Item 1.
Financial Statements
NZCH CORPORATION
CONDENSED BALANCE SHEETS
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September 30,
2016
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December 31,
2015
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(Unaudited)
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ASSETS
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Current assets:
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Cash
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$
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862,603
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$
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595,514
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Prepaid expense
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3,941
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5,802
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Total assets
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$
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866,544
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$
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601,316
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable and other current liabilities
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$
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6,692
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$
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8,896
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Payable to affiliate
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—
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5,802
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Total liabilities
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6,692
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14,698
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Commitments and contingencies
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Stockholders’ equity:
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Common stock
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50,004
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50,004
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Additional paid in capital
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11,146,937
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11,119,717
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Accumulated deficit
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(10,337,089
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(10,583,103
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Total stockholders’ equity
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859,852
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586,618
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Total liabilities and stockholders’ equity
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$
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866,544
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$
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601,316
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See accompanying notes to condensed financial statements.
NZCH CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
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Three months ended September 30,
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Nine months ended September 30,
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2016
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2015
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2016
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2015
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(Unaudited)
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(Unaudited)
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Revenues
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$
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—
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$
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—
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$
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—
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$
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—
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Cost of revenues
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—
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—
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—
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—
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Gross profit
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—
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—
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—
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—
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Operating expenses:
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General and administrative
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19,943
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28,962
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128,986
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128,722
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Total operating expenses
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19,943
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28,962
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128,986
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128,722
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Operating loss
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(19,943
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)
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(28,962
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)
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(128,986
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(128,722
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Gain on sale of domain names
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—
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—
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375,000
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—
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(Loss) income before income taxes
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(19,943
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(28,962
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246,014
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(128,722
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Benefit from income taxes
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—
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—
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—
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—
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Net (loss) income
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$
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(19,943
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)
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$
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(28,962
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)
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$
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246,014
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$
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(128,722
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)
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Net (loss) income per common share – basic and diluted
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$
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—
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$
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—
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$
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—
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$
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—
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Weighted average common shares outstanding – basic and diluted
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50,004,474
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50,004,474
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50,004,474
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50,004,474
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See accompanying notes to condensed financial statements.
NZCH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
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Nine months ended September 30,
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2016
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2015
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(Unaudited)
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Cash flows from operating activities:
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Net income (loss)
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$
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246,014
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$
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(128,722
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)
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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Contributed capital from HRG Group, Inc. for unreimbursed management services (Note 2)
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27,220
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26,578
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Gain on sale of domain names
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(375,000
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)
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—
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Changes in operating assets and liabilities:
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Prepaid expense
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1,861
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(5,130
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Accounts payable and other current liabilities
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(2,204
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)
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(4,587
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Payable to affiliate
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(5,802
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)
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(25,217
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)
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Net cash used in operating activities
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(107,911
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)
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(137,078
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)
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Cash flows from investing activities:
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Sale of domain names
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375,000
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—
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Net cash provided by investing activities
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375,000
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—
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Net increase (decrease) in cash
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267,089
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(137,078
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Cash at beginning of period
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595,514
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748,913
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Cash at end of period
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$
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862,603
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$
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611,835
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See accompanying notes to condensed financial statements.
NZCH CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The unaudited condensed financial statements included herein have been prepared by NZCH Corporation (“NZCH” or the “Company”, formerly Zap.Com Corporation) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), have been condensed or omitted pursuant to such rules and regulations. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by US GAAP. These interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2015
filed with the SEC on March 9, 2016. The results of operations for the
nine months ended September 30, 2016
are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending
December 31, 2016
.
On June 21, 2016, the Company sold its domain names, including the Zap.Com domain name, to a third party for
$375,000
(the “Domain Sale”). The Company recognized a gain on the Domain Sale for the
nine months ended September 30, 2016
.
The Company will utilize net operating losses to offset the tax effects on the gain on the Domain Sale and there was a release of previously recorded valuation allowance on the Company’s deferred tax assets during the
nine months ended September 30, 2016
. Effective June 21, 2016, the Company also changed its name from Zap.Com Corporation to NZCH Corporation.
Note 2. Related Party Transactions
Since its inception, the Company has utilized the services of the management and staff of HRG Group, Inc., its principal stockholder (the Company’s “Principal Stockholder”), under a shared services agreement that allocated these costs on a percentage of time basis. The Company also shares office space with its Principal Stockholder under such agreement. Through
September 30, 2016
, the Principal Stockholder has waived its rights under the shared services agreement to be reimbursed for these costs. The Company recorded approximately
$7,250
and
$7,470
as contributed capital for such services for the
three months ended September 30, 2016
and
2015
, respectively, and
$27,220
and
$26,578
for the
nine months ended September 30, 2016
and
2015
, respectively. The Company believes these allocations were made on a reasonable basis; however, they do not necessarily represent the costs that would have been incurred by the Company on a stand-alone basis.
The Company’s Principal Stockholder pays certain costs of being a public company on behalf of the Company and the corresponding payables are settled periodically. At
December 31, 2015
, the payable to the Principal Stockholder related to such transactions was
$5,802
. As of
September 30, 2016
, there were no payables to the Principal Stockholder with respect to such expenses.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of NZCH Corporation (formerly Zap.Com Corporation, the “Company,” “NZCH,” “we,” “us,” or “our”) should be read in conjunction with our unaudited condensed financial statements included elsewhere in this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2015
(the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2016. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Forward-Looking Statements” in “Part II — Other Information” of this report. You should consider our forward-looking statements in light of our unaudited condensed financial statements, related notes, and other financial information appearing elsewhere in this report, our Form 10-K and our other filings with the SEC.
Overview
The Company was incorporated in Nevada in 1999 for the purpose of creating and operating a global network of independently owned web sites. HRG Group, Inc. (our “Principal Stockholder” or “HRG”) owns approximately 98% of our outstanding common stock. Currently, we have no business operations, other than complying with our reporting requirements under the Securities Exchange Act of 1934. While we may search for assets or businesses to acquire, we expect that we will in the future wind-down and/or liquidate our operations.
Results of Operations
For the three and
nine months ended September 30, 2016
and
2015
, our operations consisted of the following:
Revenues.
We had no revenues for the three and
nine months ended September 30, 2016
and
2015
, and we do not presently have any revenue-generating business.
Cost of Revenues
.
We had no cost of revenues for the three and
nine months ended September 30, 2016
and
2015
.
General and Administrative Expenses
.
General and administrative expenses consist primarily of legal and accounting professional services, printing and filing costs, expenses allocated for services by our Principal Stockholder under a shared services agreement, and various other costs. General and administrative expenses
decreased
by
$9,019
to
$19,943
for the
three months ended September 30, 2016
from
$28,962
for the
three months ended September 30, 2015
and
increased
by
$264
to
$128,986
for the
nine months ended September 30, 2016
from
$128,722
for the
nine months ended September 30, 2015
.
Gain on Sale of Domain Names.
On June 21, 2016, the Company sold its domain names, including the Zap.Com domain name, to a third party for
$375,000
(the “Domain Sale”). The Company recognized a gain on the Domain Sale of
$375,000
for the
nine months ended September 30, 2016
.
The Company will utilize net operating losses to offset the tax effects on the gain on the Domain Sale and there was a release of previously recorded valuation allowance on the Company’s deferred tax assets during the
nine months ended September 30, 2016
.
Liquidity and Capital Resources
Our primary source of liquidity has been from our initial capitalization and the Domain Sale. We have not generated any other significant revenue since our inception. At
September 30, 2016
, we held a cash balance of
$862,603
.
Since our inception, we have utilized services of the management and staff and occupied office space of our Principal Stockholder under a shared services agreement that allocated these costs. Our Principal Stockholder has waived its rights under the shared services agreement to be reimbursed these costs through
September 30, 2016
. For the
three months ended September 30, 2016
and
2015
, we recorded approximately
$7,250
and
$7,470
, respectively, as contributed capital for these services and for the
nine months ended September 30, 2016
and
2015
, we recorded approximately
$27,220
and
$26,578
, respectively.
As of
September 30, 2016
, we had a cash balance of
$862,603
and owned certain other intangible assets to which we ascribe no value. We believe that we have sufficient resources to satisfy our existing liabilities and our anticipated operating expenses for the next twelve months. Until such time as we actively pursue a business combination, asset acquisition or liquidate our operations, we expect these expenses to consist mainly of general and administrative expenses incurred in connection with maintaining our status as a public reporting company. We have no commitments for capital expenditures and foresee none, except for possible future business combinations or asset acquisitions. In order to effect a business combination or asset acquisition, however, we may need additional financing. There is no assurance that any such financing will be available or available on terms favorable or acceptable to us.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements at
September 30, 2016
that have or are reasonably likely to have a current or future material effect on our financial position, results of operations or cash flows.
Summary of Cash Flows
Cash used for operating activities was
$107,911
for the
nine months ended September 30, 2016
compared to
$137,078
for the
nine months ended September 30, 2015
. The
decrease
in cash used in operating activities was primarily due to the timing of settlements of intercompany payables.
Cash provided by investing activities was
$375,000
for the
nine months ended September 30, 2016
related to the Domain Sale during the
nine months ended September 30, 2016
.
We had no cash flows from financing activities for the
nine months ended September 30, 2016
and
2015
.
Recent Accounting Pronouncements Not Yet Adopted
As of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would have a material impact on our financial statements.
Critical Accounting Policies and Estimates
As of
September 30, 2016
, our critical accounting policies and estimates have not changed materially from those set forth in our
2015
Form 10-K.
Contractual Obligations
We do not have any long-term debt obligations, capital leases obligations, operating lease obligations or purchase obligations at
September 30, 2016
.
Item 4.
Controls and Procedures
Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that, as of
September 30, 2016
, the Company’s disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.
Changes in Internal Controls Over Financial Reporting
An evaluation was performed under the supervision of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of whether any change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended
September 30, 2016
. Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that no significant changes in the Company’s internal controls over financial reporting occurred during the quarter ended
September 30, 2016
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.