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EX-32.2 - CERTIFICATION - Creatd, Inc.f10q0620ex32-2_jerrick.htm
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EX-31.2 - CERTIFICATION - Creatd, Inc.f10q0620ex31-2_jerrick.htm
EX-31.1 - CERTIFICATION - Creatd, Inc.f10q0620ex31-1_jerrick.htm

 

 

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, 2020

 

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. 000-51872

 

JERRICK MEDIA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   87-0645394
(State or other jurisdiction
of incorporation)
  (IRS Employer
Identification No.)

 

2050 Center Avenue Suite 640

Fort Lee, New Jersey 07024

(Address of principal executive offices)

 

(201) 258-3770

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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 13, 2020, there were 9,959,812 shares outstanding of the registrant’s common stock.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  PART I – FINANCIAL INFORMATION  
     
Item 1. Condensed Consolidated Financial Statements 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 43
     
Item 4. Controls and Procedures 44
     
  PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 45
     
Item 1A.  Risk Factors 45
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
     
Item 3. Defaults Upon Senior Securities 46
     
Item 4. Mine Safety Disclosures 46
     
Item 5. Other Information 46
     
Item 6. Exhibits 47
     
Signatures 48

 

i -

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

Jerrick Media Holdings, Inc.

 

June 30, 2020

 

Index to the Condensed Consolidated Financial Statements

 

Contents   Page(s)
     
Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019   2
     
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)   3
     
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)   4
     
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (unaudited)     8
     
Notes to the Condensed Consolidated Financial Statements (unaudited)   9

 

1 -

 

Jerrick Media Holdings, Inc.

Condensed Consolidated Balance Sheets

  

   June 30,
2020
   December 31,
2019
 
   (Unaudited)     
         
Assets        
         
Current Assets        
Cash  $44,628   $11,637 
Prepaid expenses   -    4,127 
Accounts receivable, net   76,462    50,849 
Note receivable – related party   11,450    11,450 
Marketable securities   176,325    - 
Total Current Assets   308,865    78,063 
           
Property and equipment, net   34,741    42,363 
           
Intangible assets   1,024,299    1,087,278 
           
Goodwill   1,035,795    1,035,795 
           
Deposits and other assets   48,973    16,836 
           
Operating lease right of use asset   276,742    311,711 
           
Total Assets  $2,729,415   $2,572,046 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities          
Accounts payable and accrued liabilities  $2,851,017   $1,763,222 
Demand loan   325,000    225,000 
Convertible Notes - related party, net of debt discount   20,000    20,387 
Convertible Notes, net of debt discount and issuance costs   5,151,540    2,896,425 
Current portion of operating lease payable   76,833    105,763 
Note payable - related party, net of debt discount   4,990,979    5,129,342 
Note payable, net of debt discount and issuance costs   1,314,634    660,000 
Unrecognized tax benefit   68,000    68,000 
Deferred revenue   55,959    50,691 
Warrant liability   -    10,000 
           
Total Current Liabilities   14,853,962    10,928,830 
           
Non-current Liabilities:          
Note payable   401,764    - 
Operating lease payable   197,810    201,944 
           
Total Non-current Liabilities   599,574    201,944 
           
Total Liabilities   15,453,536    11,130,774 
           
Commitments and contingencies          
           
Stockholders’ Deficit          
Series A Preferred stock, $0.001 par value, 0 and 31,581 shares issued and outstanding, respectively   -    - 
Series B Preferred stock, $0.001 par value, 0 and 8,063 shares issued and outstanding, respectively   -    - 
Series D Preferred stock, $0.001 par value, 0 and 914 shares issued and outstanding, respectively   -    - 
Common stock par value $0.001: 100,000,000 shares authorized; 9,982,195 issued and 9,959,812 outstanding as of June 30, 2020 and 9,178,937 issued and 9,019,087 outstanding as of December 31, 2019   9,982    9,179 
Additional paid in capital   39,069,009    36,385,699 
Accumulated deficit   (51,708,425)   (44,580,437)
Accumulated other comprehensive income (loss)   (34,525)   (5,995)
Less: Treasury stock, 22,383 and 159,850 shares, respectively   (60,162)   (367,174)
    (12,724,121)   (8,558,728)
           
Total Liabilities and Stockholders’ Deficit  $2,729,415   $2,572,046 

 

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

2 -

 

 

Jerrick Media Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

  

   For the Three
Months Ended
   For the Three
Months Ended
   For the Six
Months Ended
   For the Six
Months Ended
 
   June 30,
2020
   June 30,
2019
   June 30,
2020
   June 30,
2019
 
                 
Net revenue  $322,540   $7,181   $615,682   $41,515 
                     
Gross margin   322,540    7,181    615,682    41,515 
                     
Operating expenses                    
Compensation   1,893,178    545,037    2,266,698    1,271,611 
Consulting fees   902,099    191,254    1,552,106    397,631 
Research and development   35,705    13,559    171,275    354,898 
General and administrative   1,026,810    659,452    1,986,804    1,124,490 
                     
Total operating expenses   3,857,792    1,409,302    5,976,883    3,148,630 
                     
Loss from operations   (3,535,252)   (1,402,121)   (5,361,201)   (3,107,115)
                     
Other income (expenses)                    
Other income   14,229    -    77,785    - 
Interest expense   (491,206)   (110,032)   (866,736)   (164,601)
Accretion of debt discount and issuance cost   (140,274)   (69,626)   (327,221)   (116,990)
Settlement of vendor liabilities   -    -    (126,087)   - 
Gain on marketable securities   10,042    -    10,042    - 
Loss on extinguishment of debt   -    (3,635)   (535,040)   (81,149)
Gain on settlement of debt   470    -    470    - 
                     
Other expenses, net   (606,739)   (183,293)   (1,766,787)   (362,740)
                     
Loss before income tax provision   (4,141,991)   (1,585,414)   (7,127,988)   (3,469,855)
                     
Income tax provision   -    -    -    - 
                     
Net loss  $(4,141,991)  $(1,585,414)  $(7,127,988)  $(3,469,855)
                     
Deemed dividend   -    -    -    - 
Inducement expense   -    (7,628)   -    (7,628)
                     
Net loss attributable to common shareholders   (4,141,991)   (1,577,786)   (7,127,988)   (3,462,227)
                     
Other comprehensive income (loss)                    
                     
Currency translation (loss)   (19,291)   -    (28,530)   - 
                     
Comprehensive loss  $(4,161,282)  $(1,577,786)  $(7,156,518)  $(3,462,227)
                     
Per-share data                    
Basic and diluted loss per share  $(0.43)  $(0.20)  $(0.76)  $(0.47)
                     
Weighted average number of common shares outstanding   9,582,964    8,072,257    9,368,777    7,389,564 

  

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

 

3 -

 

 

Jerrick Media Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended June 30, 2020 (Unaudited)

 

   Series A Preferred Stock   Series B Preferred Stock   Series D Preferred Stock   Common Stock   Treasury stock   Additional
Paid In
   Accumulated   Other
Comprehensive
    
Stockholders’
 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Income   Equity 
                                                         
Balance, March 31, 2020   -    $-    -   $-    -   $-    9,422,683   $9,423    (159,850)  $(367,174)  $37,748,356   $(47,566,434)  $(15,234)  $(10,191,063)
                                                                       
Shares issued with note payable   -    -    -    -    -    -    16,272    16    -    -    27,281    -    -    27,297 
                                                                       
Conversion of warrants to stock   -    -    -    -    -    -    6,718    7    -    -    (10,007)   -    -    (10,000)
                                                                       
Conversion of options to stock   -    -    -    -    -    -    688,473    688    -    -    1,404,976    -    -    1,405,664 
                                                                       
Stock warrants issued with note payable   -    -    -    -    -    -    -    -    -    -    247,281    -    -    247,281 
                                                                       
Cancellation of Treasury stock   -    -    -    -    -    -    (151,951)   (152)   151,951    349,030    (348,878)   -    -    - 
                                                                       
Purchase of treasury stock   -    -    -    -    -    -    -    -    (14,484)   (42,018)   -    -    -    (42,018)
                                                                       
Foreign currency translation adjustments   -    -    -    -    -    -    -    -    -    -    -    -    (19,291)   (19,291)
                                                                       
Net loss for the three months ended June 30, 2020   -    -    -    -    -    -    -    -    -    -    -    (4,141,991)   -    (4,141,991)
                                                                       
Balance, June  30, 2020   -   $-    -   $-    -   $-    9,982,195   $9,982    (22,383)  $(60,162)  $39,069,009   $(51,708,425)  $(34,525)  $(12,724,121)

 

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

 

4 -

 

 

Jerrick Media Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Six Months Ended June 30, 2020 (Unaudited)

 

   Series A Preferred Stock   Series B Preferred Stock   Series D Preferred Stock   Common Stock   Treasury stock   Additional
Paid In
   Accumulated   Other
Comprehensive
   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Income   Equity 
                                                         
Balance, December 31, 2019   -   $-    -   $-    -   $-    9,178,937   $9,179    (159,850)  $(367,174)  $36,385,699   $(44,580,437)  $(5,995)  $(8,558,728)
                                                                       
Shares issued with notes payable   -    -    -    -    -    -    24,322    24    -    -    58,912    -    -    58,936 
                                                                       
Shares issued for services   -    -    -    -    -    -    150,000    150    -    -    584,848    -    -    584,998 
                                                                       
Shares issued to settle vendor liabilities   -    -    -    -    -    -    70,696    71    -    -    235,564    -    -    235,635 
                                                                       
Conversion of warrants to stock   -    -    -    -    -    -    21,718    22    -    -    (4,250)   -    -    (4,228)
                                                                       
Conversion of options to stock   -    -    -    -    -    -    688,473    688    -    -    1,404,976    -    -    1,405,664 
                                                                       
Stock warrants issued with note payable   -    -    -    -    -    -    -    -    -    -    752,138    -    -    752,138 
                                                                       
Cancellation of Treasury stock   -    -    -    -    -    -    (151,951)   (152)   151,951    349,030    (348,878)   -    -    - 
                                                                       
Purchase of treasury stock   -    -    -    -    -    -    -    -    (14,484)   (42,018)   -    -    -    (42,018)
                                                                       
Foreign currency translation adjustments   -    -    -    -    -    -    -    -    -    -    -    -    (28,530)   (28,530)
                                                                       
Net loss for the six months ended June 30, 2020   -    -    -    -    -    -    -    -    -    -    -    (7,127,988)   -    (7,127,988)
                                                                       
Balance, June  30, 2020   -   $-    -   $-    -   $-    9,982,195   $9,982    (22,383)  $(60,162)  $39,069,009   $(51,708,425)  $(34,525)  $(12,724,121)

 

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

 

5 -

 

 

Jerrick Media Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended June 30, 2019 (Unaudited)

 

   Series A
Preferred Stock
   Series B
Preferred Stock
   Series D
Preferred Stock
   Common Stock   Treasury stock   Additional
Paid In
   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
                                                     
Balance, March 31, 2019   -   $-    -   $-    -   $-    6,730,306   $6,730    (111,667)  $(220,781)  $35,091,928   $(38,429,506)  $(3,551,629)
                                                                  
Stock based compensation   -    -    -    -    -    -    -    -    -    -    122,776    -    122,776 
                                                                  
Cash received for common stock and warrants   -    -    -    -    -    -    -    -    -    -    -    -    - 
                                                                  
Tender offering   -    -    -    -    -    -    2,100,173    2,101    -    -    (2,101)   -    - 
                                                                  
Stock issuance cost   -    -    -    -    -    -    -    -    -    -    (35,000)   -    (35,000)
                                                                  
Stock warrants issued with note payable             -    -    -    -    -    -    -    -    1,153,353    -    1,153,353 
                                                                  
Purchase of treasury stock and warrants   -    -    -    -    -    -    -    -    (38,183)   (141,393)   (89,034)   -    (230,427)
                                                                  
Inducement expense   -    -    -    -    -    -    -    -    -    -    -    7,626    7,626 
                                                                  
Net loss for the three months ended June 30, 2019   -    -    -    -    -    -    -    -    -    -    -    (1,585,414)   (1,585,414)
                                                                  
Balance, June 30, 2019   -   $-    -   $-    -   $ -    8,830,479   $8,831    (149,850)  $(362,174)  $35,241,922   $(40,007,294)  $(5,118,715)

 

See accompanying notes to the consolidated financial statements

 

6 -

 

 

Jerrick Media Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Six Months Ended June 30, 2019 (Unaudited)

 

   Series A   Series B   Series D           Additional         
   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Treasury stock   Paid In   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
                                                     
Balance, December 31, 2018   -   $-    -   $-    -   $-    6,475,340   $6,475    (27,667)  $(52,341)  $34,100,327   $(36,545,065)  $(2,490,604)
                                                                  
Stock based compensation   -    -    -    -    -    -    125,000    126    -    -    433,959    -    434,085 
                                                                  
Cash received for common stock and warrants   -    -    -    -    -    -    129,966    130    -    -    649,699    -    649,829 
                                                                  
Tender offering   -    -    -    -    -    -    2,100,173    2,100              (2,100)   -    - 
                                                                  
Stock issuance cost   -    -    -    -    -    -    -    -    -    -    (178,146)   -    (178,146)
                                                                  
Stock warrants issued with note payable   -    -    -    -    -    -    -    -    -    -    328,777    -    328,777 
                                                                  
Purchase of treasury stock and warrants   -    -    -    -    -    -    -    -    (122,183)   (309,833)   (90,594)   -    (400,427)
                                                                  
Inducement expense   -    -    -    -    -    -    -    -    -    -    -    7,626    7,626 
                                                                  
Net loss for the six months ended June 30, 2019   -    -    -    -    -    -    -    -    -    -    -    (3,469,855)   (3,469,855)
                                                                  
Balance, June 30, 2019   -   $-    -   $-    -   $-    8,830,479   $8,831   (149,850)  $(362,174)  $35,241,922   $(40,007,294)  $(5,118,715)

 

See accompanying notes to the consolidated financial statements

 

7 -

 

 

Jerrick Media Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

  

   For the Six Months Ended   For the Six Months Ended 
   June 30,
2020
   June 30,
2019
 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(7,127,988)  $(3,469,855)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   76,939    5,660 
Accretion of debt discount and issuance cost   327,221    116,991 
Inducement expense   -    7,626 
Share-based compensation   1,994,792    448,291 
Bad debt expense   34,737    - 
Gain on settlement of debt   (470)   - 
Loss on settlement of vendor liabilities   126,087    - 
Gain on marketable securities   (10,042)   - 
Loss on extinguishment of debt   535,040    81,149 
Non-cash lease expense   34,969    (47,643)
Changes in operating assets and liabilities:          
Accounts receivable   (60,350)   4,000 
Deposits and other assets   (2,137)   - 
Deferred revenue   5,268    8,828 
Accounts payable and accrued expenses   1,213,615    (251,299)
Operating lease liability   (33,064)   -
Net Cash Used In Operating Activities   (2,885,383)   (3,096,252)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Cash paid for property and equipment   (6,339)   (26,851)
Purchase of marketable securities   (166,283)   - 
Deposits   (30,000)   - 
Net Cash Used In Investing Activities   (202,622)   (26,851)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Cash overdraft   -    (33,573)
Net proceeds from issuance of notes   1,349,094    - 
Repayment of notes   (58,226)   (50,000)
Proceeds from issuance of demand loan   250,000    100,000 
Proceeds from issuance of convertible note   1,920,460    1,993,025 
Repayment of convertible notes   (75,000)   (12,508)
Proceeds from issuance of note payable - related party   152,989    1,590,000 
Repayment of note payable - related party   (327,773)   (275,000)
Proceeds from issuance of common stock and warrants   -    649,829 
Cash paid for stock issuance costs   -    (35,000)
Purchase of treasury stock and warrants   (62,018)   (407,307)
Net Cash Provided By Financing Activities   3,149,526    3,519,466 
           
Effect of exchange rate changes on cash   (28,530)   - 
           
Net Change in Cash   32,991    396,363 
           
Cash - Beginning of Year   11,637    - 
           
Cash - End of period  $44,628   $396,363 
           
SUPPLEMENTARY CASH FLOW INFORMATION:          
Cash Paid During the Year for:          
Income taxes  $-   $- 
Interest  $55,859   $18,273 
           
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Settlement of vendor liabilities  $109,548   $- 
Deferred offering costs  $-   $143,146 
Warrants issued with debt  $752,136   $247,628 
Shares issued with debt  $58,935   $- 
Issuance of common stock for prepaid services  $585,000   $- 
Cancellation of Treasury stock  $349,030   $- 
Operating Lease liability  $-   $288,790 
Option liability  $-   $7,328 
Conversion of note payable and interest into convertible notes  $385,000   $- 
Conversion of Demand loan into notes payable  $150,000   $- 
Conversion of note payable and interest into convertible notes  $385,000   $- 
Conversion of note payable- related party and interest into convertible notes- related party  $-   $20,000 

 

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

 

8 -

 

 

Jerrick Media Holdings, Inc.

June 30, 2020

Notes to the Condensed Consolidated Financial Statements

 

Note 1 – Organization and Operations

 

Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Jerrick Media” or “Jerrick”) is a technology company focused on the development of digital communities, marketing branded digital content, and e-commerce opportunities. Jerrick’s content distribution platform, Vocal, delivers a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content. Through Jerrick’s proprietary algorithm dynamics, Vocal enhances the visibility of content and maximizes viewership, providing advertisers access to target markets that most closely match their interests.

 

The Company was originally incorporated under the laws of the State of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc. as part of its plan to diversify its business.

 

On February 5, 2016 (the “Closing Date”), GTPH, GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of GTPH (the “Merger”). GTPH acquired, pursuant to the Merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 1,425,000 shares of GTPH’s common stock. In connection therewith, GTPH acquired 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”).

 

In connection with the Merger, on the Closing Date, GTPH and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from GTPH (i) all of GTPH’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of GTPH’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 39,091 shares of GTPH’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of GTPH, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.

 

Upon closing of the Merger on February 5, 2016, the Company changed its business plan to that of Jerrick Media.

 

Effective February 28, 2016, GTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”) with Jerrick, pursuant to which GTPH became the parent company of Jerrick Ventures, LLC, a wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”) and GTPH changed its name to Jerrick Media Holdings, Inc. to better reflect its new business strategy.

 

On September 11, 2019, the Company acquired 100% of the membership interests of Seller’s Choice, LLC, a New Jersey limited liability company (“Seller’s Choice”). Seller’s Choice is digital e-commerce agency based in New Jersey (see Note 4).

 

Note 2 – Significant and Critical Accounting Policies and Practices

 

Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by the accounting principles generally accepted in the United States of America.

 

9 -

 

  

Basis of Presentation

 

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or any other interim period or for any other future year. These unaudited condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2019, included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 2019 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

   

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
   
(ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
   
(iii)   Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses and (b) general economic conditions.

  

(iv) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk-free rate(s) to value share options and similar instruments.
   
(v) Operating lease estimates and assumptions: These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We estimate the incremental borrowing rate for each lease based on an evaluation of our credit ratings and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the terms of the lease.

  

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these 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 in relation to the financial statements taken as a whole 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 evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

10 -

 

  

Actual results could differ from those estimates.

 

Principles of consolidation

 

The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 

As of June 30, 2020, the Company’s consolidated subsidiaries and/or entities are as follows:

 

Name of combined affiliate  State or other jurisdiction of
incorporation or organization
  Company
Ownership Interest
 
        
Jerrick Ventures LLC  Delaware   100%
Abacus Tech Pty Ltd  Australia   100%
Seller’s Choice, LLC  New Jersey   100%
Jerrick Global, LLC  Delaware   100%
Jerrick Investment Advisors LLC  Delaware   100%
Jerrick Partners LLC  Delaware   100%
Maven Tech LLC  Delaware   100%
OG Collection LLC  Delaware   100%
VMENA LLC  Delaware   100%
Vocal For Brands, LLC  Delaware   100%
Vocal Ventures LLC  Delaware   100%
What to Buy, LLC  Delaware   100%

 

All inter-company balances and transactions have been eliminated.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
   
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

  

Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, notes payable, convertible debt, accounts payable and accrued liabilities approximate their fair value because of the short maturity of those instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

11 -

 

  

The assets or liabilities’ fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the relevant assets and liabilities that are measured at fair value on a recurring basis:

 

Fair Value Measurements as of

June 30, 2020

  

       Quoted Prices   Quoted Prices     
       in Active   for Similar     
       Markets for   Assets or     
       Identical   Liabilities in   Significant 
       Assets or   Active   Unobservable 
       Liabilities   Markets   Inputs 
   Total   (Level 1)   (Level 2)   (Level 3) 
Assets:            
Marketable securities - debt securities  $150,000   $-   $-   $150,000 
Marketable securities - equity securities   26,325    26,325          -    - 
Total assets  $176,325   $26,325   $-   $150,000 

 

The Company valued the initial value of debt securities, which are investments in convertible notes receivable, by assessing the separate values of the debt and equity components for similar instruments convertible into private company equity (Level 3). The investment was initially measured at cost, which was determined to approximate fair value due to the lack of marketability of the conversion shares underlying these convertible instruments and the expected recoverability of the note principal. The key assumption affecting the level 3 fair values would be collectability of the notes. The Company monitors for impairment indicators at each balance sheet date.

 

 Marketable debt securities as of June 30, 2020 are as follows:

 

   Fair Value Hierarchy  Cost  

Unrealized

Gains (Loss)

   Fair Value 
Marketable securities - debt securities  3  $150,000   $                 -   $150,000 

 

The change in net unrealized holding gain (loss) on debt securities available for sale that has been included in Accumulated Other Comprehensive Income as a separate component of Stockholder’s Equity for the six months ended June 30, 2020 and 2019 was $0 and $0, respectively.

 

Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Marketable equity securities as of June 30, 2020 are as follows:

  

   Fair Value Hierarchy 

 

Cost

  

Realized

Gains (Loss)

   Fair Value 
Marketable securities - equity securities  1  $16,283   $10,042   $26,325 

 

The change in net realized and unrealized appreciation on equity trading securities that has been included in other expenses for the six months ended June 30, 2020 and 2019 was $10,042 and $0, respectively.

 

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

 

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

 

   Estimated Useful Life
(Years)
 
     
Computer equipment and software  3 
Furniture and fixtures  5 

 

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

12 -

 

 

Long-lived Assets Including Goodwill and Other Acquired Intangibles Assets

 

We evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the six months ended June 30, 2020.

 

We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value. As of June 30, 2020, no impairment of goodwill has been identified.

 

Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life.

 

Investments

 

The Company accounts for its investments in debt securities, in accordance with sub-topic 320-10 of the FASB Accounting Standards Codification (“Sub-topic 320-10”).

 

Pursuant to Paragraph 320-10-35-1, investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the consolidated balance sheets at each balance sheet date. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized except an available-for-sale security that is designated as being hedged in a fair value hedge, from which all or a portion of the unrealized holding gain and loss of shall be recognized in earnings during the period of the hedge, pursuant to paragraphs 815-25-35-1 through 815-25-35-4.

 

The Company follows Paragraphs 326-30-35-1 through 326-30-35-4 to assess whether an investment is impaired in each reporting period. An investment in debt security is impaired if the fair value of the investment is less than its amortized cost. Impairment indicators include, but are not limited to the following: a. asset quality, or business prospects of the investee; b. a significant adverse change in the regulatory, economic, or technological environment of the investee; c. a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. If the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the impairment is either temporary or other than temporary.

 

13 -

 

 

The following table sets forth a summary of the changes in marketable securities that are measured at fair value on a recurring basis:

 

   For the three months ended
June 30,
2020
   For the six months ended
June 30,
2020
 
   Total   Total 
January 1, 2020  $-   $- 
Purchase of marketable securities   166,283    166,283 
Gain on trading securities   10,042    10,042 
June 30, 2020  $176,325   $176,325 

 

We invest in debt and equity securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in securities with maturities of two years or less and maintain a weighted average maturity of one year or less. As of June 30, 2020, all of our investments had maturities between one and two years.

  

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

Foreign Currency

 

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our Consolidated Balance Sheet dates. Results of operations and cash flows are translated using the average exchange rates throughout the periods. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant in any period presented.

 

Revenue Recognition

 

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

identification of the contract, or contracts, with a customer;

 

identification of the performance obligations in the contract;

 

determination of the transaction price;

 

14 -

 

 

allocation of the transaction price to the performance obligations in the contract; and

 

recognition of revenue when, or as, we satisfy a performance obligation.

  

Revenue disaggregated by revenue source for the six months ended June 30, 2020 and 2019 consists of the following:

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
Branded content  $68,728   $2,350   $124,728   $22,421 
Managed Services   190,106    -    382,357    - 
Creator Subscriptions   54,972    -    90,934    - 
Affiliate sales   8,195    2,539    16,344    5,661 
Other revenue   539    2,292    1,319    13,433 
   $322,540   $7,181   $615,682   $41,515 

  

Branded Content

 

Branded content represents the revenue recognized from the Company’s obligation to create and publish branded articles for clients on the Vocal platform and promote said stories, tracking engagement for the client. The performance obligation is satisfied when the Company successfully publishes the articles on its platform and meets any required promotional milestones as per the contract. The revenue is recognized over time as the services are performed.

 

Below are the significant components of a typical agreement pertaining to branded content revenue:

 

The Company collects fixed fees ranging from $5,000 to $45,000

 

The articles are created and published within three months of the signed agreement, or as previously negotiated with the client

 

The articles are promoted per the contract and engagement reports are provided to the client

 

The client pays 50% at signing and 50% upon completion

 

Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat fee

 

Affiliate Sales

 

Affiliate sales represents the commission the Company receives when a purchase is made through affiliate links placed within content hosted on the Vocal platform. Affiliate revenue is earned on a “click through” basis, upon referring visitors, via said links, to an affiliate’s site and having them complete a specific outcome, most commonly a product purchase. The Company uses multiple affiliate platforms, such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage, which typically range from 2-20%. The revenue is recognized upon receipt as reliable estimates could not be made.

 

Subscription

 

Vocal+ is a premium subscription offering for Vocal creators.  In addition to joining for free, Vocal creators now have the option to sign up for a Vocal+ membership for either $9.99 monthly or $99 annually. Vocal+ subscribers receive access to value-added features such as increased rate of CPM cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, access to exclusive Vocal+ Challenges, and early access to new Vocal features. Subscription revenues stem from both monthly and annual subscriptions, the latter of which is amortized over a twelve-month period. Any customer payments received are recognized over the subscription period, with any payments received in advance being deferred until they are earned. 

 

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Managed Services

 

The Company provides Studio/Agency Service offerings to business-to-business (B2B) and business-to-consumer (B2C) product and service brands which encompasses a full range of digital marketing and e-commerce solutions. The Company’s services include the setup and ongoing management of clients’ websites, Amazon and Shopify storefronts and listings, social media pages, search engine marketing, and other various tools and sales channels utilized by e-commerce sellers for sales and growth optimization. Contracts are broken into three categories Partners, Monthly Services, and Projects. Contract amounts for Partner and Monthly Services clients range from approximately $500-$7,500 per month while Project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month. Some Partners may also have projects within their contracts that get billed and recognized as agreed upon project milestones are achieved.

 

Deferred Revenue

 

Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of June 30, 2020 and December 31, 2019, the Company had deferred revenue of $55,959 and $50,691, respectively.

 

Accounts Receivable and Allowances

 

Accounts receivable are recorded and carried when the Company has performed the work in accordance with managed services, project, partner, consulting and branded content agreements. For example, we bill a managed service client monthly when we have updated their Amazon store, modified SEO or completed the other services listed in the agreement. For projects and branded content, we will bill the client and record the receivable once milestones are reached that are set in the agreement. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the six months ended June 30, 2020 the Company recorded $34,737 as a reserve for doubtful accounts. As of June 30, 2020 and December 31, 2019 the Company has an allowance for doubtful accounts of $68,240 and $33,503 respectively.

 

Stock-Based Compensation

 

The Company recognizes compensation expense for all equity–based payments granted in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.

 

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate. 

 

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Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.

 

Loss Per Share

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the six months ended June 30, 2020 and 2019 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

The Company had the following common stock equivalents at June 30, 2020 and 2019:

 

   June 30, 
   2020   2019 
Options   452,523    882,500 
Warrants   936,240    713,138 
Convertible notes - related party   5,574    5,180 
Convertible notes   1,562,138    551,923 
Totals   2,956,475    2,152,741 

 

Reclassifications

 

Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. The company reclassified $105,763 from current portion of operating lease right of use asset to operating lease right of use asset within the December 31, 2019 Balance Sheet. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. 

 

Recently Adopted Accounting Guidance

 

The Company invests in equity and debt securities. The Company’s investments in debt securities are classified at the date of purchase as available-for-sale securities. Debt securities are reported at fair value with unrealized gains and losses, net of the related tax effect, reflected as an accumulated other comprehensive income component of stockholder’s equity until such gains or losses are realized. In accordance with ASU 2016-01, Equity securities are now reported at fair value with unrealized gains and losses, net of the related tax effect, reflected as a gain or loss on the statement of operations.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-16 did not have a material impact on its condensed consolidated financial statements.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). The updated guidance, which became effective for fiscal years beginning after December 15, 2019, did not have a material impact on its condensed consolidated financial statements.

 

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In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. The adoption of ASU 2018-13 did not have a material impact on its condensed consolidated financial statements.