally, at the contract signing, the franchisee is required to fund $90,000 for purchases of equipment, inventory, point of sale software and computer hardware, furniture, fixtures and décor and signage and payment of import taxes and freight costs. Revenue for these items is recognized upon delivery of the assets. The Company defers revenue from the initial franchise fee and other amounts due at contract signing until the respective revenue recognition milestones are met. As of November 30, 2016, the Company had sold three franchise units. The Company has completed the services required to recognize the revenue for one of the franchise units. As such, the Company has recognized franchise revenue of $3,613 and associated franchise expenses of $17,081 for the three months ended November 30, 2016. For the remaining two franchise units for which the Company has not completed the services required to recognize revenue, the Company has deferred revenue of $219,847 at November 30, 2016. At August 31, 2016, the Company had recognized $119,387 of revenue on one franchise unit and had recorded deferred revenue of $210,612.

 

On an ongoing basis, royalties of 14% of gross revenues on authorized products and services will be recognized in the period in which they are earned. As of November 30, 2016, no royalties have been earned on the one franchise unit placed into operation.

 

 
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Advertising

 

Advertising expenditures are charged to expense as incurred. Total advertising expense for the three month periods ended November 30, 2016 and 2015 was $49,003 and $-0-, respectively, and is included in general and administrative expenses.

 

Research and Development

 

Research and development expenditures are charged to expense as incurred.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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.

 

Deferred tax assets are reduced by a valuation allowance, which is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Our judgment regarding the realization of deferred tax assets may change due to future profitability and market conditions, changes in U.S. or foreign tax laws and other factors. These changes, if any, may require material adjustments to these deferred tax assets and an accompanying reduction or increase in net income in the period when such determinations are made.

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.

 

The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the consolidated statements of income.

 

Tax years 2013 and forward remain open to examination under United States statute of limitations. Management is not aware of any material uncertain tax positions and no liability has been recognized at November 30, 2016 or August 31, 2016.

 

Earnings Per Share

 

Basic Earnings per share are computed based on the weighted-average number of common shares outstanding during each year, while diluted earnings per share are based on the weighted-average number of common shares and common share equivalents outstanding.

 

 
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Foreign Currency Translation

 

For financial reporting purposes, the functional currency of the foreign operations of My Power Solutions, Inc. is the local currency. The assets and liabilities of foreign operations for which the local currency is the functional currency are translated into the U.S. dollar at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average exchange rates during the period. The accumulated foreign currency translation adjustment is presented as a component of accumulated other comprehensive loss in the consolidated statement of changes in stockholders’ deficit.

 

Reclassifications

 

Certain amounts in the prior periods have been reclassified to conform to current period presentation. These reclassifications had no impact on previously reported stockholders’ deficit or net loss.

 

Recent Accounting Pronouncements

 

The Company has reviewed all recently issued, but not yet effective, Accounting Standards Updates (ASU) issued by the Financial Accounting Standards Board (FASB) and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of operations.

 

NOTE 3 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

In September 2013, the Company authorized the issue of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock at a par value of $.0001. There are a total of 7,927,515 and 7,328,848 shares of common stock issued and outstanding at November 30, 2016 and August 31, 2016, respectively. Preferred stockholders could receive preferential treatment relative to declared dividends, should there be any, and to distributions upon a liquidation event. As of November 30, 2016, no preferred stock has been issued

 

Since incorporation, the Company has raised capital through private sales of its common stock. As of November 30, 2016, of our 7,927,515 outstanding shares of common stock, 5,931,000 shares were issued to various stockholders in exchange services. Relative to those shares, since inception, the Company has recognized total expense of $5,931,000. No such shares were issued for services during the three months ended November 30, 2016.

 

Poverty Dignified, Inc. currently has open a Private Investment in Public Equity transaction, in which the Company is offering 1,000,000 unregistered shares to accredited investors at a discounted price of $0.75 per share to raise an additional $750,000 of growth capital. During the three months ended November 30, 2016, the Company sold 598,667 shares of common stock under this Private Investment in Public Equity offering for proceeds of $449,000.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

Under the terms of the Company's agreement with a supplier, as of November 30, 2016 and August 31, 2016, the Company was committed to purchase products related to the production of certain franchise units. The total commitment for the products is $110,970, all of which was paid prior to August 31, 2016 and is included in prepaid inventory to be provided to two franchise units at November 30, 2016 and August 31, 2016.

 

The Company maintains a month to month lease on its corporate headquarters location. The Company has a 12 month lease for its office in South Africa. The lease expires on May 31, 2017. As of November 30, 2016, total future minimum lease payments are $4,491.

 

 
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NOTE 5 – INCOME TAXES

 

Due to the operating loss and the inability to recognize an income tax benefit, there is no provision for current or deferred federal or state income taxes for the period from inception through November 30, 2016.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

 

The Company’s total deferred tax asset, calculated using federal and state effective tax rates is as follows:

 

 

 

November 30,
2016

 

 

 August 31,
2016

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$653,615

 

 

$517,790

 

Organization costs

 

 

99,806

 

 

 

101,703

 

Accrued payroll

 

 

191,695

 

 

 

190,497

 

Gross deferred tax asset

 

 

945,116

 

 

 

809,990

 

Valuation allowance

 

 

(945,116)

 

 

(809,990)

Net deferred tax asset

 

$-

 

 

$-

 

 

The Company has not recognized a deferred tax asset for its stock compensation expense due to its non-deductibility. The Company has no plans to pursue any tax benefits relative to its recognized stock compensation expense.

 

The reconciliation of income taxes computed at the federal statutory income tax rate of 35% to total income taxes for the three months ended November 30, 2016 and 2015 is as follows:

 

 

 

2016

 

 

2015

 

Income tax computed at the federal statutory rate

 

$(135,126)

 

$(54,894)

State income tax, net of federal tax benefit

 

 

-

 

 

 

-

 

Total

 

 

(135,126)

 

 

(54,894)

Change in valuation allowance

 

 

135,126

 

 

 

54,894

 

Provision for income taxes

 

$-

 

 

$-

 

 

Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased by $135,126 and $54,894 during the three months ended November 30, 2016 and 2015, respectively.

 

As of November 30, 2016, the Company had a federal and state net operating loss carryforward in the amount of $1,867,470. The net operating loss carryforward differs from the accumulated deficit incurred to date primarily due to the non-deductibility of stock compensation and organizational costs capitalized for income tax purposes. Our federal net operating losses will begin to expire in 2034 and our state tax loss carryforwards will begin to expire in 2029.

 

 
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NOTE 6 – RELATED PARTY TRANSACTIONS

 

During the three months ended November 30, 2015, the Company was reimbursed $27,524 by Power It Perfect, Inc., an affiliated company primarily owned by John K. Lowther (CEO and Director of the Company) and George C. Critz, III (CFO and Director of the Company) for the use of Company employees and various other expenses. This amount has been recorded as an offset to those expenses in the accompanying consolidated statements of operations. There were no such use of resources or reimbursements during the three months ended November 30, 2016.

 

Due to Officer

 

On March 13, 2015, John K. Lowther, Chief Executive Officer and Director, advanced the Company $12,916. The balance outstanding at November 30, 2016 and August 31, 2016 is $5,364 and $5,497, respectively. This advance does not bear interest.

 

Notes Payable – Related Party

 

During the year ended August 31, 2015, Power It Perfect, Inc. loaned the Company $194,500 for working capital purposes in exchange for three promissory notes of $175,000, $12,000 and $7,500, respectively, that all bear interest at five percent. During the year ended August 31, 2016, Power It Perfect, Inc. loaned the Company an additional $208,160 for working capital purposes in exchange for 18 promissory notes that all bear interest at five percent per annum. All the notes are non-collateralized and due on demand, as soon as the Company has a stream of revenue available for repayment. The balance of the notes payable was $241,147 at November 30, 2016 and $340,195 at August 31, 2016. Accrued interest on the notes, which is included in accrued expenses, totaled $66 at November 30, 2016 and $2,288 at August 31, 2016. There are no conversion provisions associated with the notes.

 

NOTE 7 – SUBSIDIARY OPERATIONS

 

Poverty Dignified, Inc. owns 100% of My Power Solutions, Inc., which holds and manages the Company’s franchise operations in Africa. The following represents summarized financial information of My Power Solutions, Inc.:

 

 

 

Three Months Ended

 

 

 

November 30,
2016

 

 

November 30,
2015

 

Franchise revenue

 

$3,613

 

 

$-

 

Net loss

 

 

(76,570)

 

 

-

 

 

 

 

November 30,
2016

 

 

August 31,
2016

 

Total assets

 

$146,950

 

 

$131,427

 

Total liabilities

 

 

444,761

 

 

 

352,668

 

 

Total liabilities of My Power Solutions, Inc. includes amounts due to Poverty Dignified, Inc. of $195,754 at November 30, 2016 and $112,260 at August 31, 2016 that were eliminated in consolidation.

 

NOTE 8 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through January __, 2017, which is the date when these consolidated financial statements were issued, and is aware of none requiring disclosure.

 

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

 

With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues and net income, projections concerning operations and available cash flow. Our actual results could differ materially from the results discussed in such forward-looking statements. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein.

 

Background Overview

 

Poverty Dignified, Inc. is incorporated in the State of Nevada in September 2013. We were formed to operate as a micro-franchise business incubation company servicing the energy needs of poor households in rural and peri-urban areas across the globe. In September 2013, we commenced our planned principal operations. To date, we have invested in developing our business plan, developing relationships with a variety of potential marketplaces, developing our charging station for our wholly owned subsidiary, My Power Solutions, Inc, and developing our franchise agreement. From inception through November 30, 2016, we have sold three franchises. The Company has completed the services required to recognize the revenue for one of the franchise units. As such, the Company has recognized franchise revenue of $123,000 and associated franchise expenses of $121,468, including $3,613 of revenue and $17,081 of expenses for the three months ended November 30, 2016. For the remaining two franchise units for which the Company has not completed the services required to recognize revenue, the Company has deferred revenue of $219,847 at November 30, 2016.

 

Since our inception on September 27, 2013 to November 30, 2016, we have only generated $123,000 in revenues and have incurred an accumulated deficit of $8,630,746, due in part from recording stock compensation for issuing our stock at par value to certain insiders in exchange for cash and services. For the three months ended November 30, 2016, we incurred expenses of $389,687 and recorded a net loss of $386,074. 

 

Going Concern

 

The accompanying 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. As of November 30, 2016, the Company had cash of $52,225; working capital deficit of $916,297 and a stockholders’ deficit of $916,156. The Company has incurred net losses from start-up costs and minimal operations since inception to November 30, 2016 and continues to expend cash in order to accomplish its business objectives. Based on the Company’s current progress in its business plan, it has not successfully implemented its plan to mitigate the going concern issue. Specifically, the Company has only sold three units, only one for which revenue has been recognized, and has not been effective in reducing operational expenses. As a result, as of November 30, 2016, these issues raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company's primary source of operating funds since inception has been equity financings through a private placement. In its private placement memorandum dated January 2014 and closed November 2014, the Company raised $1,182,180 for its operations, research and development, and marketing of its franchise opportunities. Additionally, the Company has borrowed funds from a related party for working capital purposes and $241,147 remains outstanding under notes payable to this related party at November 30, 2016.

 

The Company needs to sell additional franchises or raise additional capital, reduce expenses and curtail cash outflows in order to be able to accomplish its business plan. In the interim, the Company will accrue for management salaries and defer certain payments until the franchise sales are finalized and will continue to borrow funds from affiliates as needed. Additionally, funds to equip franchise units are not expended until franchise agreements are executed and payment is received from the franchisee. Through November 30, 2016, we have sold three franchises. The Company has completed the services required to recognize revenue on one of the franchise units. As such, the Company has recognized franchise revenue of $123,000 and associated franchise expenses of $121,468 from inception through November 30, 2016. For certain portions of the three franchise units for which the Company has not completed the services required to recognize the associated revenue, the Company has deferred revenue of $219,847 at November 30, 2016. The Company’s long-term liquidity depends upon its ability to generate revenues from the sale of additional franchises. We estimate that it will take having 10 operational franchises for us to achieve profitability within the next 12 months. Management believes that it will be successful in closing the necessary franchise sales; however, no assurance can be provided that the Company will be able to do so.

 

 
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The Company also has the ability to sell Master Franchise Agreements for various territories throughout Africa, which could generate sufficient cash to fund working capital needs. Poverty Dignified, Inc. is an "Incubation" company. The Company is constantly incubating other business concepts and technologies that will be wholly owned subsidiaries of Poverty Dignified. These concepts could contribute to the overall profitability of Poverty Dignified, Inc. and allow the necessary funds to be in place to offset any additional costs from the operations of My Power Solutions, Inc.

 

Poverty Dignified, Inc. currentlyhas open a Private Investment in Public Equity transaction, in which the Company is offering 1,000,000 unregistered shares to accredited investors at a discounted price of $0.75 per share to raise an additional $750,000 of growth capital. During the second or third quarter of fiscal year 2017, Poverty Dignified, Inc. plans to ask for approval for a secondary offering. Upon approval, the Company plans to register 1,000,000 shares in an S-1 registration. Once "effective" by the SEC, these shares will be made available to the public market.

 

Results of Operations

 

For the three months ended November 30, 2016

 

There were revenues of $3,613 for the three months ended November 30, 2016. There was a net loss of $386,074.

 

Our expenses for the three months ended November 30, 2016 were related to franchise expenses of $17,081, research and development of $306, professional fees of $57,907, and general and administrative costs of $314,393. General and administrative costs primarily consisted of payroll expenses of $155,623, $49,003 in advertising and $69,953 of travel related costs. $70,168 of the payroll expenses related to amounts accrued for, but not paid to, the Company’s management team.

 

For the three months ended November 30, 2015

 

There were no revenues for the three months ended November 30, 2015. There was a net loss of $156,840.

 

Our expenses for the three months ended November 30, 2015 were related to research and development of $7,500, professional fees of $4,906, and general and administrative costs of $144,434. General and administrative costs primarily consisted of payroll expenses of $130,972. $127,208 of the payroll expenses related to amounts accrued for, but not paid to, the Company’s management team.

 

Liquidity and Capital Resources

 

The Company had $20,557 in cash and a balance of $124,46 3in prepaid expenses at August 31, 2016. As of November 30, 2016 the Company had a cash balance of $52,225 and $132,104 of prepaid expenses. Additional cash will be necessary to continue the development of our business plan, roll out of the sales of our franchises in My Power Solutions, travel expenses for our management to Africa to deploy our business plan, research and development, and relationship development with potential franchisees.

 

 
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We continue to explore market opportunities in Kenya and South Africa. From inception to November 30, 2016, we have incurred an accumulated deficit of $8,630,746, of which $5,931,000 was non-cash compensation. Although we do believe we will continue to need the services of our founders and consultants, we do not believe that we will continue to issue large quantities of stock for those services. Stock to our founders and consultants was tendered at par value and for various services. We have valued the stock at $1 per share based on our Private Placement price of $1 per share that commenced fundraising in January 2014 and closed in November 2014. Through November 30, 2016, we have sold three franchises The Company has completed the services required to recognize the revenue for one of the franchise units. As such, the Company has recognized franchise revenue of $123,000 and associated franchise expenses of $121,468, included $3,613 of revenues and $17,081 of expenses for the three months ended November 30, 2016. For the remaining two franchise units for which the Company has not completed the services required to recognize revenue, the Company has deferred revenue of $219,847 at November 30, 2016. We believe we will continue selling franchises over the next 12 months and this will provide for our expenses. We also believe that we will not invest as much capital for research and development of this franchise concept, and therefore, our expenses will decrease. Furthermore, we issued significant amounts of stock in exchange for services. We do not believe that we will continue this trend in the future. Thus, we believe that we will see a significant reduction in our monthly burn rate now that we have moved into an operational stage and out of a development stage. We define burn rate as the rate which we spend capital in excess of revenues.

 

We also have a history of raising capital and have the ability to continue to raise capital through the issuance of stock if needed. In our private placement memorandum dated January 2014 and closed November 2014, we raised $1,182,180 for operations, research and development, and marketing of franchise opportunities. Poverty Dignified, Inc. currently doing a Private Investment in Public Equity transaction, in which the Company is offering 1,000,000 unregistered shares to accredited investors at a discounted price of $0.75 per share to raise an additional $750,000 of growth capital. During the three months ended November 30, 2016, the Company sold 598,667 shares of common stock under this Private Investment in Public Equity offering for proceeds of $449,000.

 

We have the ability to sell Master Franchise Agreements for various territories throughout Africa, generating sufficient cash to fund working capital needs. Poverty Dignified, Inc. is an “Incubation” company. The Company is constantly incubating other business concepts and technologies that will be wholly owned subsidiaries of Poverty Dignified, and thus contributing to the revenues and profitability of Poverty Dignified as a whole.

 

As of November 30, 2016, we had cash of $52,225 and have had a net increase in cash of $31,668 during the three months ended November 30, 2016. We will need to find additional sources of capital to continue. We believe in the near future we will generate significant revenues from the deployment of franchises. We are substantially complete with our research and development activities as it relates to My Power Solutions and our franchise operations in Africa. We do not expect to incur any additional significant research and development expenses at this time with respect to the aforementioned My Power Solutions business concept. We have begun to generate revenues under the My Power Solutions business concept and believe we will be generating more revenues for the remainder of fiscal year 2017, but there can be no guarantee of our doing so. However, if we want to develop additional franchising concepts, we will need to reinvest muchof our net income into research and development. Therefore, we do not believe we will have any profits in the near future, nor we will be distributing any dividends.

 

We do not currently have enough cash on hand to fully deploy our current business plan and to open additional franchises in South Africa and Kenya in 2017.

 

 
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Poverty Dignified, Inc. currentlyhas open a Private Investment in Public Equity transaction, in which the Company is offering 1,000,000 unregistered shares to accredited investors at a discounted price of $0.75 per share to raise an additional $750,000 of growth capital. During the second or third quarter of fiscal year 2017, Poverty Dignified, Inc. plans to ask for approval for a secondary offering. Upon approval, the Company plans to register 1,000,000 shares in an S-1 registration. Once "effective" by the SEC, these shares will be made available to the public market. We cannot provide any assurance or guarantee that we will be able to raise the full amount or any additional funds under these offerings. Further, we may be required to raise funds in addition to these offerings. We cannot provide any assurance or guarantee that we will be able to conduct other additional rounds of financing at all or on terms acceptable to us.

 

Equity Distribution to Management

 

Since our incorporation, we have raised capital through private sales of our common equity. As of November 30, 2016 we have issued 5,931,000 shares of our common stock to various shareholders, in exchange for cash and services. Since inception, we have recognized total expense of $5,931,000. No such expenses were recognized during the three months ended November 30, 2016 or 2015.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Based upon an evaluation of the effectiveness of disclosure controls and procedures, our principal executive and financial officer has concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were not effective. The Company’s principal executive and financial officer has determined that there are material weaknesses in our disclosure controls and procedures.

 

 
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The material weaknesses in our disclosure control procedures are as follows:

 

1)

lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures; and

 

 

 

2)

inadequate segregation of duties consistent with control objectives;

 

We recognize the importance of the control environment as it sets the overall tone for the organization and is the foundation for all other components of internal control.

 

As of January __, 2017, while we have hired a third party consultant to help us with our public reporting and disclosures we have not taken action to correct the material weaknesses identified above in our internal control over financial reporting. Once the Company has additional sales activities and has sufficient personnel available, then our Board of Directors, in connection with the aforementioned weaknesses, will implement the following remediation measures:

 

We will hire additional personnel with sufficient qualifications to allow us to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. We plan to use some of the funds through the private placement offering to allocate to this additional salary cost.

 

And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

 

If we are able to raise additional capital, we anticipate having sufficient funds to at least partially, if not fully, implement our plans by August 31, 2017. Additionally, we plan to test our updated controls and remediate our deficiencies by August 31, 2017.

 

 
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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.

 

No director, officer, or affiliate of the issuer and no owner of record or beneficiary of more than 5% of the securities of the issuer, or any security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer.

 

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

 

None

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other Information

 

None

 

 
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Item 6. Exhibits

 

31.1Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

 

 

31.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

 

 

32Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

101

XBRL Interactive Data Files

 

 
20
 

 

SIGNATURES

 

Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Poverty Dignified, Inc.

    
Dated: January 12, 2017By:/s/ John K. Lowther

 

 

John K. Lowther 
  President and Chief Executive Officer 
  (Principal Executive Officer) 

 

 

 

 

 

 

/s/ George C. Critz, III

 

 

 

George C. Critz, III

 

 

 

Vice-President and Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

 

 

21