The financial statements of SigmaBroadband
Co. ("SigmaBroadband Co." or the "Company") as of March 31, 2016 and 2015 included herein have been prepared
by the Company, without audit, pursuant to U.S. generally accepted accounting principles and the rules and regulations of the
SEC. In addition, certain information and note disclosures normally included in financial statements prepared in accordance with
U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements
reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present
fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative
of the results for the full year.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
SigmaBroadband Co. ("Sigma" or the "Company")
was incorporated in Georgia in October 2012. The Company has been in the development stage since inception and has not generated
any revenue to date. The Company will be a full service, facilities-based broadband service provider, local exchange and inter-exchange
carrier serving residential and commercial customers with a special focus on rural areas.
Basis of Presentation
The accompanying unaudited financial statements
have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Certain
information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally
accepted accounting principles have been condensed or omitted pursuant to such principles and regulations of the Securities and
Exchange Commission for Form 10-Q. All adjustments, consisting of normal recurring adjustments, have been made which, in the opinion
of management, are necessary for a fair presentation of the results of interim periods. The results of operations for such interim
periods are not necessarily indicative of the results that may be expected for a full year because of, among other things, seasonality
factors in the retail business. The unaudited financial statements contained herein should be read in conjunction with the audited
financial statements and notes thereto for the fiscal year ended December 31, 2015.
Long-Lived Assets
The Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
An impairment loss is recognized when estimated future cash flows expected to result from the use of the asset and its eventual
disposition are less than its carrying amount. Based on this analysis an impairment loss of $8,000,000 was recognized at December
31, 2015.
Revenue Recognition
In general, the Company will record revenue
when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price
to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria
for the various revenues streams of the Company:
Revenue will be recognized at the time the
product is delivered or services are performed. Provision for sales returns will be estimated based on the Company's historical
return experience. Revenue will be presented net of returns.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.
Segment Information
The Company follows Accounting Standards Codification
("ASC") 280, "Segment Reporting". The Company currently operates in a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Net Loss Per Common Share
Basic net (loss) income per common share is
calculated using the weighted average common shares outstanding during each reporting period. Diluted net (loss) income per common
share adjusts the weighted average common shares for the potential dilution that could occur if common stock equivalents (convertible
debt and preferred stock, warrants, stock options and restricted stock shares and units) were exercised or converted into common
stock. There were no common stock equivalents at March 31, 2015 or 2016.
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
Income Taxes
Deferred income taxes are recognized for the
tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes at each year end, based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized when, based
on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax
assets will not be realized. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.
ASC 740, Income Taxes, requires a company
to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax
position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine
the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold
is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon
effective settlement with a taxing authority.
Stock-Based Compensation
The Company accounts for equity instruments
issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation
payments to be recognized in the financial statements based on the fair value using an option pricing model. ASC 718 requires
forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from initial estimates.
Equity instruments granted to non-employees
are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with
performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant
disincentive for non-performance.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Pursuant to ASC No. 820. "Fair Value
Measurement and Disclosures," the Company is required to estimate the fair value of all financial instruments included on its
balance sheet as of March 31, 2016. The Company's financial instruments consist of cash, accounts payable and accrued expenses,
loans payable - stockholders, and note payable . The Company considers the carrying value of such amounts in the financial statements
to approximate their fair value due to the short-term nature of these financial instruments.
Reclassifications
Certain prior year amounts have been reclassified
to conform with the current year presentation.
Recent Pronouncements
In May 2014, FASB and IASB issued a new joint
revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition. The core principle of the standard
is that revenue recognition should depict the transfer of goods and services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods and services. The new standard is effective for the Company
for the fiscal year beginning January 1, 2017, and the effects of the standard on the Company’s financial statements are
not known at this time.
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
In March 2016, the FASB issued ASU 2016-03.
The amendments in this Update make the guidance in Updates 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing
their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo
a preferability assessment the first time they elect the accounting alternatives within the scope of this Update. The Company
is in the process of evaluating the impact of the adoption of this ASU.
In March 2016, the FASB issued ASU 2016-09,
Stock Compensation, which is intended to simplify several aspects of the accounting for share-based payment award transactions.
The guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year.
The Company is in the process of evaluating the impact of the adoption of this ASU.
In April 2016, the FASB issued ASU 2016-10,
Revenue from Contracts with Customer, the principle of which is that a company should recognize revenue to record the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled
for the transfer of those goods or services by applying the following steps:
1. Identify the contract(s) with a customer.
2. Identify the performance obligations in the contract(s).
3. Determine the transaction price.
4. Allocate the transaction price
to the performance obligations in the contract.
5. Recognize revenue when, or as, the
company satisfies a performance obligation
The guidance will be effective for the fiscal year beginning after December 15,
2016, including interim periods within that year. The Company is in the process of evaluating the impact of the adoption of
this ASU.
NOTE 2 – EQUIPMENT, NET
The Company's furniture and equipment at March
31, 2016 and December 31, 2015 consisted of the following:
Telecommunications equipment
|
|
$
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10,000,000
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|
|
$
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10,000,000
|
|
Less: accumulated depreciation
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|
|
2,000,000
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|
|
|
2,000,000
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|
Less: impairment
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|
|
8,000,000
|
|
|
|
8,000,000
|
|
|
|
|
|
|
|
|
|
|
Total
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|
$
|
—
|
|
|
$
|
—
|
|
Note 3. LOANS PAYABLE - STOCKHOLDERS
At March 31, 2016 and December 31, 2015, a
stockholder and officer of the Company was owed $18,025 and $4,438 by the Company for funds he had advanced to pay for certain
expenses. The loan bears no interest and is payable on demand.
At March 31, 2016 and December 31, 2015, a
stockholder and officer of the Company was owed $11,759 and $4,505 by the Company for funds he had advanced to pay for certain
expenses. The loan bears no interest and is payable on demand.Note
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
4. NOTE PAYABLE
In December 2013, the Company signed an agreement
to purchase certain telecommunications equipment for $10 million. The agreement called for the Company to sign an installment
agreement for $1,000,0000. The installment agreement, as amended in November 2015, calls for this balance to be amortized over
a six year term with interest accruing at 8% per annum. Additionally, under the terms of this modification, payments will begin
48 months after the signing of the original agreement (December 2013) at which time all interest accrued until that time will
be due and payable. Interest only payments will begin in month 49 and will continue through month 72 at which time a balloon payment
of the principal and any unpaid interest will be due. At March 31, 2016 and December 31, 2015, accrued interest on this note totaled
$224,187 and $204,187, respectively.
The amendment stipulates that the remaining
$9,000,000 owed by the Company will be paid by the issuance of 10,000,000 shares of the Company's preferred stock within 36 months
from the date of the amendment. The Company has not issued any shares at March 31, 2016, under the terms of this amendment.
Note 5. STOCKHOLDERS' EQUITY
The Company has authorized 500,000,000 shares
of common stock with a par value of $0.0001 per share. During the three months ended March 31, 2016, the Company issued 100,000
shares at $0.50 per share for services provided to the company. At March 31, 2016, 24,674,000 shares of common stock were issued
and outstanding.
In August 2014, the Company received $20,000
in payment for 20,000 shares of common stock at $1.00 per share that are to be issued at a future date.
In March 2016, the Company authorized the
issuance of 50,000 shares of common stock at $0.10 per share, or $5,000, for services provided to the Company. The shares were
issued in May 2016. (Note 9)
The Company has authorized 10,000,000 shares
of preferred stock with no par value. No shares were issued or outstanding at March 31, 2016.
Note 6. COMMITMENTS AND CONTINGENCIES
The Company currently leases its offices on
a month to month basis from the Company's President and stockholder for $500 per month.
Rent expense for the three months ended March
31, 2016 and 2015, totaled $1,500 and $1,500, respectively, and was capitalized as additional paid-in capital.
Note 7. INCOME TAXES
The deferred tax asset consists of the following:March
31, 2016 December 31, 2015
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|
March 31, 2016
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|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
1,710,000
|
|
|
$
|
1,676,000
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|
Valuation allowance
|
|
|
(1,710,000
|
)
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|
|
(1,676,000
|
)
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Deferred tax asset, net
|
|
$
|
—
|
|
|
$
|
—
|
|
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
The income tax benefit differs from the amount
computed by applying the statutory federal and state income tax rates to the loss before income before income taxes. The sources
and tax effects of the differences are as follows:
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|
March 31, 2016
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|
December 31, 2015
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|
|
|
|
|
|
|
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|
Statutory federal income tax rate
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|
|
34
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%
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|
|
34
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%
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State income taxes, net of federal taxes
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|
|
6
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%
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|
|
6
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%
|
Valuation allowance
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|
|
(40
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)%
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|
|
(40
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)%
|
Effective income tax rate
|
|
|
0
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%
|
|
|
0
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%
|
As of March 31, 2016, the Company has a net
operating loss carryforward of approximately $10,366,000. This loss will be available to offset future taxable income. If not
used, this carryforward will begin to expire in 2033. The deferred tax asset relating to the operating loss carryforward has been
fully reserved at March 31, 2016.
The Company currently has no federal or state
tax examinations in progress, nor has it had any federal or state examinations since its inception. All of the Company's tax years
are subject to federal and state tax examinations. The Company is only subject to state taxes in Georgia.
Note 8. BASIS OF REPORTING
The Company's financial
statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities
in the normal course of business.
The Company has incurred losses from inception
of approximately $10,366,000, which among other factors, raises substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional
capital from the sales of stock and receiving additional loans from related parties.
The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of the Company to continue as a going concern.
Note 9. SUBSEQUENT EVENTS
In May 2016, the
Company issued the 50,000 shares of common stock that were authorized in March 2016 for services provided to the Company. (Note
5)