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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q/A

(Amendment No. 1)

 

(Mark One)

 

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

 

For the Quarterly Period Ended March 31, 2022

 

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. 001-13126

 

FOMO WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

 

California   83-3889101

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

831 W North Ave, Pittsburgh, PA 15233

(Address of principal executive offices)

(630) 708-0750

(Registrant’s telephone number, including area code)

 

FOMO CORP., 1 E Erie St, Ste 525 Unit #2250, Chicago, IL 60611

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common   FOMC   OTC Expert Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ 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 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, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer,” “smaller reporting company” and “emerging growth 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 ☒

 

There were 8,620,188,088 shares of common stock, no par value, of the Registrant issued and outstanding as of March 24, 2023.

 

 

 

 
 

 

EXPLANATORY NOTE

 

As previously reported in the Registrant’s Current Reports on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on November 16, 2022 and November 18, 2022, the Board of Directors of FOMO WORLDWIDE, INC. previously known as “FOMO WORLDWIDE, INC.” (the “Company”) concluded that the Company’s unaudited financial statements for the period ended March 31, 2022, included in its Quarterly Report on Form 10-Q filed with the SEC on July 11, 2022, contained material misstatements and should not be relied upon. The misstatement related to accounting errors attributable to our revenue recognition policies. In particular, our percentage of completion calculations as well as work in progress (“WIP”) billings and our inventory for our wholly owned subsidiary, SMARTSolution Technologies, LP., were incorrect. See note 13 included herein for additional details.

 

This Form 10-Q/A is presented as of the filing date of the Form 10-Q and does not reflect events occurring after that date or modify or update disclosures in any way other than as required to reflect the restatement. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Form 10-Q. Among other things, forward-looking statements made in the original Form 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Form 10-Q, and such forward-looking statements should be read in their historical context.

 

The following items have been amended as a result of the restatement:

 

Part I, Item 1, “Financial Statements”,

Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and

Part I, Item 4, “Controls and Procedures”, and

 

In accordance with applicable SEC rules, this Amendment No. 1 on Form 10-Q/A includes an updated signature page and certifications of the Company’s Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2 as required by Rule 12b-15.

 

The Company has concluded there was a material weakness in the Company’s internal control over financial reporting as of March 31, 2022 and that its disclosure controls and procedures were ineffective as of March 31, 2022. See additional discussion included in Part I, Item 4 of this amended quarterly report.

 

 

 

 

FOMO WORLDWIDE, INC.

 

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

 

TABLE OF CONTENTS

 

  PAGE
   
Part I. FINANCIAL INFORMATION:  
   
Item 1. Financial Statements: 3
   
Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 4
   
Consolidated Statements of Operations for the three Months ended March 31, 2022 and 2021 (unaudited) 5
   
Consolidated Statement of Stockholders’ Deficit for three Months ended March 31, 2022 and 2021 (unaudited) 6
   
Consolidated Statements of Cash Flows for the three Months ended March 31, 2022 and 2021 (unaudited) 8
   
Notes to Consolidated Financial Statements (unaudited) 9
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 50
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 62
   
Item 4. Controls and Procedures 63
   
Part II. OTHER INFORMATION:  
   
Item 1. Legal Proceedings 64
   
Item 1A. Risk Factors 64
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64
   
Item 3. Defaults Upon Senior Securities 64
   
Item 4. Mine Safety Disclosures 64
   
Item 5. Other Information 64
   
Item 6. Exhibits 64
   
SIGNATURES 65
   
EXHIBIT INDEX

 

2

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

FOMO WORLDWIDE, INC.

 

INDEX TO FINANCIAL STATEMENTS

 

Consolidated Balance Sheets, March 31, 2022 (unaudited) and December 31, 2021 4
   
Consolidated Statements of Operations for the Three Months ended March 31, 2022 and 2021 (unaudited) 5
   
Consolidated Statements of Stockholders’ Deficit (unaudited) for the Three Months ended March 31, 2022 and 2021 (unaudited) 6
   
Consolidated Statements of Cash Flows for the Three Months ended March 31, 2022 and 2021 (unaudited) 8
   
Notes to Consolidated Financial Statements (unaudited) 9

 

3

 

 

FOMO WORLDWIDE, INC and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

 

  $ 2022     $ 2021  
    March 31, 2022     December 31, 2021  
    (Unaudited)        
    (Restated)        
Assets                
                 
Current Assets                
Cash   $ 69,666     $ 94,224  
Accounts receivable – net     1,021,357       36,790  
Loan receivable - related party     39,058       53,732  
Inventory – net     525,305       8,114  
Prepaids and other     1,078       223  
Total Current Assets     1,656,464       193,083  
                 
Property and equipment – net     81,974       -  
                 
Operating lease - right-of-use asset     333,721       -  
                 
Goodwill     1,443,688       -  
                 
Investments     517,599       765,463  
                 
Total Assets   $ 4,033,446     $ 958,546  
                 
Liabilities and Stockholders’ Equity (Deficit)                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 145,404     $ 40,117  
Accounts receivable credit facility    

982,517

      

-

  
Operating lease liability     59,278       -  
Convertible notes payable – net     383,230       89,305  
Loans payable - related parties     9,491       22,714  
Preferred dividend payable     45,059       0  
Deferred revenue     1,121,802      

11,100

  
Derivative liabilities     761,603       1,105,537  
Total Current Liabilities     3,508,384       1,268,773  
                 
Long Term Liabilities                
Convertible notes payable - related party – net     195,000       -  
Loans payable - related parties     140,880       -  
Operating lease liability     276,523       -  
Total Long-Term Liabilities     612,403       -  
                 
Total Liabilities     4,120,787       1,268,773  
                 
Commitments and Contingencies (Note 10)     -        -   
                 
Stockholders’ Equity (Deficit)                
Preferred stock, Class A, $0.0001 par value, 78,000,000 shares designated,
5,750,000 and 5,750,000 shares issued and outstanding, respectively		  
 		  
 		  
575		  
 		  
 		  
 		  
575		  
 
Preferred stock, Class B, $0.0001 par value, 20,000,000 shares designated,
6,839,982 and 5,249,982 shares issued and outstanding, respectively		  
 		  
 		  
684		  
 		  
 		  
 		  
525		  
 
Preferred stock, Class C, $0.0001 par value, 2,000,000 shares designated,
1,000,000 and 1,000,000 shares issued and outstanding, respectively		  
 		  
 		  
100		  
 		  
 		  
 		  
100		  
 
Common stock, no par value, 20,000,000,000 shares authorized
7,976,879,909 and 7,177,931,757 shares issued and outstanding, respectively		  
 		  
 		  
8,941,835		  
 		  
 		  
 		  
8,631,776		  
 
Additional paid-in capital     13,085,477       11,301,942  
Accumulated deficit     (22,116,012 )     (20,245,145 )
Total Stockholders’ Equity (Deficit)     (87,341 )     (310,227 )
                 
Total Liabilities and Stockholders’ Equity (Deficit)   $ 4,033,446     $ 958,546  

 

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

 

4

 

 

FOMO WORLDWIDE, INC. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

  $ 2022     $ 2021  
    For the Three Months Ended March 31,  
    2022     2021  
    (Restated)        
Sales – net   $ 592,291     $ 151,392  
                 
Cost of sales     520,847       132,221  
                 
Gross profit     71,444       19,171  
                 
General and administrative expenses     1,223,824       589,785  
                 
Loss from operations     (1,152,380 )     (570,614 )
                 
Other income (expense)                
Interest expense     (58,102 )     (211,312 )
Amortization of debt discount     (205,776 )     -  
Change in fair value of derivative liabilities     (2,716 )     (1,375,374 )
Derivative expense     (12,192 )     -  

Gain on debt extinguishment (derivative liabilities – convertible debt)

     100,693       -  
Loss on debt extinguishment     (205,691 )     (231,930 )
Change in fair value of marketable equity securities     (289,644 )     -  
Total other expense - net     (673,428 )     (1,818,616 )
                 
Net loss   $ (1,825,808 )   $ (2,389,230 )
                 
Preferred stock dividends     (45,059 )     0  
                 
Net loss available to common shareholders   $ (1,870,867 )     (2,389,230 )
                 
Loss per share - basic and diluted   $ (0.00 )   $ (0.00 )
                 
Weighted average number of shares - basic and diluted     7,896,234,748       5,445,268,799  

 

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

 

5

 

 

FOMO WORLDWIDE, INC and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2022

(Unaudited) (Restated)

 

                                                                                                 
    Preferred Stock - Class A     Preferred Stock - Class B     Preferred Stock - Class C     Common Stock    

Additional

Paid-in

     Common Stock     Accumulated    

Total

Stockholders’

Equity

  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital     Issuable     Deficit     (Deficit)  
                                                                         
December 31, 2021     5,750,000     $ 575       5,249,982     $ 525       1,000,000     $ 100       7,177,931,757     $ 8,631,776     $ 11,301,942     $ -     $ (20,245,145 )   $ (310,227 )
                                                                                                 
Issuance of stock in cashless exercise of warrants     -       -       -       -       -       -       437,500,000       -       -       -       -       -  
                                                                                                 
Issuance of stock for services     -       -       650,000       65       -       -       -       -       534,935       -       -       535,000  
                                                                                                 
Acquisition of Smart Solutions Technologies, Inc. - net of broker fees     -       -       1,000,000       100       -       -       -       -       699,900       -       -       700,000  
                                                                                                 
Issuance of stock in conversion of debt and accrued interest     -       -       -       -       -       -       301,448,152       310,059       -       -       -       310,059  
                                                                                                 
Conversion of Series B preferred stock into common stock     -       -       (60,000 )     (6 )     -       -       60,000,000       -       6       -       -       -  
                                                                                                 
Warrants issued for services     -       -       -       -       -       -       -       -       209,713       -       -       209,713  
                                                                                                 
Warrants issued for services - related party     -       -       -       -       -       -       -       -       13,981       -       -       13,981  
                                                                                                 
Reclassification of financial instruments that ceased to be derivative liabilities (warrants)     -       -       -       -       -       -       -       -       325,000               -       -       325,000  
                                                                                                 
Preferred dividends                                                                                     (45,059 )     (45,059 )
                                                                                                 
Net loss - 2022     -       -       -       -       -       -       -       -       -       -       (1,825,808 )     (1,825,808 )
                                                                                                 
March 31, 2022     5,750,000     $ 575       6,839,982     $ 684       1,000,000     $ 100       7,976,879,909     $ 8,941,835     $ 13,085,477     $ -     $ 22,116,012     $ (87,341 )

 

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

 

6

 

 

FOMO WORLDWIDE, INC and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2021

(Unaudited)

 

    Preferred Stock - Class A     Preferred Stock - Class B     Preferred Stock - Class C     Common Stock    

Additional

Paid-in

     Common Stock     Accumulated    

Total

Stockholders’

  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital     Issuable     Deficit     Deficit  
                                                                         
December 31, 2020     3,000,000     $ 300       4,463,815     $ 446       1,000,000     $ 100       4,713,546,121     $ 4,232,960     $ 3,139,400     $ 125,000     $ (7,662,645 )   $ (164,439 )
                                                                                                 
Conversion of convertible debt     -       -       -       -       -       -       905,435,038       563,643       -       -       -       563,643  
                                                                                                 
Issuance of stock for services     -       -       -       -       -       -       6,550,000       99,640       -       -       -       99,640  
                                                                                                 
Stock issued for loan cost     -       -       -       -       -       -       10,000,000       20,000       -       -       -       20,000  
                                                                                                 
Issuance of stock for cash - common stock     -       -       -       -       -       -       65,000,000       250,000       -       -       -       250,000  
                                                                                                 
Issuance of stock for cash - class A preferred stock     2,750,000       275       -       -       -       -       -       -       274,725       -       -       275,000  
                                                                                                 
Issuance of stock for services     -       -       300,000       30       -       -       -       -       123,970       -       -       124,000  
                                                                                                 
Issuance of class B preferred stock as non-refundable deposit to acquire business     -       -       175,000       17       -       -       -       -       38,483       -       -       38,500  
                                                                                                 
Issuance of class B preferred stock to acquire assets     -       -       375,000       38       -       -       -       -       924,962       -       -       925,000  
                                                                                                 
Warrants issued for services     -       -       -       -       -       -       -       -       194,000       -       -       194,000  
                                                                                                 
Net loss - 2021     -       -       -       -       -       -       -       -       -               (2,389,230 )     (2,389,230 )
                                                                                                 
March 31, 2021     5,750,000     $ 575       5,313,815     $ 531       1,000,000     $ 100       5,700,531,159     $ 5,166,243     $ 4,695,540     $ 125,000     $ (10,051,875 )   $ (63,886 )

 

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

 

7

 

 

FOMO WORLDWIDE, INC. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

  $ 2022 )   $ 2021 )
    For the Three Months Ended March 31,  
    2022     2021  
    (Restated)        
Operating activities                
Net loss   $ (1,825,808 )   $ (2,389,230 )
Adjustments to reconcile net loss to net cash used in operations                
Stock based compensation     535,000       165,500  
Stock issued for interest and loan costs     -       258,467  
Warrants issued for services     209,713       -  
Warrants issued for service - related party     13,981       -  
Amortization of debt discount     205,776       -  
Amortization of operating lease - right-of-use asset     11,508       -  
Depreciation and amortization expense     579       43,583  
Change in fair value of derivative liabilities     2,716       1,375,375  
Derivative expense     12,192       -  

Gain on debt extinguishment

     (100,693 )     -  
Loss on debt extinguishment     205,691       231,930  
Change in fair value of marketable equity securities     289,644       -  
Changes in operating assets and liabilities                
(Increase) decrease in                
Accounts receivable     214,267       (66,134 )
Inventory     (128,941 )     -  
Prepaids and other     (180,675 )     910  
Increase (decrease) in                
Accounts payable and accrued expenses     (157,645 )     (60,060 )
Customer deposits    

-

       91,434  
Deferred revenue     (89,770 )     -  
Operating lease liability     (9,428 )     -  
Net cash used in operating activities     (791,893 )     (348,225 )
                 
Investing activities                
Cash acquired in acquisition of Smart Solutions Technologies, Inc.     223,457       -  

Purchase of securities - net of sales

     (41,780 )     -  
Repayment - loan receivable - related party     15,199          
Advance - loan receivable - related party     (525 )     -  
Net cash provided by investing activities     196,351       -  
                 
Financing investing                
Proceeds from loans payable     -       205,000  
Proceeds from loans payable - related party     -       3,958  
Proceeds from issuance of convertible notes     253,750       -  
Proceeds from issuance of convertible note - related party     195,000       -  
Repayments of notes payable - government - SBA     (150,000 )     -  
Repayments of loans payable - related parties     (194,049 )     -  
Repayment of notes payable     (516,234 )     (128,800 )
Proceeds from draw downs on accounts receivable credit facility     1,022,749       -  
Repayment on accounts receivable credit facility     (40,232 )     -  
Proceeds from issuance of Class A preferred stock     -       275,000  
Proceeds from issuance of common stock     -       250,000  
Net cash provided by financing activities     570,984       605,158  
                 
Net increase (decrease) in cash     (24,558 )     256,933  
                 
Cash - beginning of year     94,224       12,069  
                 
Cash - end of year   $ 69,666     $ 269,002  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest   $ -     $ -  
Cash paid for income tax   $ -     $ -  
                 
Supplemental disclosure of non-cash investing and financing activities                
Acquisition of SST in exchange for Class B preferred stock   $ 700,000     $ -  
Debt discount recorded in connection with derivative liability   $ 66,851     $ -  
Issuance of stock in conversion of debt and accrued interest   $ 104,368     $ 563,643  
Conversion of Class B preferred stock into common stock   $ 6     $ -  
Reclassification of financial instruments that ceased to be derivative liabilities (notes and warrants)   $ 325,000     $ -  

 

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

 

8

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

Note 1 - Organization and Nature of Operations

 

Organization and Nature of Operations

 

FOMO CORP. (“FOMO,” “we,” “our” or “the Company”), is focused on the sale of its smart board technology as well as related installation services through its wholly owned subsidiary SMARTSolution Technologies L.P. (“SST”). Additionally, the Company markets and sells clean air disinfection products.

 

On May, 18 2021, FOMO incorporated FOMO ADVISORS LLC, a Wyoming limited liability company, as a wholly owned private merchant banking subsidiary. FOMO ADVISORS LLC intends to assist private companies in accessing the capital markets through “pass through” investments that allow investors to gain liquidity, while benefiting from direct exposure to private company growth through derivative instruments or other rights. The subsidiary is engaging with strategic targets to introduce them to its network of financial and strategic contacts, provide them management consulting, and create a portfolio of technology investments for future incubation, capital formation, and wealth creation. The Company is currently evaluating its corporate development pipeline and has identified a number of candidates for this capital formation model, though there can be no assurances. Currently, this entity is inactive.

 

On February 28, 2022, the Company acquired SST , see Note 9.

 

In June 2022, the Company applied with the State of California for a name change to FOMO Worldwide, Inc. The name change is being reviewed for approval.

 

The parent (FOMO CORP.) and subsidiaries are organized as follows: 

 

Company Name   Incorporation Date     State of Incorporation  
FOMO CORP. (“FOMO” or the “Company”)     1990       California  
FOMO Advisors, LLC (“FOMOAD”)     2021       Wyoming  
SMARTSolution Technologies L.P. (“SST”)     1995 1     Pennsylvania  
IAQ Technologies, LLC (“IAQ”)     2020 2     Pennsylvania  
Energy Intelligence Center LLC (“EIC”)     2021 3     Wyoming  

 

1 The Company was acquired on February 28, 2022
2 The Company was acquired in 2020
3 The Company was formed in 2021

 

9

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

IAQ Technologies, LLC

 

On October 19, 2020, the Company acquired 100% of the membership interests of Purge Virus, LLC in exchange for the issuance of 2,000,000 Series B Preferred Shares valued at $800,000 to its member. We subsequently changed the name of the company to IAQ Technologies LLC (“IAQ”). IAQ, which is based in Philadelphia, PA, is engaged in the marketing and sale of disinfection products and services to businesses, including hotels, hospitals, cruise ships, offices, and government facilities, as well as to individuals. Products and services marketed by IAQ include:

 

● Ultraviolet-C in-duct and portable devices,
● Hybrid disinfection devices with UVC, carbon filtration and HEPA filtration,
● Hybrid disinfection devices with UVC and Photo Plasma,
● Bio-polar ionization disinfection for virus and Volatile Organic Compound disinfection; and
● PPE (personal protective equipment) ranging from masks to gloves with factory-direct supply side logistics.

 

Operating results for IAQ since its acquisition have not met expectations, Accordingly, the interim chief executive is in the process of reorganizing IAQ. Accordingly, we determined that IAQ’s value was impaired at December 31, 2021.

 

Independence LED Lighting, LLC and Energy Intelligence Center, LLC

 

On February 12, 2021, the Company purchased the assets of Independence LED Lighting, LLC (“iLED”), an affiliate of IAQ, in exchange for the issuance of 250,000 Series B Preferred Shares valued at $3.3 million, iLED is in the sale of clean air products intended for use in disinfecting and improving air quality.

 

On March 7, 2021, the Company purchased the assets of Energy Intelligence Center, LLC (“EIC PA”) in exchange for the issuance of 125,000 Series B Preferred Shares and 50,000,000 warrants valued at $1,479,121. EIC is engaged in the commercialization, marketing and licensing of software and hardware designed to work in conjunction with a commercial building’s HVAC system to reduce energy consumption and optimize operating efficiency.

 

Following the acquisitions of the assets of iLED and EIC, the Company combined the assets and businesses of iLED and EIC into a newly formed wholly owned subsidiary, Energy Intelligence Center LLC (“EIC Wyoming”).

 

The Founder and Former Managing Member of IAQ, iLED and EIC stayed on following the asset acquisitions to run their businesses. However, in July 2021, he stepped down and assumed a consulting role and a new chief executive operating officer was hired to run the businesses of IAQ and EIC Wyoming. Such individual resigned from his position on March 2, 2022 and we then appointed an interim chief executive officer.

 

See Note 9.

 

SMARTSolution Technologies L.P.

 

On February 28, 2022, FOMO closed the acquisition of the general and all the limited partnership interests of SMARTSolution Technologies L.P. and SMARTSolution Technologies, Inc. (collectively “SST”) pursuant to a Securities Purchase Agreement dated February 28, 2022 (the “SPA”), by and between the Company and Mitchell Schwartz (“Seller”), the beneficial owner of the general and limited partnership interests in SST. SST is a Pittsburgh, Pennsylvania–based audio/visual systems integration company that designs and builds presentation, teleconferencing and collaborative systems for businesses, educational institutions, and other nonprofit organizations.

 

SST has been engaged in the EdTech business for over 25 years. SST markets its systems to and installs the systems in elementary, middle and high schools, as well as colleges, universities, and commercial facilities. A current focus of SST’s business is the sale and installation of interactive smartboards to elementary, middle and high schools. These interactive smartboards provide students with interactive remote access from home or other locations to classrooms and teachers via personal computers, laptops, tablets, and similar devices. SST currently markets its systems primarily in Western Pennsylvania, Eastern Ohio, and West Virginia, is in the process of expanding into the Alabama and Michigan markets and plans to expand further throughout the United States as opportunities present itself organically or through strategic acquisitions.

 

10

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

As a result of the growth in remote learning, as a result of the COVID-19 pandemic and otherwise, and due to $500 billion in stimulus funding (“ESSER funds”) from the federal government, SST is currently experiencing a significant increase in orders and sales and a growth in backlog.

 

The interactive smartboards which form the key element of SST’s interactive systems are supplied by a single supplier in Canada, SMART Technologies ULC, which is a subsidiary of a large multi-national company, Foxconn (of Hon Hai Technology Group). SST believes that its relationship with its supplier is excellent, although there can be no assurance that if the relationship with the supplier was interrupted or otherwise adversely affected that an alternative source of supply at commercially reasonable cost would be available or that SST’s business would not be seriously harmed.

 

See note 9.

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 28, 2022.

 

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

 

Principles of Consolidation

 

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

11

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

Business Combinations

 

The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date.

 

The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.

 

Significant judgments are used in determining fair values of assets acquired and liabilities assumed, as well as intangibles. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows, and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.

 

On February 28, 2022 (the “closing”, the “closing date”), the Company and SST executed a securities purchase agreement, which is treated as a business combination, and accounted for using the acquisition method. SST became a wholly owned subsidiary of the Company. See Note 9.

 

At March 31, 2022 and December 31, 2021, goodwill was $1,443,688 and $0, respectively.

 

As a result of the SST acquisition, the consolidated financial statements include the balance sheet of SST at March 31, 2022, as well as the results of operations and cash flows of SST from the date of acquisition through March 31, 2022.

 

Goodwill and Intangible Assets

 

The Company initially records intangible assets at their estimated fair values and reviews these assets periodically for impairment. Goodwill represents the excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is tested at least annually for impairment.

 

For the three months ended March 31, 2022 and 2021, impairment expense was $0 and $0, respectively.

 

Business Segments and Concentrations

 

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as a single reportable segment. Customers in the United States accounted for approximately 100% of our revenues. We do not have any property or equipment outside of the United States.

 

12

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

Use of Estimates

 

Preparing 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 the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Significant estimates during the three months ended March 31, 2022 and the year ended December 31, 2021, respectively, include, allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of investments, valuation of goodwill and intangible assets, valuation of loss contingencies, valuation of derivative liabilities, valuation of stock-based compensation, estimated useful lives related to intangible assets and property and equipment, uncertain tax positions, and the valuation allowance on deferred tax assets.

 

Risks and Uncertainties

 

The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

 

Coronavirus (“COVID-19”) Pandemic

 

During the three months ended March 31, 2022, the Company’s financial results and operations were not materially adversely impacted by the COVID-19 pandemic. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends on future developments that are highly uncertain and cannot be predicted at this time. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities.

 

These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

 

Fair Value of Financial Instruments

 

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

13

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

The three tiers are defined as follows:

 

● Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
● Level 2 - Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
● Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

 

Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

 

The Company’s financial instruments, including cash, accounts receivable, inventory, accounts payable and accrued expenses, loans payable and notes payable are carried at historical cost. At March 31, 2022 and December 31, 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

 

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.

 

14

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

Assets and liabilities measured at fair value at March 31, 2022 and December 31, 2021 are as follows:

 

    March 31, 2022  
    Level 1     Level 2     Level 3     Total  
Assets                        
Investments   $ 467,599       -      $ 50,000     $ 517,599  
Total Assets   $ 467,599     $ -     $ 50,000     $ 517,599  
                                 
Liabilities                                
Derivative liabilities   $ -       -      $ 761,603     $ 761,603  
Total   $ -     $ -     $ 761,603     $ 761,603  

 

      December 31, 2021  
      Level 1       Level 2       Level 3       Total  
Assets                                
Investments   $ 740,463       -      $ 25,000     $ 765,463  
Total Assets   $ 740,463     $ -     $ 25,000     $ 765,463  
                                 
Liabilities                                
Derivative liabilities   $ -       -      $ 1,105,537     $ 1,105,537  
Total   $ -     $ -     $ 1,105,537     $ 1,105,537  

 

Level 1 Investments consist of common stock, options and warrants of publicly traded companies which are considered to be highly liquid and easily tradeable. The Company also holds Level 3 investments in the common stock of a private company.

 

Derivative liabilities are derived from certain convertible notes payable and warrants.

 

Cash and Cash Equivalents and Concentration of Credit Risk

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At March 31, 2022 and December 31, 2021, respectively, the Company did not have any cash equivalents.

 

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000. There were no accounts in excess of this insured limit.

 

15

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

Accounts Receivable

 

The Company has a policy of reserving for uncollectible accounts based on the best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable and perform ongoing credit evaluations of customers and maintain an allowance for potential bad debts if required.

 

It is determined whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance, as necessary.

 

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate the collectability of receivables.

 

Allowance for doubtful accounts at March 31, 2022 and December 31, 2021, were $0, respectively. For the three months ended March 31, 2022 and 2021, the Company recorded bad debt expense of $0 and $0, respectively.

 

Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

The Company had the following concentrations at March 31, 2022 and December 31, 2021, respectively. All concentrations relate solely to the operations of SST.

 

    Three Months Ended     Year Ended  
Customer   March 31, 2022     December 31, 2021  
A     46 %     0 %
B     18 %     0 %
C     10 %     0 %
Total     74 %     0 %

 

Inventory

 

Inventory consists of finished products purchased from third-party suppliers. The Company’s inventory primarily consists of Smart Boards which are sold by SST.

 

Inventory is stated at the lower of cost or net realizable value. Cost is determined using the specific identification method for finished goods. Management compares the cost of inventory with the net realizable value and, if applicable, an allowance is made for writing down the inventory to its net realizable value, if lower than cost, inventory is reviewed for potential write-down for estimated obsolescence or unmarketable inventory based upon forecasts for future demand and market conditions. Generally, the Company only keeps inventory on hand for sales made and in which a deposit has been received.

 

16

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

At March 31, 2022 and December 31, 2021 inventory consisted of:

 

Classification   March 31, 2022     December 31, 2021  
Smart Boards   $ 513,750     $ -  
Clean Air Technology     11,555       8,114  
Total Inventory   $ 525,305     $ 8,114  

 

During the three months ended March 31, 2022 and 2021 , impairment expense was $0 and $0, respectively.

 

The Company had the following vendor purchase concentrations at March 31, 2022 and 2021, respectively. All concentrations relate solely to the operations of SST.

 

    Three Months Ended March 31,  
Customer   2022     2021  
A     84 %     0 %
Total     84 %     0 %

 

Impairment of Long-lived Assets

 

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

 

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

For the three months ended March 31, 2022 and 2021, impairment expense was $0 and $0, respectively.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets, which range from one to seven years.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

17

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)

 

For the three months ended March 31, 2022 and 2021, impairment expense was $0 and $0, respectively.

 

Derivative Liabilities

 

The Company assessed the classification of its derivative financial instruments as of March 31, 2022 and December 31, 2021, which consist of convertible notes payable and certain warrants (excluding those for compensation) and has determined that such instruments qualify for treatment as derivative liabilities as they meet the criteria for liability classification under ASC 815.

 

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. The Company uses a binomial pricing model to determine fair value of these instruments.

 

Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock at fair value, relieves all related debt, derivatives, and debt discounts, and recognizes a net gain or loss on debt extinguishment. In connection with the debt extinguishment, the Company typically records an increase to additional paid-in capital for any remaining liability balance.

 

Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

 

Original Issue Discount

 

For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.

 

Debt Issue Cost

 

Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.

 

18

 

 

FOMO WORLDWIDE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

UNAUDITED (RESTATED)