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Starco Brands, Inc. - Quarter Report: 2017 June (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-Q


[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended JUNE 30, 2017


  [   ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

Commission file number:  0-54892

INSYNERGY PRODUCTS, INC

 (Exact name of registrant as specified in its charter)



Nevada

 


27-1781753

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

2501 West Burbank Blvd., Suite 201, Burbank, CA

 

91505

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

Registrant’s telephone number, including area code: (818) 260-9370


Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  [X]    No  [  ]

 

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


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


Large accelerated filer [  ]

Non-accelerated filer [  ]

Emerging growth company [  ]

Accelerated filer [  ]

Smaller reporting company [X]

 

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  [X]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of August 9, 2017, the issuer had 36,263,534 shares of its common stock issued and outstanding.




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TABLE OF CONTENTS

PART I

 

 

Item 1.

Condensed Financial Statements

3

Item 2.

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

10

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

Item 4.

Controls and Procedures

13

PART II

  

Item 1.

Legal Proceedings

14

Item 1A.

Risk Factors

14

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

14

Item 3.

Defaults Upon Senior Securities

14

Item 4.

Mining Safety Disclosures

14

Item 5.

Other Information

14

Item 6.

Exhibits

15

 

Signatures

16



2



 PART I – FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

INSYNERGY PRODUCTS, INC.

INDEX TO FINANCIAL STATEMENTS


Condensed Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016

4

Condensed Statements of Operations for the Three and Six Months ended June 30, 2017

and 2016 (unaudited)

5

Condensed Statements of Cash Flows for the Six Months ended June 30, 2017 and 2016 (unaudited)

6

Notes to the Condensed Financial Statements (unaudited)

7



3



INSYNERGY PRODUCTS, INC.

BALANCE SHEETS

  
  

June 30, 2017

  

December 31, 2016

ASSETS

 

(unaudited)

 

  

Current Assets:

  

 

  

    Cash

$

269,299

 

$

-

    Prepaid and other assets

 

22,291

  

6,601

        Total Current Assets

 

291,590

 

 

6,601

   

 

  

    Deposit

 

3,500

 

 

3,500

        Total Assets

$

295,090

 

$

10,101

 

  

 

  

LIABILITIES AND STOCKHOLERS' DEFICIT

 

  

Current Liabilities:

  

 

  

    Accounts payable

$

421,444

 

$

417,387

    Other payables and accruals

 

277,520

 

 

270,988

    Accrued compensation

 

210,070

  

87,850

    Due to an officer

 

113,105

  

1,393

   Common stock to be issued

 

250,000

  

-

    Notes payable

 

41,400

  

21,400

        Total Current Liabilities

 

1,313,539

 

 

799,018

       Total Liabilities

 

1,313,539

 

 

799,018

Stockholders' Deficit:

  

 

  

Common Stock par value $0.001 300,000,000 shares authorized, 36,263,534 and 27,605,564 shares issued, respectively

 

36,266

 

 

27,607

Additional paid in capital

 

14,804,545

 

 

14,553,464

Accumulated deficit

 

(15,859,260)

 

 

(15,369,988)

Total Stockholders' Deficit

 

(1,018,449)

 

 

(788,917)

Total Liabilities and Stockholders' Deficit

$

295,090

 

$

10,101

 

 

 

 

  

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

 


4



INSYNERGY PRODUCTS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

 

 

 

    

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

2017

 

 

2016

 

2017

 

2016

Revenues

$

-

 

 $

159,203

 $

-

 $

174,602

Costs of goods sold

 

-

 

 

(412,345)

 

-

 

(503,946)

      Gross margin

 

-

 

 

(253,142)

 

-

 

(329,344)

 

 

  

 

 

 

 

 

 

Operating Expenses:

 

  

 

 

 

 

 

 

    Compensation expense

 

64,750

 

 

78,001

 

131,000

 

150,711

    Advertising and promotion

 

-

 

 

49,742

 

-

 

52,406

    Professional fees

 

9,912

  

1,456

 

31,296

 

42,500

      General and administrative

 

28,027

 

 

41,589

 

65,439

 

123,303

      Total operating expenses

 

102,689

 

 

170,788

 

227,735

 

368,920

 

 

  

 

 

 

 

 

 

Loss from operations

 

(102,689)

 

 

(423,930)

 

(227,735)

 

(698,264)

 

 

  

 

 

 

 

 

 

Other Income (Expense):

 

  

 

 

 

 

 

 

    Interest expense

 

(934)

  

(1,474)

 

(1,798)

 

(2,226)

Loss on conversion of debt

 

(259,739)

  

-

 

(259,739)

 

-

   Loss on disposal of property and equipment

 

-

  

(20,461)

 

-

 

(20,461)

Gain on extinguishment of debt

 

-

  

9,754

 

-

 

11,393

 Total other expense

 

(260,673)

 

 

(12,181)

 

(261,537)

 

(11,294)

 

 

  

 

 

 

 

 

 

Loss before provision for income taxes

 

(363,362)

  

(436,111)

 

(489,272)

 

(709,558)

Provision for income taxes

 

-

  

-

 

-

 

-

          

    Net Loss

$

(363,362)

 

 $

(436,111)

 $

(489,272)

 $

(709,558)

 

 

  

 

 

 

 

 

 

Loss per Share, Basic & Diluted

$

(0.01)

 

 $

(0.02)

 $

(0.02)

 $

(0.03)

Weighted Average Shares Outstanding

 

35,882,964

 

 

26,296,868

 

31,767,130

 

26,296,868


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


5

>


INSYNERGY PRODUCTS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Six Months Ended

June 30,

 

 

2017

  

2016

CASH FLOW FROM OPERATING ACTIVITES:

     

Net loss

$

(489,272)

 

$

(709,558)

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

  

 

  

    Deferred compensation

 

-

 

 

16,324

    Depreciation

 

-

 

 

13,288

    Loss on disposal of property and equipment

 

-

  

20,461

    Loss on inventory

 

-

  

499,861

Gain on extinguishment of debt

 

-

  

(11,392)

    Additional shares issued for prior debt conversion

 

259,739

  

-

Changes in Operating Assets and Liabilities:

  

 

  

   Accounts receivable

 

-

  

91,171

    Prepaids & other assets

 

(15,690)

 

 

41,022

    Inventory

 

-

  

4,085

    Accounts payable

 

4,057

 

 

206,736

    Product returns & allowances

 

-

  

(304,107)

    Accrued expenses

 

128,754

 

 

120,704

Net Cash Used in Operating Activities

 

(112,412)

 

 

(11,405)

   

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

 

-

  

-

      

CASH FLOWS FROM FINANCING ACTIVITIES:

  

 

  

Advances from officers

 

154,248

  

8,900

    Repayment of officer advance

 

(42,537)

 

 

(3,100)

    Proceeds from the sale of common stock

 

250,000

  

-

    Proceeds from notes payable

 

21,966

 

 

36,843

    Payments on notes payable

 

(1,966)

  

(63,274)

Net Cash (Used) Provided by Financing Activities

 

381,711

 

 

(20,631)

Net Increase (Decrease) in Cash

 

269,299

 

 

(32,036)

Cash at Beginning of Period

 

-

 

 

40,485

Cash at End of Period

$

269,299

 

$

8,449

 

 

  

Cash paid during the year for:

  

 

  

   Interest

$

-

 

$

-

   Franchise and income taxes

$

-

 

$

-

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



6



INSYNERGY PRODUCTS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2017

(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Insynergy Products, Inc. (the "Company") was incorporated in the State of Nevada on January 26, 2010, to engage in Direct Response marketing of consumer products with the goal of producing sales through television and/or retail.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2017. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  

 

Recently issued accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 – GOING CONCERN

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $15,859,260 at June 30, 2017, had a net loss of $489,272 and net cash used in operating activities of $112,412 for the six months ended June 30, 2017. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

The Company has started to embark on a new strategy to ensure the Company can operate as a going concern; although there are no assurances that any of these measures will be successful. The Company has raised $250,000 in seed financing to embark on its new strategy. Management is analyzing and beginning to execute on new potential growth paths and has the potential for a restructuring. The Company is currently performing its due diligence for a corporate reorganization. This due diligence phase, involving counsel and other qualified professionals is necessary in order to cautiously explore appropriate steps to restructure the Company for the purposes of executing a new business model within the Company’s core competencies.  

 

NOTE 4 – ACCOUNTS PAYABLE

 

A large portion of the Company’s accounts payable are the result of chargebacks for product that was not sold by two of our former customers. The Company also has other payables that are several years old for which management is in discussion with the vendors to settle those liabilities for a lesser amount.


Chargeback

$

224,832

Aged payables

 

99,745

Other vendor payables

 

93,867

 

$

421,444



7


NOTE 5 – NOTES PAYABLE

 

As of June 30, 2017, the Company owes $21,400 on a loan payable. The loan is uncollateralized, non-interest bearing and is due on demand. The Company expects that they will be able to have this liability dismissed by the payee in the near future.

 

The Company also has a financing loan for its Director and Officer Insurance. As of June 30, 2017 and December 31, 2016 the loan has a balance of $20,000 and $0, respectively, it bears interest at 3.7% and is due within one year.

 

NOTE 6 – COMMITMENTS & CONTIGENCIES

 

The Company currently occupies office space in Burbank, California. The Company signed a three-year lease starting January 1, 2016. Current monthly lease payments are $3,527 with yearly increases.  The lease required a deposit of $3,500 which was paid on December 10, 2015. Minimum lease payments over the next two years are as follows: 

 

Year

 

Amount

2017

$

42,330

2018

 

43,596

Total

$

127,023

Investment Agreement

 

On July 9, 2014, the Board of Directors approved an investment arrangement with an individual. Per the terms of the agreement the investor has transferred $150,000 to the Company for which he was entitled to the following: $1 per unit sold of a fitness product through all retail outlets including online and retail shopping shows until the investment was paid back in full. Once the original investment was recouped the investor shall then receive a 2% royalty in perpetuity on all future retail sales of the fitness product. The investment remains with the Company and is disclosed as an accrued liability on the balance sheet. Since the product for which the investment was intended was never produced this agreement is being renegotiated.

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

During the six months ended June 30, 2017, Sanford Lang, CEO advanced the company $151,518 to pay for general operating expenses; $40,241 of which was paid back. The advances are uncollateralized, non-interest bearing and due on demand. As of June 30, 2017 $111,277 is due to Mr. Lang.

 

During the six months ended June 30, 2017, Martin Goldrod, COO advanced the company $345 to pay for general operating expenses. The advance was uncollateralized, non-interest bearing and due on demand. As of June 30, 2017 the advance was repaid in full.

 

As of June 30, 2017, the Company owed its officers $1,828 for expense reimbursement.

 

NOTE 8 – COMMON STOCK

 

On April 4, 2017, the Company’s Board of Directors determined it was in the best interest of the Company to issue additional shares to Paul Bershin and Alan Diamante in consideration for funds previously loaned to the Company. Accordingly, the Company issued 3,811,594 shares of common stock to Paul Bershin at $0.03 per share and issued 4,846,376 shares of common stock to Alan Diamante at $0.03 per share. As the notes have been previously converted to equity in a prior period the stock issuance, which was valued at $259,739, was expensed and recorded as a loss on conversion of debt in the accompanying statement of operations.


8


On April 4, 2017, the Company received $250,000 from two of its investors for the purchase of common stock. The number of shares to be issued is still to be determined as it will be based upon a future valuation of the Company at which time the proper allocation will be determined. The $250,000 has been credited to a stock payable account as of June 30, 2017.

 

NOTE 9 – STOCK WARRANTS

 

A summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below:


 

Shares available to purchase with warrants

 

 

Weighted

Average

Price

 

 

Weighted

Average

Fair Value

 

 

 

 

 

 

 

 

Outstanding, December 31, 2016

 

51,000,000

 

 

$

0.23

 

 

$

0.186

 

 

 

 

 

 

 

 

 

 

 

Issued

 

-

 

 

$

-

 

 

$

-

Exercised

 

-

 

 

$

-

 

 

$

-

Forfeited

 

-

 

 

$

-

 

 

$

-

Expired

 

-

 

 

$

-

 

 

$

-

Outstanding, June 30, 2017

 

51,000,000

 

 

$

0.23

 

 

$

0.186

 

 

 

 

 

 

 

 

 

 

 

Exercisable, June 30, 2017

 

35,000,000

 

 

$

0.23

 

 

$

0.186

 


Range of Exercise Prices

Number Outstanding 6/30/2017

Weighted Average Remaining Contractual Life

 

Weighted Average Exercise Price

$0.23

51,000,000

8.13 years

$

0.23


 

 NOTE 10 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued, and has determined that no material subsequent events exist other than the following.

 

On July 27, 2017, the Board of Directors approved a resolution to change the Company’s name to Starco Brands, Inc. and change the trading symbol of the Company to reflect the name change.

 

On August 9, 2017 our Board of Directors accepted the resignation of Sanford Lang as Chief Executive Officer and President of the Company.  Mr. Lang will continue to serve as Chairman of the Board.  On that same date, the Board of Directors appointed Ross Sklar, our Director, to serve as Chief Executive Officer and President of the Company.  Mr. Sklar has served as a director on our Board since August 13, 2015.  He is the founder and current Chief Executive Officer of The Starco Group.



9


ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following information should be read in conjunction with our financial statements and related notes thereto included in Part I, Item 1, above. We also urge you to review and consider our disclosures describing various risks that may affect our business, which are set forth under the heading "Risk Factors," below.

 

Forward Looking Statements

 

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:

 

         ·our future strategic plans

        ·our future operating results;

        ·our business prospects;

        ·our contractual arrangements and relationships with third parties;

        ·the dependence of our future success on the general economy;

        ·our possible future financings; and

        ·the adequacy of our cash resources and working capital.

 

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

Plan of Operations

 

Insynergy Products is a company with experience in commercializing consumer products through commercial and infomercial production development.  The corporate goal was to develop intellectual property (“IP”) internally or via a license from a third party; however, due to the Company’s inability to raise funds, the Company has abandoned this strategy. The Board of Directors is still cognizant of the Company’s current limitations. The Company had reduced revenue in 2016 and has not recorded revenue for 2017. However, on July 12, 2017 the Company entered into a licensing agreement with The Starco Group, located in Los Angeles, California.  Management believes the Company may realize modest earnings in the short term with a stronger positive outlook over the next 36 months.  

 

The Company intends to pursue a new strategic plan to commercialize unique products with The Starco Group.  The Starco Group is predominantly an aerosol and liquid fill private label manufacturer with manufacturing assets in the following verticals: DIY/Hardware, paints, coatings and adhesives, household, air care, disinfectants, automotive, motorcycle, arts & crafts, personal care cosmetics, personal care FDA, sun care, food, cooking oils, beverage and spirits and wine.

 

The Company has performed extensive due diligence and has identified specific channels to penetrate and has identified novel technologies to pursue.  The business model includes the Company developing brands for certain novel products that the Company intends to market and distribute to major brick-and-mortar retail and the online retailing community.  The Company expects to realize royalties from this venture.


The Company has taken steps in executing this vision and has now launched our first product line called ‘Breathe ™’, through our manufacturing partner The Starco Group, for which we have applied for a registered trademark with the United States Patent and Trade Office.  Breathe is an environmentally friendly line of household cleaning aerosol products.  It is the first aerosol household cleaning line approved by the EPA’s Safer Choice program. This product line is biodegradable and is propelled by nitrogen, which makes up approximately 80% of the earth’s breathable air. The initial shipments of Breathe have been to Wegmans, a 93-store grocery retailer recognized as an innovative leader among retailers. The Breathe line is currently on shelves in all Wegmans stores.  

 

To secure assistance with marketing and logistics for our new household cleaning line Breathe, through our manufacturing partner, The Starco Group entered into a distribution agreement with United Natural Foods, Inc. (“UNFI”), a multibillion dollar distributor. UNFI has access to over 15,000 retail stores that the Company plans to access over the next 36 months.  The Company plans to launch other products under the Breathe brand.  In addition, the Company plans to launch other products in air care, food, personal care, spirits and beverages over the next 60 months, although a number of hurdles the Company may encounter could prevent this and future product launches from achieving sustained commercial success. 


10


 

The Company anticipates that we may raise additional capital as needed through the issuance and sale of our common stock. Such stock sales will likely be exempt from the registration requirements provided by federal and state securities laws.  The purchasers and manner of issuance will be determined according to our financial needs and the available exemptions to the registration requirements of the Securities Act of 1933.  We currently have no plans for a public offering of our stock.   

 

The new strategic plan may include a reorganization and restructuring of the Company’s capital structure in the future. This reorganization may also include consummating new strategic relationships in manufacturing, marketing and sales and may also include licensing existing brands. Through these potential new partnerships, the Company intends to commercialize key products that we believe will have a competitive advantage in the consumer products marketplace.  In the event of this potential reorganization, the Company is in discussions with new personnel that may become part of the senior management team to execute the new strategic plan. 


Before the reorganization the Company intends to change the Company’s name to Starco Brands, Inc.  The Company’s ultimate goal is to become a leading supplier in the consumer marketplace through the introduction of innovative and unique products and brands whose success is expected to increase shareholder value.  

 

The Company will continue to evaluate this and other opportunities to further set its strategy for 2017, 2018 and 2019.

 

Results of Operation for the Three Months Ended June 30, 2017 and 2016

 

Revenues

 

For the three months ended June 30, 2017 the Company recorded no revenue, compared to revenue net of sales returns of $159,203 for the three months ended June 30, 2016. Cost of goods sold was $0 compared to $412,345 of cost of goods sold in the prior period.

 

Operating Expenses

 

For the three months ended June 30, 2017, the Company incurred compensation expense of $64,750 compared to $78,001 for the three months ended June 30, 2016; a decrease of $13,251, or 17%. The decrease is due to the elimination of a part time employee in 2016.

 

For the three months ended June 30, 2017, the Company incurred $0 in advertising and promotional expense as compared to $49,742 for three months ended June 30, 2016. The decrease is in conjunction with our decreased business activities as we pursue a potential restructuring.

 

For the three months ended June 30, 2017, the Company incurred $9,912 in professional fees compared to $1,456 for the same period in the prior year. Professional fees are mainly for accounting, auditing and legal services associated with our quarterly filings as a public company. The increase is just due to the timing of billed audit fees.

 

For the three months ended June 30, 2017, the Company incurred $28,027 in general and administrative expense as compared to $41,589 for the same period in the prior year; a decrease of $13,562, or 32.6%. The decrease is in conjunction with our decreased business activities as we pursue a potential restructuring.

 

Other Income and Expense

 

For the three months ended June 30, 2017 we had total other expense from interest of $260,673 compared to $12,181 for the same period in the prior year. For the three months ended June 30, 2017, the Company recorded interest expense of $934 and a loss on conversion of debt of $259,739 due to additional shares issued for a prior debt conversion.

 

Net Loss

 

For the three months ended June 30, 2017 we realized a net loss of $363,362 as compared to $436,111 for the same period in the prior year.



11


Results of Operation for the Six Months Ended June 30, 2017 and 2016

 

Revenues

 

For the six months ended June 30, 2017 the Company recorded no revenue, compared to revenue net of sales returns of $174,602 for the six months ended June 30, 2016. Cost of goods sold was $0 compared to $503,946 of cost of goods sold in the prior period.

 

Operating Expenses

 

For the six months ended June 30, 2017, the Company incurred compensation expense of $131,000 compared to $150,711 for the six months ended June 30, 2016; a decrease of $19,711, or 13.1%. The decrease is due to the elimination of a part time employee in 2016.

 

For the six months ended June 30, 2017, the Company incurred $0 in advertising and promotional expense as compared to $52,406 for six months ended June 30, 2016. The decrease is in conjunction with our decreased business activities as we pursue a potential restructuring.

 

For the six months ended June 30, 2017, the Company incurred $31,296 in professional fees compared to $42,500 for the same period in the prior year. Professional fees are mainly for accounting, auditing and legal services associated with our quarterly filings as a public company. The decrease is due to decreased audit fees.

 

For the six months ended June 30, 2017, the Company incurred $65,439 in general and administrative expense as compared to $123,303 for the same period in the prior year; a decrease of $57,864, or 46.9%. The decrease is in conjunction with our decreased business activities as we pursue a potential restructuring.

 

Other Income and Expense

 

For the six months ended June 30, 2017 we had total other expense from interest of $261,537 compared to $11,294 for the same period in the prior year. For the six months ended June 30, 2017, the Company recorded interest expense of $1,798 and a loss on conversion of debt of $259,739.

 

Net Loss

 

For the six months ended June 30, 2017 we realized a net loss of $489,272 as compared to $709,558 for the same period in the prior year.

 

Liquidity and Capital Resources

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $15,859,260 at June 30, 2017, had a net loss of $489,272 and net cash used in operating activities of $112,412 for the six months ended June 30, 2017.

 

The Company has started to embark on a new strategy to ensure the Company can operate as a going concern; although there are no assurances that any of these measures will be successful. The Company has raised $250,000 in seed financing to embark on its new strategy. Management is analyzing and beginning to execute on new potential growth paths and has the potential for a restructuring. The Company is currently performing its due diligence for a corporate reorganization. This due diligence phase, involving counsel and other qualified professionals is necessary in order to cautiously explore appropriate steps to restructure the Company for the purposes of executing a new business model within the Company’s core competencies.  

 

Net cash flows from financing activities for the six months ended June 30, 2017 were $381,711 compared to $(20,631) used for the six months ended June 30, 2016.

 

The Company currently has no revenue from current operations, with liabilities exceeding its assets. Management is analyzing new potential growth paths and the potential for a restructuring; however, there is still substantial doubt about the Company’s ability to continue as a going concern.

 

Critical Accounting Estimates and Policies



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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

 

We are subject to various loss contingencies arising in the ordinary course of business.  We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies.  An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.  We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

 

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities.  The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.  Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

 

Off-Balance Sheet Arrangements 

 

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

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in ASC 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the effect this standard will have on our financial statements.

 

In June 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force.” The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including interim periods within those fiscal years. An entity that elects early adoption must adopt all of the amendments in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s consolidated cash flows.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

We maintain 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”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and



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communicated to our management to allow timely decisions regarding required disclosure.  Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended June 30, 2017.  The following aspects of the Company were noted as potential material weaknesses:

 

·

timely and accurate reconciliation of accounts

·

lack of segregation of duties

·

complex accounting transaction expertise

·

lack of corporate documentation

 

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, 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.

 

Changes in Internal Controls

 

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.


PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

 

There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

ITEM 4. MINING SAFETY DISCLOSURES

 

Not applicable.

ITEM 5. OTHER INFORMATION.

 

On August 9, 2017, our Board of Directors accepted the resignation of Sanford Lang as Chief Executive Officer and President of the Company.  Mr. Lang will continue to serve as Chairman of the Board.  On that same date, the Board of Directors appointed Ross Sklar, our Director, to serve as Chief Executive  CanOfficer and President of the Company.  Mr. Sklar has served as a director on our Board since August 13, 2015.  He is the founder and current Chief Executive Officer of The Starco Group.  



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ITEM 6. EXHIBITS

 

Part I Exhibits

No.

Description

31.1

Chief Executive Officer Section 302 Certification

31.2

Chief Financial Officer Section 302 Certification

32.1

Section 1350 Certification


Part II Exhibits

No.

Description

3(i)

Articles of Incorporation, as amended August 13, 2015 (Incorporated by reference  to exhibit 3(ii) to Form 8-K, filed August 20, 2015)

3(ii)

Bylaws of Insynergy Products, Inc.  (Incorporated by reference to exhibit 3.2 to Form S-1,

filed January 31, 2010)

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Label Linkbase Document

101.PRE

XBRL Taxonomy Presentation Linkbase Document




15


SIGNATURES


In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

INSYNERGY PRODUCTS, INC.

 

 

 Dated: August 11, 2017

By:  /s/ Ross Sklar

Ross Sklar

Chief Executive Officer

 

By: /s/Rachel Boulds

Rachel Boulds

Chief Financial Officer




 




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