NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2017
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Northsight Capital Inc. (Northsight or the Company) is an early stage company incorporated in the State of Nevada on May 21, 2008. In May, 2011, Safe Communications, Inc. (n/k/a Kuboo, Inc.) acquired 80% of the Companys issued and outstanding common stock, and, as a result, became its parent company. On June 25, 2014, the Company completed the acquisition of approximately 7,500 cannabis related Internet domain names, in exchange for which the Company issued 78.5 million shares of its common stock and a promissory note in the principal amount of $500,000. As a result of this transaction, the seller of the domain names became an 81% stockholder of the Company. Kuboo, Inc. continues to be a significant stockholder of the Company. John Venners, a director of Kuboo, Inc., is our EVP, Operations and also sits on our board of directors. See Note 14 - Related Party Transactions.
The Companys principal business is to provide a wide variety of online directories for a broad range of businesses engaged in the lawful sale and distribution of cannabis and hemp related products. The following constitute the Companys major product categories: a monthly listing in one or more of the Companys online directories, paid advertising in one or more of the Companys online directories and leasing to customers one or more Internet domain names for the customers exclusive use.
The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The interim financial statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three month period ended March 31, 2017, are not necessarily indicative of the operating results for the full year.
NOTE 2 LIQUIDITY/GOING CONCERN
The Company had a net loss of $201,756 for the three months ended March 31, 2017, has accumulated losses of $20,885,166 and has had consistent negative cash flows from operating activities since inception (May 2008). These factors raise substantial doubt about the Companys ability to continue as a going concern.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. During the three months ended March 31, 2017 the Company received a net $62,211 in loans from related party shareholders to fund operations. Management plans to (i) raise additional capital as soon as possible, to fund continued operations of the Company and (ii) continue its efforts to generate revenues and income from operations.
In the event the Company does not generate sufficient funds from revenues or financing through the issuance of its common stock or from debt financing, the Company will be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.
NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS
Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact on the Companys financial position, results of operations or cash flows upon adoption.
6
NOTE 4 INVESTMENT IN JOINT VENTURE
On February 29, 2016, the Company entered into a joint venture agreement with Tumbleweed Holdings, Inc. (TW), pursuant to which a newly formed joint venture company is developing an online dating service around the URL, www.jointlovers.com. The Company and TW own 60% and 40% respectively of equity of the joint venture company. Under the joint venture agreement, the Company and TW agreed as follows:
·
The Company contributed the URL www.jointlovers.com to the joint venture entity, in exchange for 60% of the joint venture company.
·
TW contributed $30,000 and agreed to contribute an additional $70,000 towards the development of the online web portal, in exchange for 40% of the joint venture company. With any additional funds required for development to be contributed 60% by the Company and 40% by TW (see Note 17 Subsequent Events).
·
Revenue from the joint venture company will be shared proportionally with a portion of operating income to be used to repay principal and income due under the convertible notes referenced below (up to $165,000 in principal amount of notes).
·
TW agreed to purchase an aggregate of $150,000 in principal amount of convertible notes, convertible into shares of the Companys common stock at a conversion price of $.20 per share. In addition to repayment of principal, if the joint venture company has revenues, the notes are entitled to receive a portion of the joint venture companys operating income until they have received an amount equal to 50% of the face value of the notes (see Note 17 Subsequent Events).
During the year ended December 31, 2016, Tumbleweed contributed a total of $85,000 to the joint venture company. Tumbleweed has not contributed the remaining $15,000 as of the date of these financial statements.
Additionally, both parties agreed to issue the other a warrant to purchase 4.9% of their outstanding common stock. Pursuant to this agreement, TW agreed to issue a warrant to the Company to purchase 9,770,878 shares of its common stock at an exercise price of $0.02 per share, and the Company agreed to issue a warrant to TW to purchase 5,525,318 shares of the Companys common stock at an exercise price of $0.08 per share, valued at $475,751. The warrants have a three-year term and a cashless exercise right (see Note 5 Securities and Note 12 Stock Warrants for details). As of the date of these financial statements, TW has not yet issued the warrants due to the Company. Therefore, the Company has not yet recorded their value on its balance sheet.
The Companys ownership of the joint venture company is accounted for under the equity method of accounting, in accordance with ASC 323. Under the equity method of accounting, an Investee Companys accounts are not reflected within the Companys Balance Sheets and Statements of Operations; however, the Companys share of the earnings or losses of the Investee Company is reflected as a gain or loss on the Companys investment. Additionally, under the equity method of accounting, the Companys initial investment in the joint venture company was recorded at the historic cost basis of the contributed domain of $0. Accordingly, the Company expensed $475,751 related to the value of warrants the Company issued and is included as a component of loss on investments in the Companys Statements of Operations for the three months ended March 31, 2016.
When the Companys carrying value in an equity method Investee Company is reduced to zero, no further losses are recorded in the Companys financial statements unless the Company guaranteed obligations of the Investee Company or has committed additional funding. When the Investee Company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. During the three months ended March 31, 2017, the joint venture did not have a net income or loss. During the three months ended March 31, 2016, the joint venture company experienced a net loss attributable to the Companys 60% ownership of $1,326 which was not recorded as an adjustment to the Companys investment account due to the Company having a zero book value in the investment.
As of March 31, 2017, Tumbleweed was in default under the terms of the joint venture agreement and owed the joint venture company the remaining $15,000 in development funding and the Company $50,000 for the final note purchase, both of which were due by April 29, 2016. Additionally, Tumbleweed owes the joint venture company $18,904, representing its 40% share of costs in excess of the first $100,000.
On August 15, 2016, the Company instituted a legal action in Arizona against, Tumbleweed Holdings Inc., (TW). The complaint alleged that (i) TW breached the joint venture agreement by failing to fund the remaining $15,000 due to the joint venture company by April 29, 2016, (ii) TW breached the joint venture agreement by failing to fund the last $50,000 convertible note due to the Company by April 29, 2016, and (iii) TW breached the joint venture agreement by failing to fund their respective 40% of development expense in excess of the initial $100,000. The Company seeks damages in the amount of $128,000 plus interest.
7
On September 22, 2016, Tumbleweed Holdings Inc., instituted a counterclaim in Arizona in response to the above legal action. The complaint alleged that (i) The Company breached the joint venture agreement by failing to leverage relationships and failing to provide budgeting and accounting records, (ii) the Company breached implied covenant of good faith and fair dealing by enticing TW into making significant contributions and then failing to perform under the agreement, (iii) the Company was unjustly enriched by having use of funds contributed by TW, (iv) the Company converted funds contributed by TW into its own assets, and (v) the Company has not provided accounting for all funds received by TW. TW seeks damages in the amount to be determined at trial. The Company believes these claims are without merit and intends to vigorously defend itself against them.
Summary revenue information on the joint venture for the three months ended March 31, 2017 and 2016 is as follows:
|
|
|
|
|
|
|
For the Three Months Ended
|
|
March 31, 2017
|
|
March 31, 2016
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
Revenues
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
General administrative
|
|
-
|
|
|
2,210
|
Total operating expenses
|
|
-
|
|
|
2,210
|
|
|
|
|
|
|
Loss from operations
|
|
-
|
|
|
(2,210)
|
|
|
|
|
|
|
Net Loss
|
$
|
-
|
|
$
|
(2,210)
|
|
|
|
|
|
|
Company Share of Net Loss
|
$
|
-
|
|
$
|
(1,326)
|
NOTE 5 SECURITIES
In conjunction with the formation of the joint venture discussed in Note 4, Tumbleweed Holdings agreed to issue the Company a warrant to purchase up to 9,770,878 shares of Tumbleweed Holdings, Inc. at an exercise price of $0.02 with an expiration date three years from the date of issuance. At March 31, 2017, Tumbleweed had not yet issued these warrants to the Company. The Company will record the value of these warrants on its balance sheet once they are received.
NOTE 6 WEB DEVELOPMENT COSTS AND DOMAIN NAMES ASSETS
In accordance with ASC 350-50, during the three months ended March 31, 2017 and the year ended December 31, 2016, the Company did not capitalize any expenses towards the development of multiple websites on which third parties can advertise the sale and distribution of cannabis related products and services: an online yellow pages. The Company does not intend to engage in the sale or distribution of marijuana or related products. During the three months ended March 31, 2017 and 2016 the Company recorded website development expenses of $2,218 and $6,975, respectively, which is included in general and administrative expenses on the Companys consolidated statements of operations.
The Company amortizes these assets over their related useful lives (approximately 1 to 5 years), using a straight-line basis. Assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable, or at least annually. Measurement of the amount of impairment, if any, is based upon the difference between the assets carrying value and estimated fair value. Fair value is determined through various valuation techniques, including market and income approaches as considered necessary. During the three months ended March 31, 2017 and 2016 the Company recorded amortization expense of $18,091 related to websites previously launched.
|
|
|
|
|
|
|
|
|
|
|
As of
March 31,
2017
|
|
As of
December 31,
2016
|
|
Amortization
Period
|
Web development costs
|
|
$
|
311,912
|
|
$
|
311,912
|
|
5 years
|
Capitalized costs
|
|
|
-
|
|
|
-
|
|
|
Less: accumulated depreciation
|
|
|
(153,040)
|
|
|
(134,949)
|
|
|
|
|
$
|
158,872
|
|
$
|
176,963
|
|
|
8
NOTE 7 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
As of
March 31,
2017
|
|
As of
December 31,
2016
|
|
Estimated
Useful Life
|
Furniture and equipment
|
|
$
|
12,438
|
|
$
|
12,438
|
|
3 years
|
Total
|
|
|
12,437
|
|
|
12,437
|
|
|
Less: Accumulated depreciation
|
|
|
(10,799)
|
|
|
(9,763)
|
|
|
|
|
$
|
1,638
|
|
$
|
2,675
|
|
|
The Company records depreciation expense on a straight-line basis over the estimated life of the related asset (approximately 3 years). The Company recorded depreciation expense of $1,037 and $1,037 during the three months ended March 31, 2017 and 2016, respectively.
NOTE 8 ACCOUNTS PAYABLE AND ACCRUED EXPENSES RELATED PARTY
At March 31, 2017, the Company had a balance in related party accounts payable and accrued expenses of $783,403 which consisted of the following:
|
|
|
|
|
Party Name:
|
Relationship:
|
|
|
Amount
|
Howard Baer
|
Spouse of majority shareholder
|
Consulting fees
|
|
315,500
|
Howard Baer
|
Spouse of majority shareholder
|
Accrued interest
|
|
70,461
|
John Venners
|
Director/EVP, President and CEO of Kuboo, Inc.
|
Consulting fees/salaries
|
|
233,466
|
John Venners
|
Director/EVP, President and CEO of Kuboo, Inc.
|
Advances
|
|
3,000
|
Kuboo, Inc.
|
Former parent company, significant shareholder
|
Rent
|
|
160,976
|
|
|
|
$
|
783,403
|
NOTE 9 NOTES PAYABLE RELATED PARTY
On May 19, 2015, the Company issued Kae Yong Park and her spouse Howard Baer (together, Park) a non-interest bearing, unsecured demand promissory note to evidence all unpaid advances received by the Company to that point and to cover all additional advances received afterward. Unpaid principal under the note is due and payable upon the earlier of (i) an event of default (as defined), (ii) written demand and (iii) the Companys receipt of capital (to the extent of net proceeds received) from any capital raising transaction after May 15, 2015, whether in the form of debt, equity or otherwise.
On September 30, 2015, the Company amended and restated its promissory note to Park to include all advances to date and provide certain assets, including all internet domain names, websites and related assets as collateral. Repayment terms remain the same, and Park has to date not enforced the provision requiring repayment upon receipt of net proceeds from capital raising transactions.
During the three months ended March 31, 2017, Park advanced an aggregate of $36,400 on an unsecured basis to the Company for short-term capital needs. During this period, the Company also repaid $7,550 of its secured debt to Park and recaptured $35,938 worth of payroll expenses for Parks use of Company personnel. Amounts recaptured for use of Company personnel have been treated as repayments on the Companys Statements of Cash Flows. At March 31, 2017, the Company had a note payable to Park for these advances of $1,407,579 which is secured by the assets of the Company. Due to the on demand nature of this amount, the company has classified it as a current liability.
The following table summarizes the Companys balance for these advances for the three months ended March 31, 2017:
|
|
|
Amount due - December 31, 2016
|
$
|
1,414,667
|
Advances received from Park
|
|
36,400
|
Repayments made to Park
|
|
(7,550)
|
Recapture of Company expenses
|
|
(35,938)
|
Balance dueMarch 31, 2017
|
$
|
1,407,579
|
9
On June 23, 2014, the Company issued a $500,000 promissory note in conjunction with the purchase of approximately 7,500 cannabis-related internet domain names. The note originally bore interest at the rate of 3.25% per annum and the first $100,000 of which was payable upon the Companys receipt of an aggregate of $1,000,000 in funding (whether debt or equity). The remaining $400,000 is payable in thirty-six equal monthly installments, commencing on the fifteenth day following the first month the Company realizes at least $150,000 in gross revenue (see Note 15 - Commitments and Contingencies).
On July 25, 2014, the Company amended and restated its promissory note in the principal amount of $500,000 owing to Kae Yong Park (the Companys then majority shareholder) to provide that it would make the first $100,000 installment payment due under the Note on July 25, 2014 (earlier than required), in exchange for which Kae Yong Park agreed to waive all interest due over the term of the note. Thereafter, Kae Yong Park waived the requirement that the Company pay the $100,000 due under the Amended and Restated Note until August 25, 2014, at which time it was paid. The Company subsequently recaptured all previously recorded interest expense related to the note.
Between December 1, 2016 and March 16, 2017, the Company received proceeds of $131,849 from a related party and significant shareholder for which notes were issued bearing 8% interest annually. The notes, as extended, mature on August 1, 2017 and are unsecured. At March 31, 2017, the Company had accrued interest of $2,359 related to the notes.
NOTE 10 NOTES PAYABLE
Notes
On July 1, 2015, the Company entered into a seven (7) day loan agreement with two parties for aggregate proceeds of $34,900. The note bears interest at the rate of six percent (6%) annually. In addition to the loans, the Company issued an aggregate 349,000 shares of common stock valued at $26,016 and warrants to purchase an aggregate 100,000 shares of the Companys common stock at an exercise price of $0.25 per share valued at $6,898. The relative fair value of the shares and warrants associated with these notes have been recorded as debt discount to be amortized over the life of the loans. As of March 31, 2017, these notes have not yet been repaid and principal and interest totaling $38,549 is in default.
On August 10, 2015, the Company entered into a one hundred twenty (120) day loan agreement with an existing investor for aggregate proceeds of $45,000 (two installments of $22,500 each). The note bears interest at the rate of six percent (6%) annually. As additional consideration for these loans, the Company issued an aggregate 1,200,000 shares of common stock valued at $38,918. The relative fair value of the shares associated with these notes have been recorded as debt discount to be amortized over the life of the loans). As of March 31, 2017, these notes have not yet been repaid and principal and interest totaling $48,991 is in default.
Convertible Notes
On February 29, 2016, in conjunction with its joint venture agreement (see Note 4 Investment in Joint Venture), the Company entered an agreement to issue three $50,000, one year convertible notes. These notes are convertible into shares of the Companys stock at a price of $0.20 per share or a total of 250,000 shares each Interest on the note is payable quarterly in an amount equal to a percentage of the Companys joint venture companys net revenues, up to fifty percent of the original face value This interest will be payable only in the event that the joint venture company generates net revenues. Concurrent with this agreement, the Company issued the first of these convertible notes. On April 8, 2016, the Company issued the second of these convertible notes. As of March 31, 2017, the proceeds from the third note investment of $50,000 had not been received.
Dilutive shares associated with convertible notes outstanding at March 31, 2017 is as follows:
|
|
|
|
|
|
|
Principal
|
|
Shares
|
Note dated February 29, 2016, convertible at $0.20 per share
|
$
|
50,000
|
|
|
250,000
|
Note dated April 8, 2016, convertible at $0.20 per share
|
|
50,000
|
|
|
250,000
|
Total Dilutive shares March 31, 2017
|
$
|
100,000
|
|
|
500,000
|
10
The following table summarizes the Companys notes and convertible notes payable for the three months ended March 31, 2017:
|
|
|
|
|
|
|
Notes
|
|
Convertible
Notes
|
Balance December 31, 2016
|
$
|
79,900
|
|
$
|
100,000
|
Note proceeds received
|
|
-
|
|
|
-
|
Repayments on notes
|
|
-
|
|
|
-
|
Balance March 31, 2017
|
$
|
79,900
|
|
$
|
100,000
|
NOTE 11 EQUITY
On January 10, 2017, the Company issued 400,000 shares of the Companys common stock previously recorded as a subscription payable valued at $62,000 as settlement of its previously settled lawsuit with Lee Ori.
NOTE 12 STOCK WARRANTS
The Company has applied fair value accounting for all warrants issued. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.
A summary of the Companys warrant activity for the three months ended March 31, 2017 is as follows:
|
|
|
|
|
|
|
|
|
Number of
Warrants
|
|
Weighted Average
Exercise Price
|
Outstanding December 31, 2016
|
|
|
17,755,603
|
|
$
|
0.08
|
Granted
|
|
|
-
|
|
|
-
|
Exercised/settled
|
|
|
-
|
|
|
-
|
Balance as March 31, 2017
|
|
|
17,755,603
|
|
$
|
0.08
|
The Companys outstanding warrants at March 31, 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Outstanding
|
|
Warrants Exercisable
|
Exercise Price Range
|
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Life (in
years)
|
|
Weighted Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise Price
|
|
Intrinsic Value
|
$0.05 - $0.25
|
|
|
|
17,755,603
|
|
|
0.95
|
|
$
|
0.08
|
|
|
17,755,603
|
|
$
|
0.08
|
|
|
497,880
|
NOTE 13 EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Since the Company reflected a net loss for the three months ended March 31, 2017 and 2016, respectively, the effect of considering any common stock equivalents, if exercisable, would have been anti-dilutive. Therefore, a separate computation of diluted earnings (loss) per share is not presented.
The Company has the following common stock equivalents as of March 31, 2017:
|
|
|
|
|
|
As of
March 31,
2017
|
Warrants (exercise price $0.05 - $0.25/share)
|
|
|
17,755,603
|
Convertible debt (exercise price $0.20/share)
|
|
|
500,000
|
|
|
|
18,255,603
|
11
NOTE 14 RELATED PARTY TRANSACTIONS
We are headquartered in Scottsdale, Arizona where we rent space from Kuboo Inc. our former parent company and a significant shareholder. Currently, the Company is renting approximately 6,100 square feet of space on a month-to-month basis. The monthly rent for this facility is $11,500. During the three months ended March 31, 2017 the company incurred expense payable to Kuboo, Inc. of $34,500 for rent.
Between January 13, 2017 and March 16, 2017, the Company received proceeds of $69,299 from a related party and significant shareholder for which notes were issued bearing 8% interest annually. The notes, as extended, mature on August 1, 2017 and are unsecured. At March 31, 2017, the Company had accrued interest of $2,359 related to the notes.
During the three months ended March 31, 2017, Kae Yong Park, a significant shareholder, and her spouse, Howard Baer (collectively, Park), advanced an aggregate of $36,400 on an unsecured basis to the Company for short-term capital needs. During this period, the Company also repaid $7,550 of its secured debt to Park and recaptured $35,938 worth of payroll expenses for Parks use of Company personnel. At March 31, 2017, the Company had a note payable to Park for these advances of $1,407,579 which is secured by the assets of the Company.
During the three months ended March 31, 2017, the Company incurred expenses of $45,000 related to its consulting contract with Howard Baer, the spouse of Kae Yong Park, our significant shareholder.
On April 13, 2016, the Company agreed to amend the promissory note with Kae Yong Park and Howard R. Baer so as to make $564,000 in principal amount due under said Note interest bearing at the rate of 10% per annum, effective January 1, 2016. The remaining principal is non-interest bearing. During the three months ended March 31, 2017, the company incurred interest expense of $13,907 related to this note. At March 31, 2017, the Company has accrued interest owed under this agreement of $70,461.
NOTE 15 COMMITMENTS AND CONTINGENCIES
In May 2014, The Company entered into an asset purchase agreement that requires the Company to pay a monthly royalty equal to six percent of gross monthly revenues over $150,000. The royalty payment is payable for a period of thirty-six months from and after the first month in which the Companys gross revenues are in excess of $150,000.
On June 23, 2014, the Company issued a $500,000 promissory note in conjunction with the purchase of approximately 7,500 cannabis-related internet domain names. The original note bore interest at the rate of 3.25% per annum and was payable as follows: upon the Companys receipt of an aggregate of $1,000,000 in funding (whether debt or equity), $100,000 was required to be paid. The remaining $400,000 is payable in thirty-six equal monthly installments, commencing on the fifteenth day following the first month the Company realizes at least $150,000 in gross revenue.
On July 25, 2014, the Company amended and restated its promissory note in the principal amount of $500,000 owing to Kae Yong Park (the Companys then majority shareholder) to provide that it would make the first $100,000 installment payment due under the Note on July 25, 2014 (earlier than required), in exchange for which Kae Yong Park agreed to waive all interest due over the term of the note. Thereafter, Kae Yong Park waived the requirement that the Company pay the $100,000 due under the Amended and Restated Note until August 25, 2014, at which time it was paid.
On August 15, 2016, the Company instituted a legal action in Arizona against, Tumbleweed Holdings Inc., (TW). The complaint alleged that (i) TW breached the joint venture agreement by failing to fund the remaining $15,000 due to the joint venture company by April 29, 2016, (ii) TW breached the joint venture agreement by failing to fund the last $50,000 convertible note due to the Company by April 29, 2016, and (iii) TW breached the joint venture agreement by failing to fund their respective 40% of development expense in excess of the initial $100,000. The Company seeks damages in the amount of $128,000 plus interest.
On September 22, 2016, Tumbleweed Holdings Inc., instituted a counterclaim in Arizona in response to the above legal action. The complaint alleged that (i) The Company breached the joint venture agreement by failing to leverage relationships and failing to provide budgeting and accounting records, (ii) the Company breached implied covenant of good faith and fair dealing by enticing TW into making significant contributions and then failing to perform under the agreement, (iii) the Company was unjustly enriched by having use of funds contributed by TW, (iv) the Company converted funds contributed by TW into its own assets, and (v) the Company has not provided accounting for all funds received by TW. TW seeks damages in the amount to be determined at trial. The Company believes these claims are without merit and intends to vigorously defend itself against them.
12
NOTE 16 REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS
The Company identified an error relating to the recognition of warrants not yet received during the year ended December 31, 2016. The effect of error is to increase the net loss for the period ended March 31, 2016.
In accordance with the guidance provided by the SECs Staff Accounting Bulletin 99, Materiality, and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Measurements in Current Year Financial Statements, the Company determined that the impact of the adjustments relating to the correction of this accounting error are not material to previously issued unaudited financial statements. Accordingly, these changes are disclosed herein and will be disclosed prospectively.
As a result of the aforementioned correction of accounting errors, the revised prior unaudited financial statements have been revised as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
As Previously
|
|
|
|
As
|
Balance Sheet
|
Reported
|
|
Adjustments
|
|
Revised
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
$
|
165,284
|
|
$
|
(165,284)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
(9,760)
|
|
|
9,760
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
(1,847,786)
|
|
|
(165,284)
|
|
|
(2,013,070)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
As Previously
|
|
|
|
As
|
Statement of Operations
|
Reported
|
|
Adjustments
|
|
Revised
|
|
|
|
|
|
|
|
|
|
Loss on investments
|
$
|
(300,707)
|
|
$
|
(175,044)
|
|
$
|
(475,751)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(769,734)
|
|
|
(175,044)
|
|
|
(944,778)
|
|
|
|
|
|
|
|
|
|
Loss on marketable securities
|
|
(9,760)
|
|
|
9,760
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
(779,494)
|
|
|
(165,284)
|
|
|
(944,778)
|
|
|
|
|
|
|
|
|
|
Net loss-basic and diluted
|
|
(0.01)
|
|
|
-
|
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months ended March 31, 2016
|
|
As Previously
|
|
|
|
As
|
Statement of Cash Flows
|
Reported
|
|
Adjustments
|
|
Revised
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(769,734)
|
|
$
|
(175,044)
|
|
$
|
(944,778)
|
|
|
|
|
|
|
|
|
|
Loss on investments
|
|
300,707
|
|
|
175,044
|
|
|
475,751
|
13
NOTE 17 SUBSEQUENT EVENTS
We have evaluated all events that occurred after the balance sheet date through the date when our financial statements were issued to determine if they must be reported. Management has determined that other than as disclosed below, there were no additional reportable subsequent events to be disclosed.
Loan Advances
Since March 31, 2017, Kae Yong Park, a significant shareholder, and her spouse, Howard R. Baer, made additional unsecured advances to the Company of $10,250, leaving a balance due of $1,417,829 at May 15, 2017. These advances are secured by all of the Companys assets, including all of its internet domain names, websites and related assets, and are payable on demand. Of the aggregate $1,417,829 owed at May 15, 2017, $853,829 is non-interest bearing.
On May 1, 2017, a related party and significant shareholder advanced the Company $40,000 to fund business operations.
On May 15, 2017, a related party and significant shareholder advanced the Company $50,000 to fund business operations. This advance is evidenced by a three month, interest bearing (8% per-annum), secured promissory note. The repayment of this promissory note is secured by the following Internet domain names and related websites: www.weeddepot.com and www.420careers.com. The existing lienholders, Kae Yong Park and Howard R. Baer, have subordinated their liens in these assets.
Equity Transactions
On April 10, 2017, we sold 1,000,000 shares of common stock in a private transaction at a per share price of $.025, for gross proceeds of $25,000, to an accredited investor within the meaning of Rule 502 of Regulation D under the Securities Act of 1933, as amended.
14