Company Quick10K Filing
Quick10K
Freeze Tag
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-08-31 Officers
8-K 2018-04-02 Enter Agreement, Regulation FD, Exhibits
8-K 2018-03-15 Sale of Shares
INMB INmune Bio 65
TMRC Texas Mineral Resources 20
CMDT iShares Commodity Optimized Trust 16
SPDL Spindle 15
WLB Westmoreland Coal 3
ALPP Alpine 4 Technologies 0
DOW Dow Chemical 0
ALTA Alterola Biotech 0
EMYB Embassy Bancorp 0
VGBT Vaulted Gold Bullion Trust 0
FRZT 2019-06-30
Part I - Financial Information
Note 1 - The Company and Nature of Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Going Concern Uncertainty
Note 4 - Property and Equipment
Note 5 - Intangible Assets
Note 6 - Leases
Note 7 - Notes Payable - Related Party
Note 8 - Stockholders' Deficit
Note 9 - Subsequent Events
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4 Controls and Procedures
Part II - Other Information
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Mine Safety Disclosures
Item 5 Other Information
Item 6 Exhibits
EX-31.1 frzt_ex311.htm
EX-31.2 frzt_ex312.htm
EX-32.1 frzt_ex321.htm
EX-32.2 frzt_ex322.htm

Freeze Tag Earnings 2019-06-30

FRZT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 frzt_10q.htm FORM 10-Q frzt_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10‑Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2019

 

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

 

For the transition period from _______________ to _______________.

 

Commission file number: 000-54267

 

FREEZE TAG, INC.

 (Exact name of registrant as specified in its charter)

 

 Delaware

 

 20-4532392

(State or other jurisdiction of incorporation or organization) 

 

(I.R.S. Employer Identification No.) 

  

 

 

18062 Irvine Blvd, Suite 103

Tustin, California

 

 92780

 (Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (714) 210-3850

 

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 x No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

 

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

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

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 x

 

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

 

Applicable only to corporate issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 6, 2019, there were 75,056,123 shares of common stock, $0.00001 par value, issued and outstanding.

 

 

FREEZE TAG, INC.

 

TABLE OF CONTENTS

QUARTER ENDED JUNE 30, 2019

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

2

 

Item 2.

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

17

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

 

Item 4.

Controls and Procedures

22

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

23

 

Item 1A.

Risk Factors

23

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

 

Item 3.

Defaults Upon Senior Securities

23

 

Item 4.

Mine Safety Disclosures

23

 

Item 5.

Other Information

23

 

Item 6.

Exhibits

24

 

 

 
2
 
 

 

PART I – FINANCIAL INFORMATION

 

The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

 

In the opinion of management, the condensed financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

 

The results for the period ended June 30, 2019 are not necessarily indicative of the results of operations for the full year. These condensed financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on April 1, 2019.

 

 
3
 
Table of Contents

 

FREEZE TAG, INC.

(A DELAWARE CORPORATION)

CONDENSED BALANCE SHEETS

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

 

ASSETS

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$218,967

 

 

$309,216

 

Accounts receivable

 

 

2,554

 

 

 

5,079

 

Prepaid expenses and other current assets

 

 

14,915

 

 

 

27,001

 

Total current assets

 

 

236,436

 

 

 

341,296

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

11,307

 

 

 

13,051

 

Intangible assets, net

 

 

295,420

 

 

 

341,160

 

Other assets

 

 

78,224

 

 

 

2,850

 

 

 

 

 

 

 

 

 

 

Total assets

 

$621,387

 

 

$698,357

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$151,241

 

 

$176,020

 

Accrued expenses

 

 

455,890

 

 

 

452,655

 

Unearned royalties

 

 

7,543

 

 

 

127,182

 

Notes payable–related party

 

 

379,825

 

 

 

379,825

 

Other current liabilities

 

 

27,920

 

 

 

-

 

Total current liabilities

 

 

1,022,419

 

 

 

1,135,682

 

 

 

 

 

 

 

 

 

 

Other long-term liabilities

 

 

47,454

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

1,069,873

 

 

 

1,135,682

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Preferred stock, $0.00001 par value, 25,000,000 shares authorized:

 

 

 

 

 

 

 

 

Series B; 2,480,482 shares issued and outstanding

 

 

25

 

 

 

25

 

Series C; 4,355,000 shares issued and outstanding

 

 

44

 

 

 

44

 

Common stock; $0.00001 par value, 800,000,000 shares authorized, 75,056,123 shares issued and outstanding

 

 

751

 

 

 

751

 

Additional paid-in capital

 

 

9,024,459

 

 

 

8,997,457

 

Common stock payable

 

 

16,800

 

 

 

16,800

 

Accumulated deficit

 

 

(9,490,565)

 

 

(9,452,402)

Total stockholders’ deficit

 

 

(448,486)

 

 

(437,325)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$621,387

 

 

$698,357

 

 

The accompanying notes are an integral part of the condensed financial statements

 

 
4
 
Table of Contents

 

FREEZE TAG, INC.

(A DELAWARE CORPORATION)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$518,213

 

 

$550,824

 

 

$1,078,416

 

 

$1,046,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

82,670

 

 

 

79,565

 

 

 

154,593

 

 

 

135,260

 

Selling, general and administrative expenses

 

 

477,992

 

 

 

415,654

 

 

 

941,910

 

 

 

912,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

560,662

 

 

 

495,219

 

 

 

1,096,503

 

 

 

1,047,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(42,449)

 

 

55,605

 

 

 

(18,087)

 

 

(1,118)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(10,090)

 

 

(9,469)

 

 

(20,076)

 

 

(35,382)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(10,090)

 

 

(9,469)

 

 

(20,076)

 

 

(35,382)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$(52,539)

 

$46,136

 

 

$(38,163)

 

$(36,500)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic

 

 

75,056,123

 

 

 

72,306,123

 

 

 

75,056,123

 

 

 

71,470,764

 

Weighted average number of common shares outstanding - diluted

 

 

75,056,123

 

 

 

91,297,373

 

 

 

75,056,123

 

 

 

71,470,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share – basic and diluted

 

$(0.00)

 

$0.00

 

 

$(0.00)

 

$(0.00)

 

The accompanying notes are an integral part of the condensed financial statements

 

 
5
 
Table of Contents

 

FREEZE TAG, INC.

(A DELAWARE CORPORATION)

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

 

 

Series A

Preferred Stock

 

 

 Series B

Preferred Stock

 

Series C

Preferred Stock

 

Common Stock

 

Additional

Paid-in

 

Common

Stock

 

Common

Stock

Subscription

 

Retained Earnings

 

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Payable

 

Receivable

 

(Deficit)

 

Total

 

Balance, December 31, 2018

 

-

 

$-

 

 

2,480,482

 

$25

 

 

4,355,000

 

$44

 

 

75,056,123

 

$751

 

$8,997,457

 

$16,800

 

$-

 

$(9,452,402)$(437,325)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party debt

 

-

 

 

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

9,366

 

 

-

 

 

-

 

 

-

 

 

9,366

 

Stock-based compensation

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4,083

 

 

-

 

 

-

 

 

-

 

 

4,083

 

Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

14,376

 

 

14,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

-

 

$-

 

 

2,480,482

 

$25

 

 

4,355,000

 

$44

 

 

75,056,123

 

$751

 

$9,010,906

 

$16,800

 

$-

 

$(9,438,026)$(409,500)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party debt

 

-

 

 

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

9,469

 

 

-

 

 

-

 

 

-

 

 

9,469

 

Stock-based compensation

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4,084

 

 

-

 

 

-

 

 

-

 

 

4,084

 

Net loss

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(52,539)

 

(52,539)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

-

 

$-

 

 

2,480,482

 

$25

 

 

4,355,000

 

$44

 

 

75,056,123

 

$751

 

$9,024,459

 

$16,800

 

$-

 

$(9,490,565)$(448,486)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

-

 

$-

 

 

2,585,882

 

$26

 

 

4,355,000

 

$44

 

 

69,786,123

 

$698

 

$8,919,980

 

$16,800

 

$(5,000)$(9,392,240)$(459,692)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collection of stock subscription receivable

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,000

 

 

-

 

 

5,000

 

Issuance of common stock for conversion of Series B preferred stock

 

-

 

 

-

 

 

(50,400

)

 

(1

)

 

-

 

 

-

 

 

2,520,000

 

 

25

 

 

(25

)

 

-

 

 

-

 

 

-

 

 

-

 

Imputed interest on related party debt

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

25,911

 

 

-

 

 

-

 

 

-

 

 

25,911

 

Net loss

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(82,636)

 

(82,636)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

 

-

 

$-

 

 

2,535,482

 

$25

 

 

4,355,000

 

$44

 

 

72,306,123

 

$723

 

$8,945,867

 

$16,800

 

$-

 

$(9,474,876)$(511,417)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party debt

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

 

9,470

 

 -

 

 -

 

 -

 

 

9,470

 

Net income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

46,136

 

 

46,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

 

-

 

$-

 

 

2,535,482

 

$25

 

 

4,355,000

 

$44

 

 

72,306,123

 

$723

 

$8,955,337

 

$16,800

 

$-

 

$(9,428,740)$(455,811)
 

The accompanying notes are an integral part of the condensed financial statements

 

 
6
 
Table of Contents

 

FREEZE TAG, INC.

(A DELAWARE CORPORATION)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(38,163)

 

$(36,500)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

47,484

 

 

 

47,326

 

Imputed interest expense

 

 

18,835

 

 

 

35,381

 

Stock-based compensation

 

 

8,167

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,525

 

 

 

(1,709)

Prepaid expenses and other current assets

 

 

12,086

 

 

 

(4,234)

Accounts payable

 

 

(24,779)

 

 

13,533

 

Accrued expenses

 

 

3,235

 

 

 

(17,291)

Unearned royalties

 

 

(119,639)

 

 

(5)

 

 

 

 

 

 

 

 

 

Net cash provided (used) by operating activities

 

 

(90,249)

 

 

36,501

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities: Purchase of property and equipment

 

 

-

 

 

 

(3,106)

 

 

 

 

 

 

 

 

 

Net cash used by investing activities

 

 

-

 

 

 

(3,106)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities: Proceeds stock subscription receivable

 

 

-

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

-

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(90,249)

 

 

38,395

 

Cash at the beginning of the period

 

 

309,216

 

 

 

167,492

 

 

 

 

 

 

 

 

 

 

Cash at the end of the period

 

$218,967

 

 

 

205,887

 

 

Supplemental disclosure:

 

 

 

 

 

 

Cash paid for income taxes

 

$-

 

 

$-

 

Cash paid for interest expense

 

$-

 

 

$1

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Issuance of common shares in conversion of Series B preferred stock

 

$-

 

 

$25

 

Right-of-use asset obtained in exchange for lease obligation

 

$88,325

 

 

$-

 

 

The accompanying notes are an integral part of the condensed financial statements

 

 
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FREEZE TAG, INC.

(A DELAWARE CORPORATION)

Notes to Condensed Financial Statements

Six Months Ended June 30, 2019

(Unaudited)

 

NOTE 1 – THE COMPANY AND NATURE OF BUSINESS

 

Nature of Operations

 

Freeze Tag, Inc. (“Freeze Tag” or the “Company”) is a leading creator of mobile location-based games for consumers and businesses. The Company also offers gaming technology and services to businesses that want to leverage mobile gaming in their marketing and branding programs.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and these differences may be material.

 

The following accounting policies involve significant judgments, assumptions and estimates by management.

 

Revenue Recognition

 

The Company’s revenues are derived primarily by licensing software products in the form of mobile games for smartphone and tablet platforms. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

 

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

 

·identification of the performance obligations in the contract;

 

·determination of the transaction price;

 

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

 

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

 

 
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Property and Equipment

 

Property and equipment is stated at cost and is depreciated or amortized using the straight-line method over the estimated useful life of the related asset as follows:

 

Computer equipment

5 years

Office furniture and equipment

7 years

Automobiles

5 years

Leasehold improvements

15 years

 

Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

 

The Company will assess the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.

 

Intangible Assets

 

Intangible assets consist primarily of intellectual property, customer base and non-compete agreements acquired in the Merger, which are amortized on a straight-line basis over their estimated useful lives of 5 years. Intangible assets are reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

 

Impairment of Long-Lived Assets

 

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

 

Income Taxes

 

We account for income taxes using ASC Topic 740, Income Taxes. Under ASC Topic 740, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC Topic 740 includes accounting guidance which clarifies the accounting for the uncertainty in recognizing income taxes in an organization by providing detailed guidance for financial statement recognition, measurement and disclosure involving uncertain tax positions. This guidance requires an uncertain tax position to meet a more-likely-than-not recognition threshold at the effective date to be recognized both upon the adoption of the related guidance and in subsequent periods.

 

The Company has no uncertain tax positions at any of the dates presented.

 

 
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Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees (“ASC stock-based compensation guidance”). Stock-based compensation expense recognized during the requisite service period is based on the value of share-based payment awards after reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

The Company had stock-based compensation expense recognized in its statements of operations of $8,167 for the six months ended June 30, 2019 and $0 for the six months ended June 30, 2018.

 

Earnings per Share

 

The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average common stock equivalents which would arise from the exercise of stock options, warrants, convertible preferred stock and other rights during the period.

 

For the three and six months ended June 30, 2019 and six months ended June 30, 2018, the diluted weighted average number of shares is the same as the basic weighted average number of shares as the inclusion of any common stock equivalents would be anti-dilutive. For the three months ended June 30, 2018, the diluted weighted average number of shares includes 18,991,250 common shares issuable upon conversion of related party convertible debt.

 

Fair Value of Financial Instruments

 

In accordance with current accounting standards, certain assets and liabilities must be measured at fair value. ASC 820 defines fair value 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 (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. ASC 820 requires that certain assets and liabilities must be measured at fair value, and the standard details the disclosures that are required for items measured at fair value. The Company had no assets and liabilities required to be measured on a recurring basis at June 30, 2019 and December 31, 2018.

 

The current assets and current liabilities reported on the Company’s balance sheets are estimated by management to approximate fair market value due to their short-term nature.

 

Recent Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 “Leases (Topic 842),” which amends existing accounting standards for leases. The ASU requires lessees to recognize most leases on their balance sheet as a lease liability with a corresponding right-of-use asset. Right-of-use assets and lease liabilities are recorded at the present value of minimum lease payments. The Company adopted the ASU effective January 1, 2019. We recognized an $88,325 right-of-use asset and $88,325 related lease liability as of January 1, 2019 for our operating lease. For our operating lease, the asset is included in Other long-term assets on the consolidated balance sheet and is amortized within operating income over the lease term. The long-term component of the lease liability is included in Other long-term liabilities, net, and the current component is included in Other current liabilities. The adoption of ASC 842 did not have a material impact on the Company’s consolidated results of operations, equity or cash flows as of the adoption date. Under the alternative method of adoption, comparative information was not restated, but will continue to be reported under the standards in effect for those periods. See Note 7 for further details regarding Freeze Tag’s leases.

 

Although there were new accounting pronouncements issued or proposed by the FASB during the six months ended June 30, 2019 and through the date of filing of this report, the Company does not believe any of these accounting pronouncements, other than the item listed above, has had or will have a material impact on its financial position or results of operations.

 

 
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NOTE 3 – GOING CONCERN UNCERTAINTY

 

The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. As shown in the accompanying financial statements, the Company incurred net loss of $38,163 and used net cash of $90,249 in operations for the six months ended June 30, 2019. As of June 30, 2019, the Company had a working capital deficit of $785,983 and a total stockholders’ deficit of $448,486. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support the Company’s business plan. The Company will also continue to develop and launch new games to maximize revenues. However, management is currently evaluating alternative financing sources to fund the Company’s current business plan should cash provided by operations be insufficient.

 

The Company’s ability to continue as a going concern is dependent upon successfully executing its plans to attain a successful level of operations. The Company’s financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at:

 

 

 

June 30,

2019

 

 

December 31,

2018

 

 

 

 

 

 

 

 

Computer equipment

 

$7,971

 

 

$7,971

 

Office furniture and equipment

 

 

10,055

 

 

 

10,055

 

Total

 

 

18,026

 

 

 

18,026

 

Less accumulated depreciation

 

 

(6,719)

 

 

(4,975)

 

 

 

 

 

 

 

 

 

Net

 

$11,307

 

 

$13,051

 

 

Depreciation expense was $1,744 and $1,586 for the six months ended June 30, 2019 and 2018, respectively.

 

 
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NOTE 5 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following at:

 

 

 

June 30,

2019

 

 

December 31,

2018

 

 

 

 

 

 

 

 

Intellectual property

 

$307,100

 

 

$307,100

 

Customer base

 

 

142,000

 

 

 

142,000

 

Non-compete agreements

 

 

8,300

 

 

 

8,300

 

Less accumulated depreciation

 

 

(161,980)

 

 

(116,240)

 

 

 

 

 

 

 

 

 

Net

 

$295,420

 

 

$341,160

 

 

Amortization expense was $45,740 for the six months ended June 30, 2019 and 2018.

 

NOTE 6 – LEASES

 

Our adoption of ASU 2016-02, Leases (Topic 842), and subsequent ASUs related to Topic 842, requires us to recognize substantially all leases on the balance sheet as an ROU asset and a corresponding lease liability. The new guidance also requires additional disclosures as detailed below. We adopted this standard on the effective date of January 1, 2019 and used this effective date as the date of initial application. Under this application method, we were not required to restate prior period financial information or provide Topic 842 disclosures for prior periods. We elected the ‘package of practical expedients,’ which permitted us to not reassess our prior conclusions related to lease identification, lease classification, and initial direct costs, and we did not elect the use of hindsight.

 

We determine if a contract is a lease at the inception of the arrangement. We review all options to extend, terminate, or purchase the ROU assets, and when reasonably certain to exercise, we include the option in the determination of the lease term and lease liability. We have one operating lease related to our office space in Texas with a remaining lease terms of 3 years. We recognized $17,100 in operating lease costs for the six months ended June 30, 2019.

 

Lease ROU assets and liabilities are recognized at commencement date of the lease, based on the present value of lease payments over the lease term. The lease ROU asset also includes any lease payments made and excludes any lease incentives. When readily determinable, we use the implicit rate in determining the present value of lease payments. When leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date, including the lease term.

 

Short-term leases with an initial term of 12 months or less are not recorded on the Balance Sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. As of March 31, 2019, we did not have any short-term leases.

 

 
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The tables below present financial information associated with our lease. This information is only presented as of, and for the six months ended, June 30, 2019. As noted above, we adopted Topic 842 using a transition method that does not require application to periods prior to adoption.

 

 

 

Balance Sheet Classification

 

June 30,

 2019

 

 

 

 

 

 

 

Right-of-use assets

 

Right-of-use assets

 

$75,374

 

Current lease liabilities

 

Other current liabilities

 

 

27,919

 

Non-current lease liabilities

 

Other long-term liabilities

 

 

47,455

 

 

As of June 30, 2019, our maturities of our lease liability is as follows:

 

2019

 

$17,100

 

2020

 

 

34,200

 

2021

 

 

34,200

 

Total

 

$85,500

 

Less: Imputed interest

 

 

(10,126)

Present value of lease liabilities

 

$75,374

 

 

NOTE 7 – NOTES PAYABLE – RELATED PARTY

 

Long-term notes payable - related party consisted of the following at June 30, 2019 and December 31, 2018:

 

Note payable to Craig Holland, non-interest bearing,

maturing on December 31, 2019

 

$6,925

 

Convertible note payable to Craig Holland, non-interest

bearing, maturing on December 31, 2019

 

 

186,450

 

Convertible note payable to Mick Donahoo, non-interest

bearing, maturing on December 31, 2019

 

 

186,450

 

 

 

 

 

 

Total

 

$379,825

 

 

Messrs. Holland and Donahoo have the right, at any time, at their election, to convert all or part of the amount due into shares of fully paid and non-assessable shares of common stock of the Company. The fixed conversion price is $0.02 per share.

 

The Company has imputed interest expense on the notes payable – related party using an annual rate of 10%. During the six months ended June 30, 2019 and 2018, total imputed interest expense was $18,835 and $35,381, respectively, which was recorded to additional paid-in capital.

 

 
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NOTE 8 – STOCKHOLDERS’ DEFICIT

 

Common Stock

 

The Company is authorized to issue up to 800,000,000 shares of its $0.00001 par value common stock and had 75,056,123 common shares issued and outstanding as of June 30, 2019.

 

There was no common stock activity during the six months ended June 30, 2019. During the six months ended June 30, 2018, the Company issued 2,520,000 shares of its common stock recorded at par value of $25 to an accredited investor in conversion of 50,400 shares of its Series B preferred stock. As the conversion was within the terms of the preferred stock, no gain or loss was recognized.

 

Preferred Stock

 

The Company is authorized to issue up to 25,000,000 shares of its $0.00001 par value preferred stock. The shares of preferred stock may be issued from time to time in one or more series. As of June 30, 2019, there were 2,480,482 shares of Series B preferred stock and 4,355,000 shares of Series C preferred stock issued and outstanding.

 

Series B Preferred Stock

 

The Company’s Series B Preferred Stock has 2,700,000 shares authorized and the following rights: (i) dividend rights equal to the Company’s common stock; (ii) no liquidation preference over the Company’s common stock; (iii) each share is convertible into 50 shares of the Company’s common stock; (iv) no redemption rights; (v) no call rights by the Company; and (vi) no voting rights. The holders of the Series B Preferred Stock cannot convert their shares of Series B Sreferred Stock if such conversion would cause the holder to beneficially own more than 4.99% of our then-outstanding common stock.

 

There was no Series B Preferred Stock activity during the six months ended June 30, 2019. During the three months ended March 31, 2018, an accredited investor converted 50,400 shares of Series B Preferred Stock into 2,520,000 shares of the Company’s common stock.

 

Series C Preferred Stock

 

The Company’s Series C Preferred Stock has 4,500,000 shares authorized and the following rights: (i) dividend rights equal to the Company’s common stock; (ii) no liquidation preference over the Company’s common stock; (iii) each share is convertible into 50 shares of the Company’s common stock; (iv) no redemption rights; (v) no call rights by the Company; and (vi) each shares votes on an “as converted” basis, such that each share currently has 50 votes on all matters brought before the Company’s common stockholders for a vote.

 

There was no Series C Preferred Stock activity during the six months ended June 30, 2019 and June 30, 2018.

  

 

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Stock Options

 

2017 Non-Qualified Stock Option Plan

 

On December 4, 2017, our Board of Directors approved the Freeze Tag, Inc. 2017 Non-Qualified Stock Option Plan (the “Plan”). Under the Plan, our Board of Directors may issue options to purchase up to an aggregate of 10,000,000 shares of common stock to individuals, including, but not limited to, our Board of Directors and/or our executive management. On December 5, 2017, our Board of Directors granted options to purchase a total of 1,512,821 shares of our common stock.

 

2006 Stock Option Plan

 

The Company’s 2006 Stock Option Plan adopted by our Board of Directors in March of 2006 terminated in the year ended December 31, 2016. As of June 30, 2019, there were 5,600 stock options outstanding under the 2006 Stock Option Plan.

 

We account for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. Under the fair value recognition provisions of this standard, stock-based compensation cost is measured at the grant date based on the estimated value of the award granted, using the Black-Scholes option pricing model, and recognized over the period in which the award vests in general and administrative expenses.

 

The Company recognized $8,167 of stock-based compensation during the six months ended June 30, 2019 and none during the six months ended June 30, 2018. As of June 30, 2019, future compensation cost related to non-vested stock options not yet recognized in the statements of operations totaled $8,167.

 

A summary of the status of the stock options issued by the Company under both plans as of June 30, 2019, and changes during six months then ended is presented below:

 

 

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Weighted Average

 

 

 

Shares

 

 

Exercise Price

 

 

 

 

 

 

 

 

Outstanding, December 31, 2018

 

 

1,518,423

 

 

$0.076

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

 

-

 

Canceled / Expired

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, June 30, 2019

 

 

1,518,423

 

 

$0.076

 

 

The outstanding options expire on various dates beginning August 2020 through December 2027.

 

NOTE 9 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:

 

No subsequent events to report.

 

 
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ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q of Freeze Tag, Inc. (“Freeze Tag” or the “Company”) for the six months ended June 30, 2019 contains forward-looking statements, principally in this Section and “Business.” Generally, you can identify these statements because they use words like “anticipates,” “believes,” “expects,” “future,” “intends,” “plans,” and similar terms. These statements reflect only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation of belief will be accomplished.

 

We believe it is important to communicate our expectations to our investors. There may be events in the future; however, that we are unable to predict accurately or over which we have no control. The risk factors listed in this filing, as well as any cautionary language in this annual report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated, include, but are not limited to: distributors not accepting our games; price reductions; unforeseen delays in game production; changes in product strategies; general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.

 

Summary Overview

 

Freeze Tag, Inc. is a creator of location-based, mobile social games that are fun and engaging for consumers and businesses. Based on a free-to-play business model that has propelled games built and marketed by some of our competitors to worldwide success, we employ state-of-the-art data analytics and proprietary technology to dynamically optimize the gaming experience for revenue generation. Players can download and enjoy our games for free, and, if they so choose, they can purchase virtual items and additional features within the game to increase the fun factor.

 

Founded by gaming industry veterans, Freeze Tag has launched several successful games over the course of its history. Our current portfolio includes hits such as Munzee®, a social platform with over 7 million locations worldwide and hundreds of thousands of players that blends gamification and geolocation into an experience that rewards players for going places in the physical world; Garfield Go, a Pokemon Go style augmented reality game based on the iconic cat Garfield; WallaBee®, an addictive collecting game with over 2,000 beautifully drawn digital cards; as well as many social mobile games that provide endless hours of family-friendly fun. We also offer our technology and services to third party businesses that want to leverage mobile gaming in their marketing and branding programs. For example, our Eventzee® solution allows businesses to create private scavenger hunts in physical places such as malls, tradeshows, company events or campuses to create immersive brand experiences.

 

 
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 Our mission is to design, develop and deliver innovative digital entertainment that surprises and delights. Our products bring families together by providing fun to kids of all ages. We also strive to create a workplace environment where creativity and fun can thrive in a demanding industry.

 

In 2018, our main focus as a company was centered on our flagship product, Munzee. We dedicated virtually all of our product strategy, design, engineering, creative, and testing resources to bring the “next generation” version (called Munzee 4.0) to market. We successfully introduced the new version to the market in January 31, 2019.

 

During the first quarter of 2019, we began implementing growth marketing programs to capitalize on the launch of our Munzee 4.0 app. To date, those efforts have been very successful, resulting in thousands of new users signing up to become Munzee players. The economic impact of these new players is already rippling through the company, although it will take time for new users to begin spending at the level of players who have been active Munzee players for years. In July of 2019, Munzee, as a game, turned 8 years old. Many players are still active who began playing back in 2011.

 

During the remaining months in 2019, we will also focus development and marketing resources to growing other Freeze Tag games to strengthen our product portfolio.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. As shown in the accompanying financial statements, we incurred net loss of $38,163 and used net cash of $90,249 in operations for the six months ended June 30, 2019. As of June 30, 2019, we had a working capital deficit of $785,983 and a total stockholders’ deficit of $448,486. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

 

Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support our business plan. We also plan to continue to develop and launch new games to maximize revenues. However, management is currently evaluating alternative financing sources to fund our current business plan should cash provided by operations be insufficient.

 

Our ability to continue as a going concern is dependent upon successfully executing its plans to attain a successful level of operations. Our financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

 

Critical Accounting Policies

 

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, expenses and related disclosures. These estimates and assumptions are often based on historical experience and judgments that we believe to be reasonable under the circumstances at the time made. However, all such estimates and assumptions are inherently uncertain and unpredictable and actual results may differ. For further information on our significant accounting policies, see Note 2 to our financial statements included in this filing.

 

The following is a summary of our critical accounting policies that involve estimates and management’s judgment.

 

 
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Revenue Recognition

 

Our revenues are derived primarily by licensing software products in the form of mobile games for smartphone and tablet platforms. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

 

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

 

 

 

 

·identification of the performance obligations in the contract;

 

 

 

 

·determination of the transaction price;

 

 

 

 

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

 

 

 

 

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

 

Intangible Assets

 

Intangible assets consist primarily of intellectual property, customer base and non-compete agreements acquired in the Merger, which are amortized on a straight-line basis over their estimated useful lives of 5 years. Intangible assets are reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

 

Impairment of Long-Lived Assets

 

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

 

Accounting for Stock-Based Compensation

 

We account for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees (“ASC stock-based compensation guidance”). Stock-based compensation expense recognized during the requisite services period is based on the value of share-based payment awards after reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

Recent Accounting Pronouncements

 

Although there were new accounting pronouncements issued or proposed by the FASB during the six months ended June 30, 2019 and through the date of filing of this report, we do not believe any of these accounting pronouncements has had or will have a material impact on our financial position or results of operations.

 

 
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Results of Operations

 

Revenues

 

Our revenue can typically fluctuate based on when we release our games and the popularity of the games we release. Previously, the majority of our released game titles were “pay-per-download”, where the consumer paid to download the game onto their device, leading to revenue per download. Now our games are free to download and play, but have built-in features that require the consumer to pay if they want to access the feature, which means our revenue is tied to when the consumer pays to access the features.

 

Our revenues for the three months ended June 30, 2019 of $518,213 were down $32,611 from revenues of $550,824 for the three months ended June 30, 2018. The primary reason for the decrease was the timing of the sales of premium Munzee products during Q2 2019. During the month of June 2018, two premium products were sold to Munzee players whereas in June 2019, only one lower-priced premium product was sold. Additionally, focus moved away from some higher priced Munzee products to lower priced Munzee products. These efforts were successful in achieving greater unit sales numbers and involving an increased number of customers, but since these items were at lower price points, the overall revenue numbers dipped for the quarter.

 

Revenues for the six months ended June 30, 2019 of $1,078,416 were up $31,738 from revenues of $1,046,678 for the six months ended June 30, 2018. The primary reason for the increase in revenues year over year was due to the close-out of a significant mobile distribution contract in the period allowing us to recognize deferred revenue.

 

Cost of Sales

 

Cost of sales increased $3,105 to $82,670 for the three months ended June 30, 2019 from $79,565 for the three months ended June 30, 2018. Costs of sales for the six months ended June 30, 2019 of $154,593 were $19,333 higher than the $135,260 for the six months ended June 30, 2018. The increase was a mainly a result of increased server and server usage fees, partially offset by decreased physical product costs.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased $62,338 to $477,992 for the three months ended June 30, 2019 from $415,654 for the three months ended June 30, 2018. Selling, general and administrative for the six months ended June 30, 2019 of $941,910 also increased $29,374 from $912,536 for the six months ended June 30, 2018. The increase is primarily due to additional development resources added during 2019, partially offset by cost savings related to our Texas office relocation and cost savings initiatives throughout the company.

 

Other Income (Expense)

 

Interest expense for the three months ended June 30, 2019 of $10,090 was relatively consistent with interest expense of $9,469 for the three months ended June 30, 2018. Interest expense decreased $15,306 for the six months ended June 30, 2019, falling to $20,076 from $35,382 for the six months ended June 30, 2018 due to catch-up amounts recorded in 2018. These amounts relate primarily to the imputed interest on related party debt.

 

 
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Net Income (Loss)

 

As a result of the above, we reported net loss of $52,539 for the three months ended June 30, 2019 compared to net income of $46,136 for the three months ended June 30, 2018 and net losses of $38,163 and $36,500 for the six months ended June 30, 2019 and 2018, respectively.

 

Liquidity and Capital Resources

 

Introduction

 

As of June 30, 2019, we had current assets of $236,436, including cash of $218,967, and current liabilities of $1,022,419, resulting in a working capital deficit of $785,983. In addition, we had a total stockholders’ deficit of $448,486 at June 30, 2019.

 

During the six months ended June 30, 2019, we used net cash of $90,249 from operating activities. Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support our business plan. We will also continue to develop and launch new games to maximize revenues. As a result, we may have short-term cash needs. Therefore, management is currently evaluating alternative financing sources to fund our current business plan should cash provided by operations be insufficient. There can be no assurance that we will be successful in these efforts.

 

Sources and Uses of Cash

 

We used net cash of $90,249 in operating activities for the six months ended June 30, 2019. A net loss of $38,163 and a decrease in unearned royalties of $119,639 was partially offset by non-cash expenses of $74,486 and increases of our prepaid expenses and other assets of $12,086.

 

By comparison, net cash provided by operating activities for the six months ended June 30, 2018 was $36,501 as a result of our net loss of $36,500 and increases in accrued expenses of $17,291 offset by non-cash expenses totaling $82,707 and an increase in accounts payable of $13,533.

 

For the six months ended June 30, 2019, we did not have any cash provided by or used in investing activities. For the six months ended June 30, 2018, we used net cash in investing activities of $3,106, comprised of the purchase of property and equipment.

 

For the six months ended June 30, 2019, we did not have any cash provided by or used in financing activities. For the six months ended June 30, 2018, we had net cash provided by financing activities of $5,000, comprised of proceeds from stock subscription receivable.

 

Notes Payable – Related Party

 

As of June 30, 2019, our debt was comprised of notes payable totaling $379,825 to Craig Holland, our Chief Executive Officer and Mick Donahoo, our Chief Financial Officer. These notes are non-interest bearing and mature on December 31, 2019. Of this related party indebtedness, there are two convertible notes payable of $186,450 to each of Messrs. Holland and Donahoo, who have the right, at any time, at their election, to convert all or part of the amount due into shares of fully paid and non-assessable shares of our common stock. The fixed conversion price is $0.02 per share. We have imputed interest on these notes payable using an annual rate of 10%.

 

 
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ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4 Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a – 15(c) and 15d – 15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer, who are our principal executive officer and principal financial officers, respectively, concluded that, as of the end of the three month period ended June 30, 2019, our disclosure controls and procedures were effective (1) to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to us, including our chief executive and chief financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

(b) Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

ITEM 1 Legal Proceedings

 

We are not a party to or otherwise involved in any legal proceedings.

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

ITEM 1A Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

There is no information required to be disclosed by this Item.

 

ITEM 3 Defaults Upon Senior Securities

 

There is no information required to be disclosed by this Item.

 

ITEM 4 Mine Safety Disclosures

 

There is no information required to be disclosed by this Item.

 

ITEM 5 Other Information

 

Munzee Tax Audit

 

As noted in our previous filings, the Internal Revenue Service is currently conducting a tax audit of Munzee’s tax returns for 2015 and 2016. We are working diligently to resolve any outstanding issues. At this time, we do not know if Munzee will owe any additional amounts.

 

 
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ITEM 6 Exhibits

 

3.1 (1)

 

Articles of Incorporation of Freeze Tag, Inc.

 

3.2 (1)

 

Articles of Amendment to Articles of Incorporation

 

3.3 (1)

 

Bylaws of Freeze Tag, Inc.

 

3.4 (3)

 

Articles of Amendment to Certificate of Incorporation February 4, 2014

 

3.5 (7)

 

Articles of Amendment to Certificate of Incorporation filed on February 18, 2016

 

10.1 (1)

 

10% Convertible Promissory Note dated July 1, 2010 with The Holland Family Trust

 

10.2 (2)

 

Convertible Promissory Note (10%) dated December 20, 2013 – Accredited Investor

 

10.3 (2)

 

Convertible Promissory Note (10%) dated December 31, 2013 – Holland Family Trust

 

10.4 (2)

 

Convertible Promissory Note (10%) dated December 31, 2013 – Craig Holland Debt

 

10.5 (2)

 

Convertible Promissory Note (10%) dated December 31, 2013 – Craig Holland Salary

 

10.6 (2)

 

Convertible Promissory Note (10%) dated December 31, 2013 – Mick Donahoo Salary

 

10.7 (2)

 

Convertible Promissory Note (10%) dated December 31, 2013 – Mick Donahoo Debt

 

10.8 (2)

 

Convertible Promissory Note (10%) dated December 31, 2013 – Robert Cowdell

 

10.9 (15)

 

Convertible Promissory Note with an Accredited Investor dated June 25, 2014

 

10.10 (4)

 

Convertible Promissory Note (10%) dated September 30, 2014 – Holland Family Trust

 

10.11 (4)

 

Convertible Promissory Note (10%) dated September 30, 2014 – Craig Holland

 

10.12 (5)

 

Consulting and Co-Development Agreement with Gogii Games Corp. dated November 17, 2014 (Redacted Version)

 

10.13 (5)

 

Convertible Promissory Note with an accredited investor dated February 11, 2015

 

10.14 (5)

 

Master Development Agreement with TIC TOC STUDIOS, LLC dated February 18, 2015 (Redacted Version)

 

10.15 (6)

 

Convertible Promissory Note with an accredited investor dated July 28, 2015

 

10.16 (6)

 

Amendment to Convertible Promissory Note dated December 31, 2013 – Craig Holland

 

10.17 (6)

 

Amendment to Convertible Promissory Note dated December 31, 2013 – Mick Donahoo

 

10.18 (6)

 

Amendment to Convertible Promissory Note with an accredited investor dated December 30, 2013


 
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10.19 (8)

 

Convertible Promissory Note with an accredited investor dated April 7, 2016

 

10.20 (9)

 

License Agreement with Munzee, Inc. dated October 19, 2016

 

10.21 (9)

 

License Agreement with Paws, Incorporation dated November 1, 2016 (Redacted Version)

 

10.22 (10)

 

Amendment #1 to Convertible Promissory Note with an accredited investor dated April 7, 2016

 

10.23 (10)

 

Convertible Promissory Note with an accredited investor dated February 8, 2017

 

10.24 (11)

 

Merger Agreement with Munzee, Inc. dated July 26, 2017

 

10.25 (11)

 

Form of Securities Exchange and Common Stock Purchase Agreement with Related Parties dated July 25, 2017

 

10.26 (11)

 

Form of Securities Exchange and Common Stock Purchase Agreement with Accredited Investor #1 and Accredited Investor #2 dated July 26, 2017

 

10.27 (11)

 

Form of Second Securities Exchange and Common Stock Purchase Agreement with Accredited Investor #2 dated July 26, 2017

 

10.28 (11)

 

Form of Securities Exchange and Common Stock Purchase Agreement with Accredited Investor #3 dated July 26, 2017

 

10.29 (11)

 

Form of Amendment No. 1 to Promissory Note with Craig Holland and Mick Donahoo dated July 25, 2017

 

10.30 (11)

 

Amendment No. 1 to Promissory Note with Craig Holland dated July 25, 2017

 

10.31 (12)

 

Corporate Sponsorship Agreement with American Diabetes Association dated March 22, 2018

   

31.1*

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

 

31.2*

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

 

32.1*

 

Section 1350 Certification of Chief Executive Officer

 

32.2*

 

Section 1350 Certification of Chief Financial Officer.


 
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101.INS**

 

XBRL Instance Document

 

101.SCH**

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF**

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document


*

Filed herewith.

 

**

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

(1)Incorporated by reference from our Registration Statement on Form S-1, filed with the Commission on August 16, 2010.

 

 

(2)Incorporated by reference from Current Report on Form 8-K filed with the Commission on February 4, 2014.

 

 

(3)Incorporated by reference from Definitive Information Statement on Schedule 14-C filed with the Commission on December 31, 2013.

 

 

(4)Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 14, 2014.

 

 

(5)Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on May 15, 2015.

 

 

(6)Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 16, 2015.

 

 

(7)Incorporated by reference from Annual Report on Form 10-K filed with the Commission on March 30, 2016.

 

 

(8)Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 14, 2016.

 

 

(9)Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 14, 2016.

 

 

(10)Incorporated by reference from Annual Report on Form 10-K filed with the Commission on March 31, 2017.

 

 

(11)Incorporated by reference from Current Report on Form 8-K filed with the Commission on July 31, 2017.

 

 

(12)Incorporated by reference from Current Report on Form 8-K filed with the Commission on April 11, 2018

 

 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Freeze Tag, Inc.

 

 

 

 

Dated: August 14, 2019

By:

/s/ Craig Holland

 

 

 

Craig Holland

 

 

Its:

Chief Executive Officer (Principal Executive Officer)

 

 

 

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