SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Fiscal Year ended December 31, 2014
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE OF 1934
For
the Transition Period From to
Commission
File No. 33-20432
KIWIBOX.COM,
INC.
(formerly
known as Magnitude Information Systems, Inc.)
Exact
Name of Registrant as Specified in its Charter
DELAWARE
75-2228828 _____
State
or Other Jurisdiction of IRS Employer
Incorporation
or Organization Identification Number
330
W. 42nd Street, #3210, New York, New York 10036
Address
of Principal Executive Offices Zip Code
(347-836-4727
Registrants
Telephone Number, Including Area Code
Securities
Registered Pursuant to Section 12(b) of the Act:
NONE
Title
of Each Class Name of Each Exchange on Which Registered
NONE
NONE
Securities
Registered pursuant to Section 12(g) of the Exchange Act:
Common
Stock, par value $0.0001
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ☐
The
Registrant’s revenues for the fiscal year ended December 31, 2014 were $36,755.
Common
stock, par value $.0001 per share (“Common Stock”), was the only class of voting stock of the Registrant outstanding
on April 15, 2015. Based on the closing price of the Common Stock on the OTC Electronic Bulletin Board as reported on April 15,
2015, the aggregate market value of the shares of the Common Stock held by persons other than officers, directors and persons
known to the Registrant to be the beneficial owners (as the term is defined under the rules of the Securities and Exchange Commission)
of more than five percent of the Common Stock on April 15, 2015, was approximately $6,836,931. By the foregoing statements,
the Registrant does not intend to imply that any of the officers, directors, or beneficial owners are affiliates of the registrant
or that the aggregate market value, as computed pursuant to rules of the Securities and Exchange Commission, is in any way indicative
of the amount which could be obtained for such shares of Common Stock.
As
of April 15, 2015 683,693,060 shares of Common Stock, $.0001 par value, were outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE: SEE EXHIBIT INDEX
KIWIBOX.COM,
INC.
CONTENTS
PART I. |
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Page |
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Item 1. |
Business |
3 |
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Item 1A. |
Risk Factors |
6 |
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Item 2. |
Properties |
9 |
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Item 3. |
Legal Proceedings |
9 |
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Item 4. |
Submission of Matters to a Vote of Security Holders |
9 |
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PART II. |
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Item 5. |
Market for Registrant's Common Equity and Related
Shareholder Matters |
10 |
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Item 6. |
Selected Financial Data |
10 |
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Item 7. |
Management’s' Discussion and Analysis of Financial
Condition and Results of Operations |
11 |
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Item 7A. |
Quantitative and Qualitative Disclosures about Market
Risks |
14 |
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Item 8. |
Financial Statements |
14 |
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Item 9. |
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure |
14 |
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Item 9A. |
Control and Procedures |
14 |
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Item 9B. |
Other Information |
16 |
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PART III. |
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Item 10. |
Directors and Executive Officers of the Registrant |
17 |
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Item 11. |
Executive Compensation |
18 |
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Item 12. |
Security Ownership of Certain Beneficial Owners and
Management |
21 |
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Item`13. |
Certain Relationships and Related Transactions |
23 |
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Item 14. |
Principal Accountant Fees and Services |
23 |
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PART IV. |
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Item 15. |
Exhibits |
25 |
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Signatures |
26 |
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Exhibit Index |
27 |
PART
I
ITEM 1: BUSINESS
Section
1.1 The Company
Kiwibox.Com,
Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc.
On November 18, 1998, the Company changed its name to Magnitude Information Systems, Inc. On December 31, 2009, the Company changed
its name to Kiwibox.Com, Inc.
On
August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc., a social media network dedicated to young
adults.
The
Company, its subsidiary Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox
Media, Inc. being a wholly owned subsidiary. The 1% of Magnitude, Inc. not owned by the Company constituted a minority interest
which was valued at $0. On December 31, 2009, the two subsidiaries Magnitude, Inc. and Kiwibox Media, Inc. merged into the Company.
On
September 30, 2011, Kiwibox.com acquired the German based social network Kwick! (see Note 1 of the Financial Statements).
On December 18, 2013 the company sold 80% of its ownership interest in Kwick! (see Note 1 of the Financial Statements).
The
Company is currently subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934. The Company has
the authority to issue an aggregate of One Billion Four Hundred Million (1,400,000,000) Common Shares, par value $.0001, following
an increase from 700,000,000 shares, authorized by the Company on January 29, 2009, with authorization to issue up to Three Million
(3,000,000) “blank check” Preferred Shares, par value $.001, of which at December 31, 2011, Two Thousand Five Hundred
(2,500) were designated as Cumulative Preferred Shares, par value $.001; Three Hundred Thousand (300,000) were designated as Series
A Senior Convertible Preferred Stock, par value $0.001; Three Hundred Fifty Thousand (350,000) were designated as Series B Senior
Convertible Preferred Stock, par value $0.001; One Hundred Twenty Thousand (120,000) were designated as Series C Senior Convertible
Preferred Stock, par value $0.001; Five Hundred Thousand (500,000) were designated as Series D Senior Convertible Preferred Stock,
par value $0.001; Five Hundred Thousand (500,000) were designated as Series E Senior Convertible Preferred Stock, par value $0.001,
and Forty-Three Thousand Six Hundred Ten (43,610) were designated Series G Senior Convertible Preferred Stock
As
of December 31, 2014, there were outstanding 683,693,060 Common Shares, 1 Cumulative Preferred Share, and 85,890 Convertible
Preferred Shares.
Description
of Business
Overview
On
December 31, 2009 Magnitude Information Systems, Inc. changed its name to Kiwibox.Com, Inc.
We
own and operate “Kiwibox.com”, a social networking website. Initially launched in 1999, Kiwibox.com is an online social
networking community. Kiwibox has a regional-based advertising-system that allows target-group-optimized ads for advertisers and
sponsors.
Kiwibox
Operations
Kiwibox.com
is a social network for young adults all around the world for web based - and mobile usage. A community to find new friends and
to meet new people online and in the real world. Kiwibox continues to follow the mobile trend by updating its mobile applications
to keep members engaged across its multiple platforms. Unlike traditional social networking sites such as MySpace and Facebook,
Kiwibox combines "magazine" content and social networking technology in its website, creating attractive topics for
its membership to peruse and enjoy. Kiwibox provides advertisers with a superior, worry-free advertising platform with Profile
targeted technology to reach Webbrowser based and mobile Apps Customers.
The
Company has successfully integrated Pixunity, a photo-sharing apploication, to the US market and will continue to add enhancement
features throughout the year. At the same time we continue to increase our market presence. Our promotional teams, both inside
and outside of New York City, continue to develop partnerships with event organizers and businesses along the West Coast
of the United States and plan further expansion of these types of market alliances thoughout 2015.
Our
operating expenses, not including stock-based compensation, are at a level of approximately $100,000 per month. (see sections
“Loans and Notes Payable”).
Kiwibox
shall continue to rely upon its advertising agreement with Triple Double U (”TDU”), an exclusive German online advertising
agency, which agreements have been negotiated by out former subsidiary, Germany-based Kwick, for the Kiwibox network for web and
mobile advertisements. Integrated last year, this “Ads-Delivery” program has resulted in an increase in advertising
revenue during fiscal year 2014.
Overall,
we have equipped our entire Kiwibox.com website with the newest state-of-the-art advertising features which enable sponsors to
self-direct their message to specific target audiences based on gender, age, geographic region, education, and interests. Included
in this array of features is our “search and be found” function, incorporating Search-Engine optimization with privacy
options that improves search results. We focused our developed in 2013 and further enhanced during 2014 to facilitate friends’
searches and establish networks of users on a global basis.
Potential
Revenue Streams and Marketing Strategy
Currently
we generate the majority of our revenue from advertising/sponsorships. We anticipate revenue growth from increased membership
activity and our revitalized website as we continue to implement new marketing strategies. Our software and networking technologies
we incorporated during the last 2 years now permit our mobile devices to accept and receive direct advertising. Our social networks
permit us to work with potential advertisers to identify the right member groups for direct target advertising, a marketing channel
that is readily accessible to our social media community.
Our
continuing membership growth is fueled by infiltrating our users into local event venues where they participate and simultaneously
communicate with our social network via the regular deployment of our cutting-edge App updates. As a result, the Kiwibox network
enjoys continuing user sign-ups and continuing loyalty of users to our social network. Due to our long-time experience with our
German affiliate, the KWICK! Community (“Kwick”), we were able to fulfill the front-end and back-end needs for this
remarkable growth!
Community
means social network – and thrives on membership networking. Our new website is based on the latest web technology which
makes it easier for users to stay connected and to interact with each other. Most importantly, our website features permit our
community members to stay informed in “real” time about events and parties in areas we are targeting through our promotional
teams.
The
results of our year-long marketing efforts clearly shows the following positive trends in the growth of our community at December
31, 2014:
·
Active Members – Our Kiwibox.com website has 3.54 Million Active Members as of December 31st 2014, an increase of
approximately 32 % over fiscal year 2013. Active users are those which have logged in to Kiwibox.com during the last 30 days.
·
New Registrations – We had 517,178 new registrations for the quarter ended December 31, 2014, an increase of approximately
105% over third quarter results. New registrations represent a participant’s initial registration on our Kiwibox.com website
as a new member: we averaged 8,000 new user registrations per day during this 4th quarter 2014!
·
Unique Visitors- – For the quarter ended December 31, 2014, we had 5.07 Million Unique Visitors to our Kiwibox.com
website, an increase of approximately 3% over third quarter results. Unique Visitors refers to the number of distinct individuals
requesting pages from our Kiwibox.com website during a specific period, regardless of how often they visit. Visits refers to the
number of times our Kiwibox.com website is visited, no matter how many visitors make up those visits.
·
Page Impressions – We had 483.4 Million Page Impressions during the last quarter of 2014, an increase of approximately
1 % over the prior quarter. Generally, Page Views refer to a number of pages which are viewed or clicked on our Kiwibox.com website
during 2014.
·
Guestbook Entries – For the quarter ended December 31, 2014, Kiwibox.com had 143.3 Million Guestbook Entries, an
increase of approximately 386% from the previous quarter. A Guestbook is a logging system that permits visitors to our Kiwibox.com
website to leave a public comment.
·
Blog Entries – Our Kiwibox.com website members and visitors entered 95.4 Million Blog Entries during the last
quarter of 2014, an approximate 264% increase over the prior quarter. A Blog Entry is a message entered in our Kiwibox.com.
Market
Position
The
Kiwibox Network is in a unique position because it combines the excitement of a dating community with the benefits and accessibility
of a real social network. The Kiwibox Network encourages members to explore local events in their area, connect with other members
and enjoy the additional member exclusive benefits the social network is offering, such as games, blogging, chatting, picture-sharing
and online-flirting. This community behavior binds users to the platform and is the base for our viral marketing.
Safety
Kiwibox.com
has developed an effective monitoring model which assists in maintaining a safe site for our member base, combining both technology
based systems and user moderation. Users communicate and share information in an environment where they feel both secure and at
ease. Members of the Kiwibox team monitor forums and groups daily to ensure the content is appropriate.
In
addition to our monitoring system, the Kiwibox.com platform is equipped with advanced technology safety features. This includes
the private sphere configuration of users, contact blocs for larger age differentials, anti-spam protection and intelligent self-learning
user-scoring feature. In addition to this, Kiwibox.com has implemented state of the art security features such as former Attorney
General Andrew M. Cuomo’s hash value database in order to block images of illegal sexual content.. With the combination
of human moderation and advanced technology, users are afforded a safe and secure site.
Competition
Our
primary competitors are other online social networks, including Facebook, Instagram, Tinder and tumblr. Facebook is widely considered
as the industry leaders, however, recently statistics and strategic announcements have indicated a shift in the target audience
from teens and college students to a much broader and more adult demographic, because of their international focus. We plan to
distinguish ourselves by targeting the US-market and by combining the social-network advantages with user generated content –
from users to users, while stressing the community feeling. As these other social networks have made changes to their websites
we have been able to capitalize on the disenfranchised users and bring them into our online community.
Technology
Development
The
Company attaches great importance to its innovative technology developments and continues to follow the top social network market
leaders with technology upgrades, providing its users with an alternative social networking opportunity.
The
Kiwibox Network is focusing on the fast growing mobile usage phenomenon, being online with friends everytime and everywhere. The
Kiwibox Network released multiple updates in the 4th quarter for its iOS and Android Applications. At present, more
than 700,000 company Apps are installed in our social media marketplace. Our entire Event page was redesigned during the last
quarter of 2014, targeted to generate income based on direct advertisement sales with partners and not through the Banner Ads
market. In 2015, Kiwibox plans to optimize the Ads-Sales by organizing a department dedicated to target group based editorial
and exclusive Ads-Sales.
Intellectual
Property
The
Kiwibox.com web and mobile software and other related intellectual property rights are important assets. We hold the Internet
domain names Kiwibox.com, Kiwibox.net, Kiwibox.org, as well as other country-code top level domains and feature-based domains
like 4kiwi.com.
Governmental
Regulations
Our
Kiwibox website operations are subject to state, federal and international laws, rules and regulations that cover on-line business,
privacy policies, consumer protection and product marketing. The Kiwibox website business is subject to state, federal and international
laws, rules and regulations applicable to online commerce, including user privacy policies, product pricing policies, website
content and general consumer protection laws. Various laws, rules and regulations have been adopted, and probably will be
adopted in the future, that apply to the Internet, including available online content, privacy concerns, online marketing, “spam”
and unsolicited commercial email, taxation issues, and regulations that effect and monitor the quality of products and services.
A
portion of these laws, rules and regulations that concern the Internet and its uses have been only recently adopted. Courts and
administrative agencies have not yet fully interpreted these legal requirements as to their application and scope. Accordingly,
our Kiwibox website business is subject to the uncertainties of future interpretations and application of these legal requirements.
The application and interpretation of these legal requirements or the passage of new and/or revised laws, rules and regulations
could reduce the demand for Kiwibox website services, increase its operational costs, and expose it to potential liability. Any
such events could have a material adverse effect upon our Kiwibox website business and financial condition. Our failure, or that
of our business partners, to accurately predict and anticipate the interpretation or application of these laws, rules and regulations,
whether now in force or adopted in the future, could have a detrimental impact on our operations, create negative publicity for
us and expose us to potential liability.
State
and federal agencies are applying consumer protection laws to regulate the on-line use, collection and dissemination of personal
information and website content. These laws require us to implement programs to notify our website users of our privacy and security
programs. Consumer protection laws will require us to obtain the consent of our website users if we want to collect and use certain
portions of their personal information. We are currently voluntarily working in partnership with the New York State Attorney General’s
office and have incorporated hash value technology into our website.
The
Federal Trade Commission (“FTC”) is the lead federal agency monitoring Internet websites and their content. State
attorneys general have become active monitors of the Internet at the local State level. These governmental bodies may investigate
or bring enforcement actions against website operators they deem in violation of applicable consumer protection laws. We believe
that our Kiwibox website’s collection and dissemination of information programs, including our privacy policies, do and
will continue to comply with existing laws. However, a decision by a federal or state agency that any of our Kiwibox website’s
business practices do not meet applicable legal standards could result in liability and have a material adverse effect on our
business and financial condition.
Employees
Currently,
we have 4 employees.
ITEM
1.A: Risks Related to Our Business
Early
Stage Company; Generation of Revenues
Kiwibox.Com,
Inc. (“Kiwibox” or “the Company”) can be considered an early stage company and investors cannot reasonably
assume that we will ever be profitable. As an early stage company, we are likely to continue to have financial difficulties for
the foreseeable future. We may successfully re-develop our website operations and generate additional revenues but still be unable
to achieve profitability. Kiwibox had devoted substantial funds to develop its website, but investors should be aware that there
can be no assurance that Kiwibox will ever achieve revenues that exceed its operational costs. We may not obtain the funding necessary
to provide Kiwibox with the working capital necessary to continue to develop and market its website. Moreover, the Kiwibox.com
website may not receive sufficient internet traffic to increase revenues or achieve profitability.
Doubt
Raised About our Ability to Continue as a Going Concern.
Our
financial statements have been presented on the basis that we will remain a going concern and that our assets will increase and
that we will satisfy our liabilities in the normal course of our business. Kiwibox has had minimal revenues and/or has incurred
operating losses during the fiscal years ended December 31, 2010, 2011, 2012, 2013 and 2014. Our independent auditors have concluded
that these factors create an uncertainty about our ability to continue as a going concern. Our ability to continue as a going
concern is dependent, among other factors, on our continued success in raising capital.
Need
for Additional Capital; Short-Term Viability of Company
Our
operations require immediate investment of equity capital or loans to continue to operate. If we can not secure funds in the short-term,
we will be required to close our entire business operations and our website.
Assuming
we can receive a current investment or loans to fund our immediate operational needs, our Kiwibox website business’s future
capital requirements will depend on many factors, including the degree to which teenagers use the kiwibox.com Website and the
degree to which Kiwibox is able to generate revenues from users of its site. We expect to require additional financing before
we achieve a profitable level of operations; however, there is no assurance that such funding will be available on acceptable
terms, or at all. If we elect to sell equity to raise additional funds, there is no assurance that additional equity can
be sold on terms favorable to the Company and to its existing shareholders, with the result that existing shareholders may incur
substantial dilution. Without the necessary funding, we may be required to delay, reduce or terminate some or all of our Kiwibox
website business or our efforts to obtain additional funding.
No
Formal Feasibility and Market Research Plan
We
have collected data and statistics concerning the potential market for the Kiwibox.com website and the costs of marketing our
services. We have relied principally on the judgment and conclusions of our management, based on their respective knowledge and
experiences. We have not performed any formal marketing study that confirms any absolute demand for the services we are providing
on our Kiwibox.com website.
Unpredictability
of Future Revenues; Potential Downturns in Operating Results
Due
to Kiwibox’s minimal revenues since inception and the uncertainty of revenues that may be generated through potential partners
and alliances, we are currently unable to forecast our future revenues with accuracy. Our current and future operational
costs are based primarily on our marketing and website development plans and our estimates of future revenues. Our potential advertising
and joint marketing sales results are difficult to forecast at this stage. It will be difficult for us to realign our operational
expenses should future revenue forecasts not materialize which would require that we curtail or cease certain aspects of our operations.
Accordingly, if our future revenues are insufficient to fund our planned operations, such a shortfall could have an immediate
adverse effect on our business, prospects, financial condition and results of operations.
We
may experience cyclical downturns in our future operating results due to various factors, many of which are beyond our control.
Some of the factors that could impact our operating results include: (a) our ability to attract and retain new members to our
Kiwibox.com website; (b) new developments by our competitor websites; (c) advertising and product price competition; (d) our ability
to develop enhancements to our website, upgrade its internet functionality and services; (e) our ability to attract and retain
necessary personnel; (f) difficulties with our software or hardware equipment, including any interruptions in the development
and maintenance of our internet equipment and related infrastructure systems related to our Kiwibox.com website; (g) the future
impact of governmental rules, regulations and laws, and; (h) general economic conditions.
Website
and Service Development Risks
The
continuing development of our Kiwibox.com website is a highly complex technical process. We are continuing the process of designing
and implementing a wide array of feature and contents enhancements in order to remain competitive in our teen marketplace. If
we are unable to develop and introduce new services or enhancements to our website in a timely manner in response to changing
market conditions or customer requirements, our business, prospects, operating results and financial condition could be materially
adversely affected.
Limited
Senior Management Team; Potential Problems with Expanding Personnel
We
have a limited number of senior management personnel, planning, developing and managing our website business. We have expanded
our website operations to accommodate potential growth in our membership and marketplace. We could experience significant pressure
on our financial resources and management personnel as a result of the current expansion. In order to manage this expansion, we
may be required to adopt new
operating
procedures, develop new advertising and marketing plans, financial controls and procedures and policies to supervise a growing
employee population. We will also be required to attract, retain and properly administer the expansion of our employee population.
Investors should be aware that we may not be able to adequately manage all of these new developments in our expansion, in which
case our operations, business prospects, operating results and financial condition could be materially adversely affected.
Competition
Our
website business in the young adult and teen marketplace is highly competitive. We can give no assurances that our website business
will effectively compete with the more established teen websites currently operating in this marketplace.
Many
of our competitors have significantly greater financial resources, established brand names and significantly larger membership
and customer bases and we expect our competition to only intensify.
Dependence
on Management
The
Kiwibox.com website’s success will be substantially dependent on the continued services and on the performance of our current
senior management. We will also be dependent upon our ability to retain and provide incentives for our management team. The loss
of services of any one or more of our senior management team could have a material adverse affect on our operating results, business
prospects and financial condition.
Our
success will be dependent, in large part, on the services of our principal officers and employees. The loss of any of these
individuals could have a material adverse effect on our business or results of operations. We do not maintain “key-man”
life insurance policies on the lives of our officers to compensate us in the event of their deaths.
Except
for issues that require shareholder approval, investors should be aware that they will have no vote on our operations, business
developments or any management issues, including expansion, website enhancements or personnel decisions. You should not invest
in our company unless you understand that all business and operational decisions are made by our management.
Creation
of Brand Awareness
It
will be crucial to the economic success of our Kiwibox.com website that we promote and establish brand awareness. A successful
brand awareness campaign will tend to decrease our marketing expenses over time. If we are not able to adequately establish our
brand in our marketplace, our operating results, market growth and financial condition could be materially adversely affected.
Potential
for Defects in our Products and Services
Our
Kiwibox.com website, its functionality, product offerings and services may contain defects or problems yet undetected. Such defects
or problems could delay the launch of our new Kiwibox.com website, generate negative public comment and inhibit marketplace acceptance,
any one or more of which could have a material adverse affect on our operating results and financial condition.
Penny
Stock Regulation
Our
common shares are subject to the “penny stock rules” that require broker-dealers who sell our shares to make specific
disclosures before selling to certain persons. Unless an exception is available, the regulations require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risk associated therewith
as well as the written consent of the purchaser of such
security
prior to engaging in a penny stock transaction. These penny stock restrictions will continue to apply as long as the Company’s
common stock continues to trade at market prices below $5.00. Investors should be aware that the regulations on penny stocks may
significantly restrict the ability of any purchaser of our common shares to sell his or her Company common shares in the market.
Absence
of Dividends
We
have not paid any dividends on our common stock and we are not likely to do so in the foreseeable future. We presently intend
to retain earnings for use in growing our business. We may pay for some of our future expansion through debt financing, in which
case lenders traditionally prohibit the payment of any such dividends. We also are prohibited from paying dividends on our common
stock before we have paid all dividends accrued on our preferred stock, which accruals amounted to $735,655 at December 31, 2014.
Investors should be aware, therefore, that the Company intends to re-invest any earnings back into our business for the foreseeable
future and that they should have no expectations of receiving any dividends on the common shares they may purchase.
ITEM
2: Description of Properties
We
maintain offices for our Kiwibox operations at 330 W. 42nd Street, New York, New York 10036, for approximately 990 square feet.
The lease requires initial minimum monthly rentals of $3,833 plus tenants’ share of utility/cam/property tax charges which
average approximately $291 per month.
ITEM
3: LEGAL PROCEEDINGS
At
the time of this report, the Company is not a party to any material legal proceedings.
ITEM
4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART
II
ITEM
5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER
MATTERS
(a)
Market Information
The
Company’s common stock currently trades on the Electronic Bulletin Board of the OTC market, under the symbol KIWB. The following
table sets forth, for the calendar quarters indicated, and for the last three years, the high and low sales prices for the Company’s
common stock.
|
|
|
OTC-BB |
|
|
|
|
|
Low/Bid |
|
|
High/Ask |
|
2012 |
|
|
|
|
|
|
|
First Quarter …………….. |
$ |
0.03 |
|
$ |
0.05 |
|
|
Second Quarter ………….. |
|
0.02 |
|
|
0.04 |
|
|
Third Quarter..................... |
|
0.01 |
|
|
0.02 |
|
|
Fourth Quarter................... |
|
0.01 |
|
|
0.02 |
|
2013 |
|
|
|
|
|
|
|
First Quarter …………….. |
$ |
0.003 |
|
$ |
0.01 |
|
|
Second Quarter ………….. |
|
0.00 |
|
|
0.01 |
|
|
Third Quarter..................... |
|
0.003 |
|
|
0.01 |
|
|
Fourth Quarter................... |
|
0.003 |
|
|
0.01 |
|
2014 |
|
|
|
|
|
|
|
First Quarter …………….. |
$ |
0.002 |
|
$ |
0.006 |
|
|
Second Quarter ………….. |
|
0.002 |
|
|
0.005 |
|
|
Third Quarter..................... |
|
0.002 |
|
|
0.009 |
|
|
Fourth Quarter................... |
|
0.001 |
|
|
0.004 |
|
(b)
Shareholders
As
of April 15, 2015, there were approximately 356 shareholders of record for the Company’s Common Stock. The number of record
holders does not include shareholders whose securities are held in street names.
(c)
Dividends
The
Company has not declared or paid, nor has it any present intention to pay, cash dividends on its Common stock. The Company is
obliged to pay cash dividends on its outstanding convertible preferred stock and, under certain circumstances, on its outstanding
cumulative preferred stock. See "DESCRIPTION OF CAPITAL STOCK" - "The Series A Stock", "The Series B
Stock", "The Series C Stock", "The Series D Stock", the “Series E Stock”, and "The Series
G Stock", below.
ITEM
6: Selected Financial Data
Except
for historical information, the Company's reports to the Securities and Exchange Commission on Form 10-K and Form 10-Q and periodic
press releases, as well as other public documents and statements, contain "forward-looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ
materially
from those expressed or implied by the statements. These risks and uncertainties include general economic and business conditions,
development and market acceptance of the Company’s products, current dependence on the willingness of investors to continue
to fund operations of the Company and other risks and uncertainties identified in the Company's reports to the Securities and
Exchange Commission, periodic press releases, or other public documents or statements.
Readers
are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to republish or
revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated
events.
The
selected financial information presented below under the captions "Statement of Operations" and "Balance Sheet"
for the years ended December 31, 2010 through 2014 is derived from the financial statements of the Company and should be read
in conjunction with the financial statements and notes thereto.
The
financial data are those of Kiwibox.Com, Inc. (f/k/a Magnitude Information Systems, Inc.) including the operations of Magnitude,
Inc. and, starting with August 16, 2007, the date of acquisition, the operations of KiwiBox Media, Inc through December 31, 2009,
the date these entities were merged into Kiwibox.Com, Inc. All inter-company accounts and transactions have been eliminated in
consolidation through December 31, 2009.
Balance
Sheet
|
December
31, |
|
2014
|
2013
|
2012 |
2011 |
2010 |
|
|
|
|
|
|
Total
assets |
$
309,294 |
$
157,366 |
$ 6,877,123 |
$ 8,243,931 |
$
166,436 |
Current
liabilities |
30,894,601 |
26,017,383 |
25,910,042 |
16,326,319 |
6,181,044 |
Long-term
debt |
- |
- |
- |
- |
- |
Working
capital |
(30,608,081) |
(25,887,308) |
(25,475,653) |
(15,505,560) |
(6,145,931) |
|
|
|
|
|
|
Stockholders’
equity (impairment) |
$(30,585,307) |
(25,860,017) |
$(19,032,919) |
(8,211,778) |
(6,014,608) |
Statement
of Operations
|
For
the Year Ended December 31, |
|
2014 |
2013 |
2012 |
2011 |
2010 |
Total
revenues |
$ 36,755 |
$934,219 |
$ 1,469,705 |
$ 599,615 |
$ 2,039 |
Operating
loss |
(1,181,252) |
(7,404,934) |
(1,671,156) |
(1,500,610) |
(1,181,626) |
Net
loss |
(4,674,027) |
(6,953,532) |
(14,010,332) |
(5,900,537) |
(3,972,372) |
Net
loss after dividends on preferred shares |
(4,725,290) |
(7,004,795) |
(14,061,595) |
(5,951,800) |
(4,023,635) |
Net
loss per common share |
$ (0.007) |
$ (0.01) |
$ (0.022) |
$ (0.011) |
$ (0.008) |
Number
of shares used in computing per share data |
683,693,060
|
680,961,142 |
650,715,901 |
522,090,046 |
494,315,316 |
ITEM
7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY
STATEMENT PURSUANT TO "SAFE HARBOR" PROVISIONS OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934
The
information in this annual report contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such Act provides a “safe harbor” for forward-looking statements to encourage companies to provide
prospective information about their businesses so long as they identify these statements as forward looking and provide meaningful
cautionary statements identifying important factors that could cause actual results to differ from the projected results. All
statements other than those statements of historical fact made in this report are forward looking. In particular, the statements
herein regarding industry prospects and future results of operations or financial position are forward-looking statements. Forward-looking
statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly
from management’s expectations.
The
following discussion and analysis should be read in conjunction with the consolidated financial statements of Kiwibox.Com, Inc.,
included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue
into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.
Such discussion represents only the best present assessment of our management.
Description
of Business
Kiwibox
is in a unique position because it combines the excitement of a dating community with the benefits and accessibility of a real
social network. The Kiwibox network encourages members to explore local events in their area, connect with other members and enjoy
the additional member exclusive benefits the Kiwibox social network is offering.
Based
on its market surveys, the Company’s business plan focused on increasing its regional membership during 2014. These efforts
in the New York City membership market have resulted in an increased membership growth during 2014. The Company intends to continue
its marketing efforts in this region through a series of street promotion and event organizing in 2015. The Company has developed
a number of partnerships with event organizers and businesses along the east coast of the United States and plans further expansion
of these types of market alliances.
The
Company attaches great importance to its innovative technology developments and continues to follow the top social network market
leaders with technology upgrades, providing its users with an alternative social networking opportunity in the web and through
mobile apps. Kiwibox was one of the first social networks that integrated its mobile-apps for social mobile advertising in
its mobile-apps, to account for the fast growing movement to mobile applications from fixed site usage. We are continuing
to optimize this website and develop mobile applications to keep these users engaged across multiple platforms. At present,
more than 500,000 company Apps are installed in our network for our community and our market. Kiwibox plans to release various
monthly updates for its existing Apps and another two new mobile Apps by the end of the year. We plan to integrate in-App shopping
to be less dependent on the advertisement market.
Our
continuing membership growth is fueled by infiltrating our users into local event venues where they participate and simultaneously
communicate with our social network via the regular deployment of our cutting-edge App updates. As a result, the Kiwibox network
enjoys continuing user sign-ups and continuing loyalty of users to our social network. Due to our long-time experience with our
German affiliate, the KWICK! Community (“Kwick”), we were able to fulfill the front-end and back-end needs for this
remarkable growth.
Our
former subsidiary, Kwick, has negotiated with Triple Double U (“TDU”) – an exclusive German online advertisement
company – an exclusive online advertisement agreement for the Kiwibox network for web and mobile advertisements. This “Ads-Delivery”
has been transferred to and integrated into the Kiwibox platform in January 2014.
While
the disposition of our former subsidiary Kwick has resulted in a loss of overall advertising revenue, this new agreement has resulted
in an increase in advertising revenue in 2014 for the parent company’s operations. The Company attaches great importance
to its technology developments and continues to follow the top social network market leaders with technology upgrades, providing
its users with an alternative social networking opportunity.
Currently
we generate the majority of our revenue from advertising/sponsorships. We anticipate continued revenue growth from increased
membership activity and our revitalized website as we continue to implement new marketing strategies. Our software and networking
technologies, primarily incorporated during 2013, now permit our mobile devices to accept and receive direct advertising through
our exclusive online advertising agreement with TDU. Kiwibox has constructed a new revenue stream through its members mobile devices
based on the delivery of our Kiwibox original, editorial content, supported with the new advertisement-profiles. Overall, we have
equipped the entire website with the newest state-of-the-art advertising features which enable sponsors to self-direct their message
to specific target audiences based on gender, age, geographic region, education, and interests.
Community
means social network – and Kiwibox thrives on its membership networking. Our new website is based on the latest web technology
which makes it easier for users to stay connected and to interact with each other. Most importantly, our website features permit
our community members to stay informed in “real” time about events and parties in areas we are targeting through our
promotional teams.
The
operating expenses, not including stock-based compensation, remained at a level of approximately $100,000 per month. We are currently
receiving funding at these levels from existing investors (see sections
“Loans
and Notes Payable”).
Results
of Operations for the Twelve Months Ended December 31, 2014 Compared to the Twelve Months Ended December 31, 2013
Our
website presence is not yet supported by a volume of active members-users that would provide a basis for significant growth in
advertising revenues. For the year ended December 31, 2014, total revenues amounted to $36,755 compared to $934,219 in 2013. Revenues
in 2013 were derived almost entirely from the Kwick! operations, which were acquired on September 30, 2011. The Company deconsolidated
the operations of Kwick! in December 2013.
Gross
Profit amounted to $5,349 after considering $31,406 costs of revenue. After deducting selling, general and administrative expenses
of $1,186,600 compared to the $7,746,830 (which included $6,138,210 impairment of goodwill) recorded in 2013, the Company realized
an operating loss of $1,181,251 compared to an operating loss of $7,404,934 in 2013. After deducting the prior year impairment
of goodwill, the disposition of the former subsidiary Kwick is the main reason for the large decrease in operating expenses. For
the year 2015 management expects operating expenses to remain steady and an expected increase in revenues due to new mobile advertising,
this will start a process of putting the company on a path towards eventually eliminating the erosion of shareholder value.
The
major item included in non-operating income and expenses was a charge of $2,444,269 accounting for the intrinsic value of the
beneficial conversion feature associated with convertible debt. We also had a gain of $30,075 in connection with changes in the
valuation of derivative liabilities, In 2013, included in non-operating income and expenses was a charge of $2,307,402 accounting
for the intrinsic value of the beneficial conversion feature associated with convertible debt and a gain of $4,036,848 in connection
with changes in the valuation of derivative liabilities, and a $253,557 loss on the deconsolidation of Kwick. In 2014, the year
concluded with a net loss of $4,674,027. After accounting for dividends accrued on outstanding preferred stock which totaled $51,263
the net loss applicable to common shareholders was $4,725,290 or $0.007 per share, compared to a loss of $7,004,795 or $0.01 per
share for the previous year.
Liquidity
and Capital Resources
We
have financed our business with new debt and equity capital since our cash flow is insufficient to provide the working capital
necessary to fund our parent operations. In addition, we received $1,275,001 from short-term loans for continuing operations.
We have an urgent need for working capital to fund our operations. If we are unable to immediately receive new equity investments
or obtain loans, we will not be able to fund our operations and we will be required to close our business.
Our
deficit in working capital amounted to $30,608,081 at December 31, 2014, as compared to $25,887,308 at December 31, 2013. Stockholders’
equity showed an impairment of $30,585,307 at the end of the year, compared to an impairment of $25,860,017 at the beginning of
the year. The cash flows used by operations totaled $(1,277,811) and was brought about primarily due to operating losses. We have
no bank indebtedness at December 31, 2014. Our other indebtedness, excluding the other current liabilities described below, consisted
of certain notes and loans aggregating $11,667,229, derivative conversion liabilities of $14,482,427 and advances from related
parties of $65,909. The position “Obligations to be settled in stock” of $276,568 includes $130,568 for common shares
and options accrued for certain officers and directors pursuant to their respective employment and remuneration agreements, and
$146,000 for stock and warrants due under consulting agreements. Current liabilities also include $735,655 accrued unpaid dividends
on outstanding preferred stock. Such dividends will be paid only if and when capital surplus and cash-flow from operations are
sufficient to cover the outstanding amounts without thereby unduly impacting the Company’s ability to continue operating
and growing its business.
Our
current cash reserves and net cash flow from operations expected during the near future will be insufficient to fund our operations
and website development and marketing plan over the next twelve months. We expect to fund these requirements with further investments
in form of debt or equity capital and are in discussions with potential investors. There can be no assurance, however, that we
will be able to identify financing sources, or if we do, whether the terms of such financing will be acceptable or commercially
reasonable.
Absent
the receipt of immediate equity investment or loans, we will be compelled to close our business operations. Absent the receipt
of sufficient funds, our website development, results of operations and financial condition could be subject to material adverse
consequences. There can be no assurance that we will find alternative funding for the working capital required to finance on-going
operations.
ITEM
7 A: Quantitative and Qualitative Disclosures about Market Risk
The
Company is subject to certain market risks, for changes in financial market conditions. The Company does not undertake any special
actions to limit those exposures. We do not have a significant interest rate risk because the interest on all our debt obligations
is based on fixed rates in accordance with the terms of such indebtedness.
ITEM
8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
Company's Financial Statements and Notes to Financial Statements are attached hereto as Exhibit A and incorporated herein by reference.
ITEM
9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There
have been no changes in or disagreements with the Registrant’s independent auditors during the last two years.
ITEM 9A: |
MANAGEMENT’S ANNUAL
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING |
Item
9A(T). Evaluation of Disclosure Controls and Procedures
In
connection with the preparation of the Company’s Annual Report on Form 10-K, an evaluation was carried out by our management,
with participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)
as of December 31, 2014. Disclosure controls and procedures are designed to ensure that information required to be
disclosed in reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified, and that such information is accumulated and communicated to management, included the Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
During
our evaluation of disclosure controls and procedures as of December 31, 2014, conducted as part of the Company’s annual
audit and preparation of our annual financial statements, several deficiencies were identified which viewed in the aggregate,
represent a material weakness. As a result of this material weakness, described more fully below, our Chief Executive
Officer and Chief Financial Officer concluded that, as of December 31, 2014, the Company’s disclosure controls and procedures
were ineffective.
The
Company instituted and is continuing to implement corrective actions with respect to the deficiencies in our disclosure controls
and procedures.
Management’s
Annual Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f)
under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of the Company’s financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with accounting principles generally accepted in the United States of America. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management
has conducted, with the participation of the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2014. Management’s assessment
of internal control over financial reporting was conducted using the criteria set forth in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance
on conducting such assessments.
A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not
be prevented or detected on a timely basis. Based on management’s assessment over financial reporting, management
believes as of December 31, 2014, the Company’s internal control over financial reporting was not effective due to the following
deficiencies:
1.
The Company’s control environment did not have adequate segregation of duties and lacked adequate accounting resources to
address non routine and complex transactions and financial reporting matters on a timely basis, primarily due to a lack of resources.
2.
The Company had only a part time chief financial officer performing all accounting related duties on site, presenting the risk
that the reporting of these non routine and complex transactions during the preparation of our future financial statements and
disclosures may not be accomplished in a timely manner. In September of 2012 the Company hired an additional comptroller to review
and assist the Chief Financial Officer.
Company
management believes that notwithstanding the above identified deficiencies that constitute our material weakness, that the consolidated
financial statements fairly present, in all material respects, the Company’s consolidated balance sheets as of December
31, 2014 and 2013 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years
ended December 31, 2014 and 2013, in conformity with generally accepted accounting principles.
This
annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report
in this annual report.
Remediation
of Material Weaknesses in Internal Control over Financial Reporting
The
Company commenced efforts to address the material weakness in its internal control over financial reporting and its control environment
through the following actions:
-
We will continue to seek qualified fulltime or part-time employees and third party consultants to supplement our financial personnel
when and if additional resources become available;
-
We will continue to institute a more stringent approval process for financial transactions, and
-
We will continue to perform additional procedures and analysis for significant transactions as a mitigating control in the control
environment due to segregation of duties issues.
Changes
in Internal Control over Financial Reporting
Other
than described above, there have been no changes in the Company’s internal control over financial reporting during the most
recently completed fiscal year ended December 31, 2014, that have materially affected or are reasonably likely to materially affect
the Company’s internal control over financial reporting.
ITEM
9B: OTHER INFORMATION
None.
PART
III
ITEM
10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The
names of all directors and executive officers of the Company are as follows:
Name |
Positions |
Term
Served (Expires) |
|
|
|
Andre Scholz |
Director
President,
Chief Executive Officer
Chief
Technology Officer |
May 13,
2009 to present
August
1, 2010 to present
May 13,
2009 to present |
|
|
|
Joseph J. Tomasek |
Director |
Feb. 11, 1999 to present |
|
|
|
Craig S. Cody |
Chief Financial Officer |
May 1, 2010 to present |
|
|
|
Andre
Scholz, Age 37 – Director, Chief Technology Officer. Andre Scholz has more than 16 years business experience in
Internet, telecommunication technology and IT security. He holds an advanced degree from the University of Stuttgart and Konstanz
in electronic engineering. Mr. Scholz is a consultant and well known technical expert for numerous social networks, communities
and high-traffic sites, active around the world. He brings a wealth of social network and internet knowledge to Kiwibox. Mr. Scholz
was co-founder of various internet exchange points and manages them until now. Since 1996 he is Managing Director of a carrier
and Internet Service Provider in Stuttgart, Germany and since 2002 he is CEO of the Interscholz company group, Leonberg, Germany,
which places private investments in and is managing and operating various companies.
Craig
S. Cody, Age 52 – Chief Financial Officer. Effective as of May 4, 2010, Registrant promoted Craig S. Cody to serve
as its Chief Financial Officer. Mr. Cody, a licensed Certified Public Accountant, had previously served as the Comptroller for
the Registrant. In addition to managing an independent accounting and financial services business in New York for a diverse group
of clients, he brings extensive management experience derived in the public sector. Mr. Cody holds a B.S. Degree in Accounting
from the State University of New York.
Joseph
J. Tomasek, Age 68 - Director. Mr. Tomasek was appointed a director in February 2000. Mr. Tomasek also serves as our General
Counsel and coordinates our legal affairs in such role. In addition to serving in these Company positions, Mr. Tomasek represents
U.S. and international clients in corporate and securities law matters. Mr. Tomasek received his Juris Doctor and Bachelor of
Arts Degrees from Seton Hall University and a Certificate d'Etudes in European Studies from the University of Strasbourg, France.
Mr. Tomasek is a member of the Bars of the States of New Jersey, and New York.
Family
Relationships
There
are no family relationships between any of the directors or executive officers.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
The
Company knows of no person, who at any time during the period from the date at which it filed its annual report on Form 10-K for
the year ended December 31, 2014 to the present, was a director, officer, beneficial owner of more than ten percent of any class
of equity securities of the Company (a "Reporting Person"), that failed to file on a timely basis any reports required
to be furnished pursuant to Section 16(a), except for the annual statements of beneficial ownership of securities on Form 5 for
the officers and directors of the Company which were filed late.
ITEM
11: EXECUTIVE COMPENSATION
2014
SUMMARY COMPENSATION TABLE
The
following table sets forth certain compensation information for: (i) the person who served as the Chief Executive Officer of the
Company during the year ended December 31, 2014, regardless of the compensation level, and (ii) each of our other executive officers,
serving as an executive officer at any time since 2012, as well as the most highly compensated employees who did not serve as
executive officers since 2012. Compensation information is shown for the fiscal years ended December 31, 2014, 2013 and 2012:
(1)
Name
and
Principal
Position
(a) |
Year
(b) |
Salary
($)
(c) |
Bonus
($)
(d) |
Stock
Awards
($)
(e) |
Option
Awards
($)
(f) |
Non-Equity
Incentive Plan Compensation
($)
(g) |
Non-Qualified
Deferred Compensation Earnings
($)
(h) |
All
Other
Compen
sation
($)
(i) |
Total
($) |
Andre
Scholz
Chief
Executive
Officer,
President,
Director |
2014
2013
2012
|
220,000
200,000
200,000
|
--
2,000
2,500
|
5,400
8,040
30,600
|
-
-
-
|
-
-
-
|
-
-
-
|
- -
- |
225,400
210,040
233,100 |
Joseph
J. Tomasek, Esq., Director and General Legal Counsel
|
2014
2013
2012
|
13,500
-
- |
-
1,250
2,500 |
-
-
- |
11,880
11,880
11,880
|
-
-
- |
-
-
- |
34,288
33,708
60,000
|
59,668
46,838
74,380
|
Craig
S Cody
Chief
Financial Officer
|
2014
2013
2012
|
74,500
73,500
91,000
|
-
1,250
2,500 |
-
-
- |
-
-
- |
-
-
- |
-
-
- |
3,500
17,500
5,000
|
78,000
92,250
98,500 |
|
|
|
|
|
|
|
|
|
|
All
executive officers and named significant employees and directors as a group |
2014
2013
2012
|
308,000
273,500
291,000
|
-
4,500
7,500 |
5,400
8,040
30,600
|
11,880
11,880
11,880 |
-
-
- |
-
-
- |
37,788
51,208
65,000
|
363,068
349,128 405,980 |
Andre
Scholz 2014-2012: Andre Scholz joined the Company in May 2009, as our Chief Technology Officer and as a director. On August
1, 2010 Mr. Scholz took over as President and Chief Executive Officer. During 2014, we paid Mr. Scholz $220,000 as salary. He
also has accrued 1,200,000 common shares, earning 100,000 common shares every month. These shares were accrued for and valued
at $5,400. These shares had not been issued at December 31, 2014. During 2013, we paid Mr. Scholz $200,000 as salary. He also
has accrued 1,200,000 common shares, earning 100,000 common shares every month. These shares were accrued for and valued at $8,040.
During 2012, we paid Mr. Scholtz $200,000 as salary. He also has accrued 1,200,000 common shares, earning 100,000 common shares
every month. These shares were for and valued at $36,000.
He
also had accrued 500,000 common shares as a signing bonus and has been earning 100,000 common shares every month, beginning with
May 15, 2009.
The
terms of his consulting /employment agreement are included in our filing on Form 8-K of May 22, 2009 which is incorporated herein
by reference to that filing. On November 21, 2014 the terms of his consulting agreement were extended through December 31, 2015.
On January 1, 2014 the terms of his consulting agreement were extended through December 31, 2014 with no changes to the terms.
In December 2013 the terms of his contract was updated to $220,000 annually.
Joseph
J. Tomasek 2014-2012: During fiscal years 2014, 2013, and 2012, the Company incurred or paid $47,788, $33,708, $60,000 and
$60,000, respectively, to Mr. Tomasek for legal services rendered to the Company. In 2014 Mr. Tomasek earned options for 1,200,000
restricted shares, valued at $11,880 pursuant to the Black-Scholes valuation formula. In 2013 Mr. Tomasek earned options for 1,200,000
restricted shares, valued at $11,880 pursuant to the Black-Scholes valuation formula. In 2012 Mr. Tomasek earned options for 1,200,000
restricted shares, valued at $11,880 pursuant to the Black-Scholes valuation formula. These options are earned at the rate of
100,000 options per month, beginning with April 2009.
Craig
S Cody 2014- 2012: During the year 2014, Mr. Cody earned $78,000. During the year 2013, Mr. Cody earned $92,250. During the
year 2012, Mr. Cody earned $98,500.
Stock
Options:
No
stock options were granted during 2012, 2013 or 2014 pursuant to the Company’s 1997 Stock Option Plan and 2000 Stock Incentive
Plan, to any executive officers, directors, employees or to any beneficial owners of more than 10 percent of any class of equity
securities of the Company. In addition, there were no stock options or warrants exercised by any officer, director, employee or
any beneficial owners of more than 10 percent of any class of equity securities of the Company during 2012, 2013 or 2014.
1997
Stock Option Plan:
The
Company’s 1997 Stock Option Plan, as filed with Information Statement pursuant to Section 14(c) with the Commission on July
1, 1997, and with Registration Statement on Form S-8 with the Commission on September 8, 1997, is hereby incorporated by reference.
2000
Stock Incentive Plan:
The
Company’s 2000 Stock Incentive Plan, as filed with the Commission as an exhibit to the quarterly report on Form 10-QSB for
the period ended March 31, 2000, is hereby incorporated by reference.
Options
Granted Outside of Stock Option Plans:
During
2014, one director who also serves as the Company’s general counsel earned 1,200,000 five-year stock options, exercisable
at $0.05 per common share.
Outstanding
Equity Awards at Fiscal Year-End Table
The
following table provides certain information regarding unexercised options to purchase common stock, stock options that have not
vested, and equity-incentive plan awards outstanding at December 31, 2014, for each of the persons covered under our Summary Compensation
Table.
Name
and
Principal
Position |
Number
of
Securities
Underlying
Unexercised
Options
Exercisable |
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable |
Equity
Incentive
Plan
Awards
No.
of
Underlying
Unexercised
Unearned
Options |
Option
Exercise
Price |
Option
Expiration
Date |
No.
of
Shares
or
Units
of
Stock
that
have
not
vested |
Market
Value
of
Shares
or
Units
of
Stock
that
have
not
vested |
Equity
Incentive
Awards,
Shares,
Units
Or
other
Rights
that
have
not
vested |
Equity
Incentive
Plan Awards:
Market
or Payout value of Unearned Shares,Units or other rights that have not vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
J.
Tomasek,
Director
and General
Legal
Counsel |
4,500,000
|
-
|
-
|
$0.05
|
03/31/15
to
9/30/18 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Option
Exercises and Stock Vested Table: None
Pension
Benefits Table: None
Nonqualified
Deferred Compensation Table: None
Pre-requisites
Table: None
Compensation
of Directors:
We
did not pay any compensation to any of our directors for services rendered as directors during fiscal years 2014, 2013 and 2012
During
2014, 2013 and 2012, one outside director of the Company who also serves as the Company’s general and securities counsel,
incurred or was paid an aggregate of $56,484, $46,838 and $74,380 respectively, for legal services.
CORPORATE
GOVERNANCE AND CODE OF ETHICS
The
Company has always been committed to good corporate governance. In furtherance of this commitment, during 2002 the Board of Directors
expanded the duties of the Company’s Audit Committee by increasing the Committee's duties specifically to include responsibility
and oversight of corporate governance matters and adherence to the Company’s Code of Ethics. A copy of the Corporate Code
of Ethics and Conduct had been included as an exhibit to the Company’s report on Form 10-KSB for the year ended December
31, 2002.
Board
Committees
AUDIT
COMMITTEE
The
Company has appointed an Audit Committee in accordance with the provisions of the Sarbanes-Oxley Act of 2002. The Audit Committee
is currently comprised of the entire board of directors.
COMPENSATION
AND NOMINATING COMMITTEES
Our
board of directors intends to appoint such persons and form such committees as are required to meet the corporate governance requirements
imposed by the national securities exchanges. Therefore, we intend that a majority of our directors will eventually be independent
directors. Additionally, our board of directors is expected to appoint a nominating committee and a compensation committee, and
to adopt charters relative to each such committee. Until further determination by the Board, the full Board of Directors will
undertake the duties of the compensation committee and nominating committee.
ITEM
12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The
following table sets forth information known to us with respect to the beneficial ownership of Common Stock held of record as
of December 31, 2014, by (1) all persons who are owners of 5% or more of our Common Stock, (2) each of our named executive officers
(see “Summary Compensation Table”), (3) each director, and (4) all of our executive officers and directors as a group.
Each of the stockholders can be reached at our principal executive offices located at 330 West42nd Street, Suite 3210, New York,
New York 10036.
Title of Class* | |
Name and Address of Beneficial Owner | |
Amount and Nature of
Beneficial Ownership(1) | | |
Percent of Class
| |
Directors and Executive Officers: | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Common Stock | |
Andre Scholz | |
| 8,400,000 | (2) | |
| 1.22 | % |
| |
Pres./CEO/Director | |
| | | |
| | |
| |
| |
| | | |
| | |
| |
Joseph Tomasek | |
| 9,930,500 | (3) | |
| 1.45 | % |
| |
Director | |
| | | |
| | |
| |
| |
| | | |
| | |
| |
Craig Cody | |
| 1,250,000 | (4) | |
| 0.18 | % |
| |
Chief Financial Officer | |
| | | |
| | |
| |
| |
| | | |
| | |
All Directors and Officers as a Group: | |
| |
| 19,580,500 | | |
| 2.9 | % |
as a Group (3 persons) | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Beneficial owners of more than 5% of Common Stock
(exclusive of officers and directors): | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Discover Advisory Company | |
| |
| 68,300,937 | (5) | |
| 9.99 | % |
c/o Horymor Trust Corp. Ltd. | |
| |
| | | |
| | |
50 Shirley Street / P.O.Box N-341, | |
| |
| | | |
| | |
Nassau | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Cambridge Services Inc. | |
| |
| 68,300,937 | (6) | |
| 9.99 | % |
c/o TSZ Treuhandgesellschaft | |
| |
| | | |
| | |
Sauter & Co. | |
| |
| | | |
| | |
Suedstr. 11, CH-8034 Zurich, Switzerland | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Markus Winkler
330 West 42nd
New York, NY 10036 | |
| |
| 68,300,937 | (7) | |
| 9.99 | % |
*
The Company also has issued and outstanding as of December 31, 2014, 85,890 shares of its Senior Convertible Preferred Stock,
with concentrations in excess of 10% for one or more of the holders of such stock, however, none of such shares bear any voting
rights.
|
(1) |
For
purposes of this table, a person or group of persons is deemed to have “beneficial ownership”
of any shares of Common Stock which such person has the right to acquire within 60 days of March 1,
2015. For purposes of computing the percentage of outstanding shares of Common Stock held by each
person or group of persons named above, any shares of Common Stock which such person has the right
to acquire within such date, whether by exercise of stock options or warrants or conversions of other
securities, are deemed to be outstanding and to be beneficially owned by the person holding such option,
warrant or convertible security for purposes of computing such person’s percentage ownership
but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
Except as indicated in the footnote to this table and pursuant to applicable community property laws,
the Company believes based on information supplied by such persons, that the persons named in this
table have sole voting and investment power with respect to all shares of Common Stock which they beneficially
own.
(2)
Consists of 7,600,000hares 400,000 shares accrued but not yet issued along with 400,000 shares issued in December 2014
(3)
Includes 4,500,000 stock options and 500,000 warrants..
(4)
Includes 500,000 warrants and 250,000 shares.
(5)
Includes 33,300,937 shares issuable upon conversion of convertible debt. Karen Buehler has investment and voting control
of Discover Advisory Company.
(6)
Includes 37,171,829 shares issuable upon conversion of convertible debt. Victor Sauter has investment control of Cambridge
Services Inc.
(7)
Includes 2,300,937 shares issuable upon conversion of convertible debt of Kreuzfeld, Ltd. and VGZ (Vermoegenssverwaltungsgesellschaft)
both of which Markus Winkler has investment and voting control.
|
All
Directors of the Company hold office until the next annual meeting of the shareholders and until successors have been elected
and qualified. Executive Officers of the Company are appointed by the Board of Directors at meetings of the Company’s Directors
and hold office until they resign or are removed from office.
Family
Relationships
There
are no family relationships between any of the directors or executive officers.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
The
Company knows of no person, who at any time during the year ended December 31, 2014, was a director, officer, or beneficial owner
of more than ten percent of any class of equity securities of the Company (a "Reporting Person"), that failed to file
on a timely basis any reports required to be furnished pursuant to Section 16(a).
ITEM
13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During
the year ended December 31, 2014 and 2013 one outside director of the Company who also serves as the Company’s general and
securities counsel, incurred an aggregate $44,604 and $33,708, respectively, for each period for legal services. The director
also received 100,000 common stock options per month during the year ended December 31, 2014, valued at $11,880. The director
also received 100,000 common stock options per month during the year ended December 31, 2013, valued at $11,880. The balance due
to this director at December 31, 2014 and 2013 was $10,552 and $9,620, respectively.
For
the year ended December 31, 2014 and 2013 we incurred an aggregate $450,446 and $513,591, respectively, to companies controlled
by the Chief Executive Officer of the Company, for website hosting, website development and technical advisory services, server
farm installations and IT equipment purchases. The officer also earned 100,000 common shares per month during the year ended December
31, 2014 under a consulting agreement, valued at $5,400. During 2014, The officer received $220,000 in November 2014 for prepaid
consulting fees towards 2015 under the terms of a consulting agreement. The balance due to this officer and/or his affiliated
companies at December 31, 2014 and 2013 was $65,909 and $23,992, respectively.
During
2014 and 2013, approximately 10% of the Company’s voting stock was beneficially held by Discovery Advisory Company, located
in the Bahamas, and Cambridge Services Inc., Kreuzfeld, Ltd. and Vermoegensverwaltungs-Gesellschaft Zurich Ltd. (VGZ) of Switzerland.
Discovery Advisory Company, Cambridge Services Inc., Kreuzfeld, Ltd. and VGZ are major creditors, having advanced operating capital
against issuance by the Company of convertible promissory notes during 2013 and 2014. During the year ended December 31, 2013,
VGZ converted $409,200 of debt.
During
the year ended December 31, 2014, Cambridge Services Inc. advanced an additional $720,000, Discovery Advisory Company advanced
$485,000 and Kreuzfeld, Ltd advanced $70,000. During the year ended December 31, 2013, Cambridge Services Inc. advanced $1,085,000
and Kreuzfeld, Ltd. advanced $60,000. At December 31, 2014, $3,706,722 and $3,080,060 of such notes were outstanding and owed
to Discovery Advisory Company and Cambridge Services Inc, respectively and $3,634,959 and $771,958 owed to Kreuzfeld, Ltd. and
VGZ, respectively.
During
2014, the Company loaned $30,000 to its former Subsidiary Kwick. At December 31, 2014 the full $30,000 was outstanding. Additionally,
the Company through an advertising agreement with Triple Double U (TDU) has an ”Ads-Delivery” program whereby revenue
is received through the former subsidiary Kwick. This revenue in 2014 amounted to $36,703. At December 31, 2014 $28,146 in A/R
was outstanding.
The
Company, through its former subsidiary, Kwick, was formally a party to a service agreement with JAUMO GmbH, Germany, a company
partially owned by the former officers of Kwick. Kwick recognized approximately $93,174 in service revenue from this entity in
the year ended December 31, 2013.
During
2013, a shareholder loaned Kwick $899,794 plus accrued interest of $19,849. These loans carry an interest rate of 6% and are payable
on demand. A portion of this loan was used to pay off a bank line of credit. The balance was eliminated upon deconsolidation of
the Company’s Kwick subsidiary.
ITEM
14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT
FEES
Rosenberg
Rich Baker Berman & Company ("Rosenberg") billed us in the aggregate amount of $46,680 and $52,925 for professional
services rendered for their audit of our annual financial statements and their reviews of the financial statements included in
our Forms 10-K and 10-Q for the years ended December 31, 2014, and December 31, 2013, respectively.
AUDIT-RELATED
FEES
Rosenberg
did not bill us for, nor perform professional services rendered for assurance and related services that were reasonably related
to the performance of audit or review of the Company's financial statements for the fiscal years ended December 31, 2014, and
December 31, 2013.
TAX
FEES
Rosenberg
billed us in the aggregate amount of $0, and $0 for professional services rendered for tax related services for the fiscal years
ended December 31, 2014 and December 31, 2013, respectively.
ALL
OTHER FEES
The
aggregate fees billed by Rosenberg for services rendered to the Company during the last two fiscal years, other than as reported
above, were $0 and $0, respectively.
TRANSFER
AGENT
The
transfer agent for the Company is Securities Transfer Corporation, located at 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034.
ANNUAL
REPORT
The
Company intends to continue its practice of furnishing annual reports to its shareholders containing financial statements audited
by independent certified public accountants.
PART
IV
ITEM
15: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The
Exhibits that are filed with this report or that are incorporated by reference are set forth in the Exhibit Index attached hereto.
(b) Reports
on Form 8-K
During
the fourth quarter in 2014, the Company filed the following reports on Form 8-K:
On
October 9, 2014 the Company released a press release disclosing certain statistical accomplishments achieved during the third
quarter 2014.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
KIWIBOX.COM,
INC.
|
By: |
/s/ Andre Scholz |
Date: April 15 , 2015 |
|
|
Andre Scholz |
|
|
|
President and Chief Executive Office |
|
|
|
(Principal Executive Officer), |
|
|
|
Director |
|
|
|
|
|
|
By: |
/s/ Craig Cody |
Date: April 15, 2015 |
|
|
Craig S. Cody |
|
|
|
Secretary, Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
|
In
accordance with the requirements of the Securities Exchange Act, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
|
Name |
Date |
|
|
|
|
/s/ Joseph
J. Tomasek |
April 15, 2015 |
|
Joseph J. Tomasek, Director |
|
|
|
|
|
|
|
|
/s/ Andre
Scholz |
April 15, 2015 |
|
Andre Scholz, Director |
|
EXHIBIT INDEX
(A) |
|
Financial Statements and Notes to Financial Statements |
|
|
|
(3) (i) |
|
Articles of Incorporation and Amendments thereto, incorporated herein by reference
to Exhibits of previous filings with the Commission. |
|
|
|
(3) (ii) |
|
Bylaws of the Company, incorporated herein by reference to Exhibits of previous
filings with the Commission. |
|
|
|
10.25* |
|
Copy of Agreement and Plan of Reorganization, Dated February 19, 2007, between
the Company, Kiwibox Media, Inc. and the Kiwibox Shareholders, and Form of Employment Agreement for the Three Kiwibox Shareholders,
|
|
|
|
10.27* |
|
Amendment No. 3 to Agreement and Plan of Reorganization, dated July 31, 2007
and Effective August 2, 2007. |
|
|
|
10.28* |
|
Preliminary Employment Agreement with Paul Farris, Dated September 19, 2007 |
|
|
|
10.29* |
|
Amendment No. 4 to Agreement and Plan of Reorganization, dated as of December
3, 2007. |
|
|
|
10.30* |
|
Amendment No. 5 to Agreement and Plan of Reorganization, dated as of December
31, 2007. |
|
|
|
10.31* |
|
Standstill Letter Agreement, dated as of January 30, 2008. |
|
|
|
10.32* |
|
Standstill Letter Agreement, dated as of February 11, 2008. |
|
|
|
10.33* |
|
Amendment No. 6 to Agreement and Plan of Reorganization, dated as of February
28, 2008. |
|
|
|
10.34* |
|
Engagement Agreement, Dated June 27, 2008, between Tell Capital AG and the
Company. |
|
|
|
10.35* |
|
Resignation Agreement, Dated August 19, 2008, between Ivan Tumanov and the
Company. |
|
|
|
10.36* |
|
Form of Demand Notes issued by the Company to Lender, Discover Advisory Company. |
|
|
|
10.36-1* |
|
Form of corrected Demand Notes issued by the Company to Lender, Discover Advisory
Company. |
|
|
|
10.36-2 |
|
Form of Registrant’s Master Corporate Promissory Note, dated June 4,
2009, delivered and accepted by Discover Advisory Company, attached as an exhibit to Registrant’s Form 8-K filed with
the Commission on June 12, 2009. |
|
|
|
10.37 |
|
Copy of Stock Pledge Agreement, dated June 4, 2009, by and between Registrant
and Discover Advisory Company- attached as an exhibit to Registrant’s Form 8-K filed with the Commission
on June 12, 2009. |
|
|
|
10.38 |
|
Copy of Consulting Agreement, dated June 1, 2009, between the Registrant,
Kiwibox Media, Inc. and Andre Scholz attached as an exhibit to Registrant’s Form 8-K filed with the Commission
on June 12, 2009. |
|
|
|
10.39 |
|
Form of Registrant’s Securities Purchase Agreement, with Warrant as
an Exhibit: attached as an exhibit to Registrant’s Form 8-K filed with the Commission on December 31, 2009. |
10.40 |
|
Certificate of Ownership and Merger of Kiwibox Media, Inc.
with and into Magnitude Information Systems, Inc., including Corporate Name Change, dated December 15, 2009 and as filed with
the Secretary of State of Delaware on December 17, 2009. attached as an exhibit to Registrant’s Form 8-K
filed with the Commission on December 31, 2009 |
|
|
|
10.41 |
|
Form of Class AA Senior Secured Convertible Revolving Promissory Note issued
to Discover Advisory Company, Cambridge Services, Inc., VGZ and Kreuzfeld Ltd. On August 1, 2012, filed as Exhibit 10.41 to
Registrant’s Form 10-K for the fiscal year ended December 31, 2014, filed with the Commission on May 20, 2014. |
|
|
|
31.01A. |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 15, 2015. |
|
|
|
31.02A. |
|
Certification of Acting Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 15, 2015. |
|
|
|
32.01A. |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 15, 2015. |
|
|
|
32.02A. |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 15, 2015. |
| * | Documents
filed as exhibits to Registrant’s current reports, quarterly reports, annual reports
and registration statements and amendments thereto with the U.S. Securities and Exchange
Commission. |
OTHER DOCUMENTS INCORPORATED HEREIN
BY REFERENCE
| (a) | The Company’s Quarterly Reports
on Form 10-Q for the periods ended March 31, 2014, June 30, 2014, and September 30, 2014. |
| (b) | All other reports filed by the Company
pursuant to Section 13(a) or 15(d) of the Exchange Act since the Company’s fiscal
year ended December 31, 2010 |
Kiwibox.Com,
Inc.
Financial
Statements
December
31, 2014 and 2013
Kiwibox.Com,
Inc.
Index
to the Financial Statements
December
31, 2014 and 2013
|
Page |
|
|
Report of Independent Registered Public Accounting Firm |
F-2 |
|
|
Financial Statements |
|
|
|
Balance Sheets |
F-3 |
|
|
Statements of Operations |
F-4 |
|
|
Statements of Stockholders Equity (Impairment) |
F-5 - F-6 |
|
|
Statements of Cash Flows |
F-7 - F-8 |
|
|
Notes to the Financial Statements |
F-9 - F-36 |
Kiwibox.Com,
Inc. and Subsidiary
Consolidated
Balance Sheets
| |
December 31, 2014 | | |
December 31, 2013 | |
Assets | |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash and cash
equivalents | |
$ | 299 | | |
$ | 3,659 | |
Accounts receivable - affiliate,
net of allowance for doubtful accounts of $0 | |
| 28,146 | | |
| - | |
Loan receivable - affiliate | |
| 30,000 | | |
| - | |
Other receivables | |
| - | | |
| 5,248 | |
Prepaid
expenses and other current assets | |
| 228,075 | | |
| 121,168 | |
Total
Current Assets | |
| 286,520 | | |
| 130,075 | |
Property and equipment,
net of accumulated depreciation of $110,583 and $105,795 | |
| 4,971 | | |
| 5,795 | |
Website development costs,
net of accumulated amortization of $254,264 and $251,688 | |
| - | | |
| 2,576 | |
Other
assets | |
| 17,803 | | |
| 18,920 | |
Total
Assets | |
| 309,294 | | |
| 157,366 | |
| |
| | | |
| | |
Liabilities and Stockholders’
Equity (Impairment) | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable | |
| 257,949 | | |
| 253,347 | |
Accrued expenses | |
| 3,408,864 | | |
| 2,326,283 | |
Due to related parties | |
| 65,909 | | |
| 33,612 | |
Obligations to be settled
in stock | |
| 276,568 | | |
| 259,288 | |
Dividends payable | |
| 735,655 | | |
| 684,392 | |
Loans and notes payable
- other | |
| 100,000 | | |
| 140,000 | |
Loans and notes payable
– related parties | |
| 340,000 | | |
| 340,000 | |
Convertible notes payable-related
parties | |
| 11,193,700 | | |
| 9,918,699 | |
Current maturities of long-term
debt | |
| 33,529 | | |
| 33,529 | |
Liability
for derivative conversion feature –related parties | |
| 14,482,427 | | |
| 12,068,233 | |
Total Current Liabilities | |
|
30,894,601 | | |
| 26,017,383 | |
| |
| | | |
| | |
Stockholders’ Equity
(Impairment) | |
| | | |
| | |
Preferred Stock, $0.001 par value, non-voting, 3,000,000 shares authorized;
85,890 shares issued and outstanding | |
| 86 | | |
| 86 | |
Common Stock, $0.0001 par value, 1,400,000,000
shares authorized; | |
| | | |
| | |
issued and outstanding 683,693,060
and 683,693,060 shares respectively | |
| 68,367 | | |
| 68,367 | |
Additional paid-in capital | |
| 52,726,105 | | |
| 52,726,105 | |
Accumulated deficit | |
|
(83,379,865 | ) | |
| (78,654,575 | ) |
Total
Stockholders’ Equity (Impairment) | |
| (30,585,307 | ) | |
| (25,860,017 | ) |
Total
Liabilities and Equity (Impairment) | |
$ | 309,294 | | |
$ | 157,366 | |
The accompanying
notes are an integral part of the financial statements.
Kiwibox.Com,
Inc. and Subsidiary
Consolidated
Statements of Operations
| |
2014 | |
|
2013 |
Net Sales | |
| | | |
| | |
Advertising | |
$ | 52 | | |
$ | $833,296 | |
Advertising - affiliate | |
| 36,703 | | |
| | |
Other | |
| — | | |
| 100,923 | |
Total
Net Sales | |
| 36,755 | | |
| 934,219 | |
Cost of Goods Sold | |
| | | |
| | |
Website
hosting expenses | |
| 31,406 | | |
| 592,323 | |
Total Cost of Goods Sold | |
| 31,406 | | |
| 592,323 | |
Gross
Profit (Loss) | |
| 5,349 | | |
| 341,896 | |
| |
| | | |
| | |
Selling expenses | |
| 375,888 | | |
| 529,932 | |
Impairment-Goodwill | |
| — | | |
| 6,138,210 | |
Stock-based compensation
(see below) | |
| — | | |
| 7,750 | |
General
and administrative expenses | |
| 810,712 | | |
| 1,070,938 | |
Loss
From Operations | |
| (1,181,251 | ) | |
| (7,404,934) | |
Other
Income (Expense) | |
| | | |
| | |
Miscellaneous income | |
| 4,462 | | |
| 12,454 | |
Loss on foreign currency
exchange | |
| (2,393 | ) | |
| | |
Interest expense | |
| (1,080,651 | ) | |
| (992,131) | |
Interest expense-derivative
conversion features | |
| (2,444,269 | ) | |
| (2,307,402) | |
Loss on deconsolidation
of subsidiary | |
| — | | |
| (253,557) | |
Amortization of debt
discount | |
| — | | |
| (8,333) | |
Loss on extinguishment
of debt | |
| — | | |
| (29,310) | |
| |
| | | |
| | |
Change
in fair value – derivative liabilities | |
| 30,075 | | |
| 4,036,848 | |
Total
Other Income (Expense) | |
| (3,492,776 | ) | |
| 458,569
| |
Loss
Before Benefit (Provision) for Income Taxes | |
| (4,674,027 | ) | |
| (6,946,365) | |
Benefit
(Provision) for Income Taxes | |
| (-) | | |
| (7,167) | |
Net
Loss | |
$ | (4,674,027 | ) | |
$ | (6,953,532) | |
Dividends
on Preferred Shares | |
| (51,263 | ) | |
| (51,263) | |
Net
Loss Applicable to Common Shareholders, basic and diluted | |
$ | (4,725,290 | ) | |
$ | (7,004,795) | |
Net
Loss Per Common Share, basic and diluted | |
| (0.007 | ) | |
| (0.01)
| |
Weighted
Average of Common Shares Outstanding | |
| 683,693,060 | | |
| 680,961,142 | |
| |
| | | |
| | |
Comprehensive Income (Loss): | |
| | | |
| | |
Net Income (Loss) | |
$ | (4,674,027) | | |
$ | (6,953,532) | |
Foreign currency translation
adjustment | |
| - | | |
| (1,709) | |
OCI gains on deconsolidation of subsidiary | |
| - | | |
| 111,056 | |
Total Comprehensive Income (Loss) | |
$ | (4,674,027) | | |
$ | (6,844,185) | |
| |
| | | |
| | |
| |
| | | |
| | |
| |
| | | |
| | |
The
accompanying notes are an integral part of the financial statements
Kiwibox.Com,
Inc. and Subsidiary
Statement
of Stockholders’ Equity (Deficit)
Year
Ended December 31, 2013
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
Convertible Preferred
Shares | |
Cumulative Preferred
Shares | |
Common Stock | |
| |
| |
| |
|
| |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| | | |
| Additional
Paid in Capital | | |
| Accumulated
Deficit | | |
|
| |
| Accumulated
Other Comprehensive Income (Loss) | | |
Total Stockholders’ Equity
(Deficit) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
|
Balances, January 1, 2013 | |
| 85,890 | | |
$ | 86 | | |
| 1 | | |
$ | — | | |
| 679,393,060 | | |
| 63,937 | | |
| | | |
| 52,658,185 | | |
| (71,649,780 | ) | |
|
| |
| (109,347 | ) | |
(19,032,919) |
Shares
issued for services | |
| — | | |
| — | | |
| — | | |
| | | |
| 1,550,000 | | |
| 155 | | |
| | | |
| 7,595 | | |
| | | |
|
| |
| | | |
7,750 |
Settlements of obligation to be settled in stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,750,000 | | |
| 275 | | |
| | | |
| 60,325 | | |
| — | | |
|
| |
| | | |
60,600 |
Dividends
on conv. preferred stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| — | | |
| (51,263 | ) | |
|
| |
| | | |
(51,263) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | |
Net loss, year ended December 31, 2013 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (6,953,532 | ) | |
|
| |
| | | |
(6,953,532) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
111,056 |
Other
comprehensive income: OCI
gains on deconsolidation Foreign
currency translation loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| — | | |
| — | | |
|
| |
| 111,056 (1,709) | | |
(1,709) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | |
Balances, December 31,
2013 | |
| 85,890 | | |
$ | 86 | | |
| 1 | | |
$ | — | | |
| 683,693,060 | | |
$ | 68,367 | | |
| $ | | |
| 52,726,105 | | |
| (78,654,575 | ) | |
$ |
| |
| | | |
(25,860,017) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | |
The
accompanying notes are an integral part of the financial statements.
Kiwibox.Com,
Inc. and Subsidiary
Statement
of Stockholders’ Equity (Deficit)
Year
Ended December 31, 2014
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
Convertible Preferred
Shares | |
Cumulative Preferred
Shares | |
Common Stock | |
| |
| |
| |
|
| |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| | | |
Additional
Paid in Capital | | | |
| Accumulated
Deficit | | |
| |
| Comprehensive
Income (Loss) | | |
Total Stockholders’
Equity (Deficit) |
Balances, January 1, 2014 | |
| 85,890 | | |
$ | 86 | | |
| 1 | | |
$ | — | | |
| 683,693,060 | | |
| 68,367 | | |
| | | |
| 52,726,105 | | |
| (78,654,575 | ) | |
| |
| — | | |
(25,860,017) |
Dividends
on conv. preferred stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| — | | |
| (51,263 | ) | |
| |
| | | |
(51,263) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Net loss, year ended December 31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (4,674,027 | ) | |
| |
| | | |
(4,674,027) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Balances, December 31, 2014 | |
| 85,890 | | |
$ | 86 | | |
| 1 | | |
$ | — | | |
| 683,693,060 | | |
$ | 68,367 | | |
| $ | | |
| 52,726,105 | | |
| (83,379,865 | ) | |
$ | |
| | | |
(30,585,307) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
The
accompanying notes are an integral part of the financial statements.
Kiwibox.Com,
Inc. and Subsidiary
Statements
of Cash Flows
| |
Year
Ended December 31, |
| |
2014 | |
2013 |
Cash
Flows From Operating Activities | |
| | | |
| | |
Net
Loss | |
$ | (4,674,027 | ) | |
$ | (6,953,532 | ) |
Adjustments
to Reconcile Net Loss to Net Cash Used in Operations: | |
| | | |
| | |
Depreciation
and amortization | |
| 7,364 | | |
| 138,094 | |
Securities
issued for services | |
| — | | |
| 7,750 | |
Intrinsic
value of beneficial conversion feature | |
| 2,444,269 | | |
| 2,307,402 | |
Change
in fair value – conversion features | |
| (30,075 | ) | |
| (4,036,848 | ) |
Impairment
of goodwill | |
| — | | |
| 6,138,210 | |
Bad
debt expense | |
| — | | |
| 8,257 | |
Loss
on deconsolidation of subsidiary | |
| — | | |
| 253,557 | |
Loss
on extinguishment of debt | |
| — | | |
| 29,310 | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Accounts
receivable | |
| — | | |
| 27,058 | |
Accounts
receivable affiliates | |
| (28,146 | ) | |
| | |
Other
receivables | |
| 5,248 | | |
| (2,779 | ) |
Prepaid
expenses | |
| (106,907 | ) | |
| (27,913 | ) |
| |
| | | |
| | |
Bank
overdraft | |
| — | | |
| (176,103 | ) |
Obligations
to be settled in stock | |
| 17,280 | | |
| 19,920 | |
Accounts
payable | |
| 4,602 | | |
| 55,387 | |
Accrued
expenses | |
| 1,082,581 | | |
| 1,032,298 | |
Net
Cash Used by Operating Activities | |
| (1,277,811 | ) | |
| (1,179,932 | ) |
Cash
Flows From Investing Activities | |
| | | |
| | |
Advances
and deposits with affiliate | |
| (30,000 | ) | |
| (767,265 | ) |
Cash abandoned
upon deconsolidation of subsidiary | |
| — | | |
| (81,001 | ) |
Cash refund
(outlay) – other assets | |
| 1,117 | | |
| 899 | |
Purchases
of property and equipment | |
| (3,964 | ) | |
| (3,644 | ) |
Net
Cash Used by Investing Activities | |
| (32,847 | ) | |
| (851,011 | ) |
| |
| | | |
| | |
Cash Flows
From Financing Activities | |
| | | |
| | |
Proceeds
from loans payable | |
| — | | |
| 919,643 | |
Proceeds
from convertible notes payable | |
| 1,275,001 | | |
| 1,145,000 | |
Repayments
on convertible notes payable | |
| — | | |
| (90,000 | ) |
Net
proceeds from (repayments to) related parties | |
| 32,297 | | |
| 2,902 | |
Net
Cash Provided by Financing Activities | |
| 1,307,298 | | |
| 1,977,545 | |
| |
| | | |
| | |
| |
| | | |
| | |
Net
Increase (Decrease) in Cash | |
| (3,360 | ) | |
| (53,398 | ) |
Effect
of exchange rates on cash | |
| — | | |
| 306 | |
Cash
at beginning of period | |
| 3,659 | | |
| 56,751 | |
Cash at end of period | |
$ | 299 | | |
| 3,659 | |
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION | |
| | |
Interest
Paid | |
$ | 1,511 | | |
$ | 37,780 | |
| |
| | | |
| | |
| |
| | | |
| | |
| |
| | | |
| | |
The
accompanying notes are an integral part of the financial statements.
Kiwibox.Com,
Inc. and Subsidiary
Statements
of Cash Flows
Year
Ended December 31, 2014
NON-CASH
INVESTING AND FINANCING ACTIVITIES: | |
| | |
| |
| | |
Year Ended December 31, 2014 | |
| | |
| |
| | |
Year to date dividend accruals | |
$ | 51,263 | |
| |
| | |
Year Ended December 31, 2013 | |
| | |
| |
| | |
Settlement of obligations with common stock | |
$ | 60,600 | |
| |
| | |
Year to date dividend accruals | |
$ | 51,263 | |
| |
| | |
Settlement of bank debt with short term loan
| |
$ | 115,344 | |
The accompanying notes are an integral
part of the financial statements.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Organization
Kiwibox.Com,
Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc.
On November 18, 1998, the Company changed its name to Magnitude Information Systems, Inc. On December 31, 2009, the Company changed
its name to Kiwibox.com, Inc.
On
August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc.
The
Company, Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox Media, Inc.
being a wholly owned subsidiary. On December 31, 2009, the two subsidiaries, Magnitude, Inc. and Kiwibox Media, Inc. merged into
the Company.
On
September 30, 2011, Kiwibox.com acquired the German based social network Kwick!! Community GmbH & Co. KG, a wholly-owned subsidiary.
On
September 24, 2013, Kwick Community GmbH & Co. KG signed an equity purchase agreement to acquire Interscholtz Internet Services
GmbH and Co KG, a German limited liability company, and all the equity of its general partner, Interscholtz Beteiligungs GmbH.
As of the balance sheet date, and pursuant to the terms of the contract, since full payment was not made for the purchase price
of Interscholz Internet Services GmbH & Co KG, ownership does not transfer to Kwick Community GmbH & Co KG. Full payment
must be made for ownership to transfer to Kwick. As of December 31, 2013 only $515,037 of the total purchase price of $1,352,000
was made. On December 9, 2013 the acquisition of Intersholz Internet Services GmbH and Co KG by Kwick was rescinded due to non
compliance with the terms of the addendum to the contract, calling for the full purchase price to have been paid.. However, Kwick
did acquire all the equity of the general partner, Interscholz Beteiligungs GmbH, as full payment was not a requirement for transfer
of ownership of that entity.
On
December 10, 2013, the Company signed an Equity Purchase Agreement with Marcus Winkler to sell to him eighty (80%) percent of
the equity of its German subsidiary, KWICK! Community GmbH & Co. KG, a German limited liability company, and Kwick! Beteiligungs
GmbH, its general partner (collectively, “Kwick”). The sale was approved on December 18, 2013. Due to the fact that
the parent company ceased to have a controlling financial interest in Kwick, the subsidiary was deconsolidated from that date
forward.
Cash
and Cash Equivalents
The
Company accounts for cash and other highly liquid investments with original maturities of three months or less as cash and cash
equivalents.
Principles
of Consolidation
The
consolidated financial statements for the year ended December 31, 2013 include the accounts of Kiwibox.com, Inc. and the activities
of its former subsidiary, KWICK! Community GmbH & Co. KG (“Kwick”) through December 18, 2013 (the date of deconsolidation
of the subsidiary). Any significant inter-company balances and transactions were eliminated prior to deconsolidation.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation
and Amortization
Property
and equipment are recorded at cost. Depreciation on equipment, furniture and fixtures and leasehold improvements is computed on
the straight-line method over the estimated useful lives of such assets between 3-10 years, or lease term for leasehold improvements,
if for a shorter period. Maintenance and repairs are charged to operations as incurred. Software costs are amortized using the
straight line method and amortized over their estimated useful lives. Amortization begins when the related software is ready for
its intended use in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, Subsequent
Measurement.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Foreign
Currency Translation
Assets
and liabilities of foreign operations are translated into U.S. dollars at the rates of exchange in effect at the balance sheet
date. Income and expense items are translated at the weighted average exchange rates prevailing during each period presented.
Gains and losses resulting from foreign currency transactions are included in the results of operations. Gains and losses resulting
from translation of financial statements of our foreign subsidiary operating in a non-hyperinflationary economy are recorded as
a component of accumulated other comprehensive loss until either sale or upon complete or substantially complete liquidation by
the Company of its investment in the foreign entity. The accumulated gain or (loss) on foreign currency translation adjustment
was eliminated on December 18, 2013 due to the deconsolidation of the Company’s foreign
subsidiary.
Advertising
Costs
Advertising
costs are charged to operations when incurred. Advertising expense was $4,698 and
$82,727
for the years ended December 31, 2014 and 2013, respectively. Revenue and expense from advertising barter transactions was $41,876
for the twelve months ended December 31, 2013.
Evaluation
of Long Lived Assets
Long-lived
assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets,
their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated
undiscounted future net cash flows of the related long-lived asset.
Any
impairment of the Company’s internally-developed software is recognized and measured in accordance with the provisions of
ASC 360-10-35, Intangibles-Goodwill and Other, Internal-Use Software, Subsequent Measurement, which requires that assets
be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs
related to computer software being developed or currently in use indicating that the carrying amount may not be recoverable:
a. Internal-use
computer software is not expected to provide substantive service potential.
b. A
significant change occurs in the extent or manner in which the software is used or is expected to be used.
c. A
significant change is made or will be made to the software program.
d. Costs
of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify
the software.
Fair
Value Measurements
The
Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which is effective for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal years. Under ASC 820, a framework was established for
measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.
The Company accounted for certain convertible debentures modified in the years ended December 31, 2013 and 2012 as derivative
liabilities required to be bifurcated from the host contract in accordance with ASC 815-40, Contracts in Entity’s Own
Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued
interest being converted to a variable number of the Company’s common shares (see Note 13).
Securities
Issued for Services
The
Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair
value method. For non-employees, the fair market value of the Company’s stock on the date of stock issuance or option/grant
is used. The Company has determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model.
The Company has adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting
for equity instruments exchanged for employee services. Under the provisions of ASC 718, share-based compensation cost is measured
at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service
period (generally the vesting period of the equity grant).
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Reclassification
of Certain Securities Under ASC 815-15
Pursuant
to ASC 815-15, “Contracts in Entity’s own Equity”, if a company has more than one contract subject to this Issue,
and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions
of contracts, should be reclassified. The Company's method for reclassification of such contracts is reclassification of contracts
with the latest maturity date first.
Capitalization
of Software /Website Development Costs
The
Company capitalizes outside-contracted development work in accordance with the guidelines published under ASC 350-50, “Website
Development Costs”. Under ASC 350-50, costs incurred during the planning stage are expensed, while costs relating to software
used to operate a web site or for developing initial graphics should be accounted for under ASC 350-50, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, unless a plan exists or is being developed to market the
software externally. Under ASC 350-50, internal and external costs incurred to develop internal-use computer software during the
application development stage should be capitalized. Costs to develop or obtain software that allows for access or conversion
of old data by new systems should also be capitalized, excluding training costs.
Fees
incurred for web site hosting, which involve the payment of a specified, periodic fee to an Internet service provider in return
for hosting the web site on its server(s) connected to the Internet, are expensed over the period of benefit, and included in
cost of sales in the accompanying financial statements.
No
costs were capitalized for web-site development work during the years ended December 31, 2014 and 2013.
Income
Taxes
The
Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected
to be settled in the Company’s income tax return. Certain items of revenue and expense are reported for Federal income tax
purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes
are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses
for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income
taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Net
Loss Per Share
Net
loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss
by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been
included in this computation since the effect would be anti-dilutive. Such common stock equivalents totaled 90,753,240 common
shares at December 31, 2014, comprised of 12,750,000 shares issuable upon exercise of stock purchase warrants, 4,500,000 shares
issuable upon exercise of stock options, 729,537 shares exercisable upon conversion of convertible preferred shares, and 72,773,703
shares potentially issuable upon conversion of convertible debt. Such debt and the related accrued interest, is presently convertible
at the option of four holders at a conversion price of 50% of the ten day trailing market price. The total principal due under
these notes of $11,193,700 would yield in excess of 15.5 billion shares if fully converted, however, the respective notes, all
of which were issued to these four investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion,
may in the aggregate not exceed a number that would increase the total share holdings beneficially owned by such investor to a
level above 9.99%. At the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the
aforementioned conversions or exercises, as the case may be, are at the option of the holders.
Revenue
Recognition
The
Company’s revenue is derived from advertising on the Kiwibox.com website. Most contracts require the Company to deliver
the customer impressions, click-throughs or new customers, or some combination thereof. Accordingly, advertising revenue is estimated
and recognized for the period in which customer impressions, click through or new customers are delivered. Licensing or hosting
revenue consists of an annual contract with clients to provide web-site hosting and assistance.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2.
GOING CONCERN
The
ability of the Company to continue its operations is dependent on increasing sales and obtaining additional capital and financing.
Our revenues during the foreseeable future are insufficient to finance our business and we are entirely dependent on the willingness
of existing investors to continue supporting the Company with working capital loans and equity investments, and our ability to
find new investors should the financial support from existing investors prove to be insufficient. If we were unable to obtain
a steady flow of new debt or equity-based working capital we would be forced to cease operations. In their report for the fiscal
year ended December 31, 2014, our auditors have expressed an opinion that, as a result of the losses incurred, there is substantial
doubt regarding our ability to continue as a going concern. The accompanying financial statements do not include any adjustments
that might be necessary if the Company were unable to continue as a going concern. Management’s plans are to continue seeking
equity and debt capital until cash flow from operations cover funding needs.
3.
CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The
Company maintains cash balances in a financial institution which is insured by the Federal Deposit Insurance Corporation up to
$250,000. Balances in these accounts may, at times, exceed the federally insured limits. At December 31, 2014, cash balances in
bank accounts did not exceed this limit. The Company provides credit in the normal course of business to customers located throughout
the U.S. and overseas. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful
accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.
4.
PREPAID EXPENSES
Prepaid
expenses consist of the following at:
| |
December 31, 2014 | |
December 31, 2013 |
Rent | |
$ | — | | |
$ | — | |
Business insurance | |
| 8,075 | | |
| 10,620 | |
Consulting | |
| 220,000 | | |
| 110,000 | |
Other | |
| — | | |
| 548 | |
| |
| 228,075 | | |
| 121,168 | |
5.
PROPERTY AND EQUIPMENT
Property
and equipment consist of the following at:
| |
| December
31, 2014 | | |
| December
31, 2013 | |
Furniture | |
$ | 14,322 | | |
$ | 14,322 | |
Leasehold
Improvements | |
| 24,130 | | |
| 24,130 | |
Office
Equipment | |
| 77,102 | | |
| 73,138 | |
| |
| 115,554 | | |
| 111,590 | |
Less
accumulated depreciation | |
| 110,583 | | |
| 105,795 | |
Total | |
$ | 4,971 | | |
$ | 5,795 | |
Depreciation
expense charged to operations was $4,788 and $65,567 for the years ended December 31, 2014
and
2013, respectively.
6.
INTANGIBLE ASSETS
Intangible
assets consisted of software for website development costs is as follows:
| |
| December
31, 2014 | | |
| December
31, 2013 | |
Website
development costs | |
$ | 254,264 | | |
$ | 254,264 | |
Less
accumulated amortization | |
| 254,264 | | |
| 251,688 | |
Total | |
$ | 0 | | |
$ | 2,576 | |
Amortization
expense for the years ended December 31, 2014 and 2013 was $2,576 and $64,194, respectively.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
7.
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
On
December 10, 2013, the company signed an equity purchase agreement with Marcus Winkler to sell to him eighty (80%) percent of
the equity of its German subsidiary, Kwick. Pursuant to the terms of the agreement, the purchaser paid 36,000 Euros as the purchase
price and the company was required to obtain shareholder approval of the sale as required under applicable Delaware Law. The majority
shareholder approval was obtained on December 18, 2013. In addition, the Company and Mr. Winkler signed a Lock-Up and Standstill
Agreement pursuant to the general terms of which the Company agreed not to participate in the management, operations or finances
of Kwick, which shall be exclusively managed and under control of the purchaser. Accordingly, the Company’s minority ownership
position shall be subject, in all respects, to the exclusive control of the purchaser. Mr. Winkler also has investment and voting
control over Kreuzfeld Ltd., a major creditor of the company, which holds a Class AA convertible promissory note with an outstanding
balance (including accrued interest) of $4,696,785 as of December 31, 2014.
Due
to the significant reduction in the Company’s percentage of controlling interest in Kwick (down
to
20%), coupled with the contract restrictions over voting rights and management of the operations of Kwick subsequent to December
18, 2013, the Company recognized the deconsolidation of Kwick as of that date, resulting in a loss on deconsolidation of $253,557,
and now carries the investment in Kwick under the cost method of accounting. Due to the significant reductions in fair value of
this reporting unit that are considered other than temporary, and impairment of the related goodwill, the carrying value of this
cost method investment was zero at December 31, 2013 and 2014.
8.
ACCRUED EXPENSES
Accrued
expenses consisted of the following at:
| |
December 31, 2014 | |
December 31, 2013 |
Accrued
interest | |
$ | 3,237,414 | | |
$ | 2,158,274 | |
Accrued
payroll, payroll taxes and commissions | |
| 26,619 | | |
| 18,585 | |
Accrued
professional fees | |
| 111,900 | | |
| 116,900 | |
Accrued
rent / deferred rental obligation | |
| 12,196 | | |
| 11,789 | |
Miscellaneous
accruals | |
| 20,735 | | |
| 20,735 | |
Total | |
$ | 3,408,864 | | |
$ | 2,326,283 | |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
9.
OBLIGATIONS TO BE SETTLED IN STOCK
Obligations
to be settled in stock consisted of the following at
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Obligation for warrants granted for compensation | |
$ | 100,000 | | |
$ | 100,000 | |
| |
| | | |
| | |
600,000 common shares issuable to a consultant who
was a director of the company, for services rendered. | |
| 36,000 | | |
| 36,000 | |
| |
| | | |
| | |
1,200,000 (2014) and 0 (2013) common shares, and
2,900,000 (2014) and 2,900,000 (2013) stock options issuable to two officers of the Company pursuant to their respective employment
Agreements | |
| 62,258 | | |
| 56,858 | |
| |
| | | |
| | |
6,600,000 (2014) and 5,400,000 (2013) stock options issuable
to one director who also serves as the Company’s general counsel | |
| 68,310
| | |
| 56,430
| |
| |
| | | |
| | |
1,000,000 warrants granted on the Pixunity.de asset Purchase | |
| 10,000 | | |
| 10,000 | |
| |
| | | |
| | |
| |
$ |
276,568 | | |
$ | 259,288 | |
10.
LOANS PAYABLE
The
Company (Formerly Magnitude, Inc.) had borrowings under short term loan agreements with the following terms and conditions at
December 31, 2010 and 2009:
On
December 4, 1996, The company (Formerly Magnitude, Inc.) repurchased 500,000 shares of
its common stock and retired same against issuance of a promissory note maturing twelve
months thereafter accruing interest at 5% per annum and due December 4, 1998. This note
is overdue as of September 30, 2005 and no demand for payment has been made. | |
$ | 75,000 | |
Total | |
$ | 75,000 | |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
11.
NOTES PAYABLE
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Balance of non-converted notes outstanding.
Attempts to locate the holder of this note, to settle this liability, have been unsuccessful. | |
$ | 25,000 | | |
$ | 25,000 | |
| |
| | | |
| | |
From September 2008 through December 2014 five
creditors loaned the Company funds under the terms of the convertible notes issued, as modified in March 2009 and July 2010
and April 2011 and August 2012 (see Note 13). | |
| 11,193,700
| | |
| 9,918,699
| |
| |
| | | |
| | |
In January 2011 and again in
February 2011, a shareholder loaned the Company $50,000 under a demand note at 10%. In 2010, this shareholder
loaned the Company $240,000 under a demand note at 10%. | |
| 340,000 | | |
| 340,000 | |
| |
| | | |
| | |
Total | |
$ | 11,558,700 | | |
$ | 10,283,699 | |
12.
LONG-TERM DEBT
Long-term
debt as of December 31, 2014 and 2013 is comprised of the following:
Discounted
present value of a non-interest bearing $70,000 settlement with a former investor of
Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997. The
imputed interest rate used to discount the note is 8% per annum. This obligation is in
default. | |
$ | 33,529 | |
Total | |
| 33,529 | |
Less
current maturities | |
| 33,529 | |
Long-term
debt, net of current maturities | |
$ | — | |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
13.
DERIVATIVE CONVERSION FEATURES
On
July 27, 2010, the Company issued two Class A Senior Convertible Revolving Promissory Notes (“Class A Notes”), one
to Cambridge Services, Inc., in the principal amount of $683,996, consolidating the series of loans (and related accrued interest)
made to the Company since June 26, 2009, and one to Discover Advisory Company, in the principal amount of $1,160,984, consolidating
the series of loans (and related accrued interest) made to the Company since September 19, 2008 and including advances through
September 30, 2010. Each of these promissory notes are due on demand, accrue interest at the rate of 10%, per annum, are convertible
(including accrued interest) at the option of each lender into Common Stock of the Company at 50% of the averaged ten closing
prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event
less than $0.001 (the "Conversion Price"). Both promissory notes contain conversion caps, limiting conversions under
these notes to a maximum beneficial ownership position of Company common stock to 9.99% for each lender. Each of these notes contains
Company covenants, requiring the lenders’ prior written consent in order for the Company to merge, issue any common or preferred
stock or any convertible debt instruments, declare a stock split or dividends, increase any compensation to its officers or directors
by more than five (5%) during any calendar year. During the years ended December 31, 2014 and 2013, there were no note conversions.
The
Company renegotiated certain outstanding promissory notes with its four major creditors, Discover Advisory Company of the Bahamas
(“DAC”), Kreuzfeld Ltd. of Switzerland (“Kreuzfeld”), Cambridge Services, Inc. of Panama (“CSI”)
and Vermoegensverwaltungs-Gesellschaft Zurich LTD of Switzerland (“VGZ”). As of August 1, 2012, the Company authorized
the issue of a new series of corporate notes, the Class AA Senior Secured Convertible Revolving Promissory Notes, dated as of
August 1, 2012 (the New Note(s)”) and issued New Notes: (1) to DAC, with a maximum credit facility of $5,000,000 which replaced
the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated July 27, 2010, in the original principal
amount of $1,080,984, now cancelled, which has an outstanding balance due (including accrued interest) of $4,764,109 as of December
31, 2014; (2) to Kreuzfeld, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class
A Senior Convertible Revolving Promissory Note, dated September 16, 2011, in the original principal amount of $2,000,000, now
cancelled, which has an outstanding balance due (including accrued interest) of $4,696,785 as of December 31, 2014; (3) to CSI,
with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving
Promissory Note, dated August 1, 2011, in the original principal amount of $1,303,996, now cancelled, with an outstanding balance
due (including accrued interest) of $3,730,580 as of December 31, 2014, and; (4) to VGZ, with a maximum credit facility of $2,000,000
which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 30, 2010,
in the original principal amount of $2,000,000, now cancelled, with an outstanding balance due (including accrued interest) of
$1,032,355 as of December 31, 2014. All of the New Notes accrue interest at the rate of 10%, are convertible into common shares
at the conversion rate equal to 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading
days immediately preceding the Conversion Date but in no event less than $0.001, and are due on demand.. Pursuant to an Equity
and Stock Pledge Agreement, also negotiated and executed as of August 1, 2012, the repayment of the outstanding indebtedness of
the New Notes is secured by all of the limited partnership interests of the Company’s partly-owned (now deconsolidated)
German subsidiary, KWICK! Community GmbH & Co. KG, a private German limited partnership (“KG”), and all of its
shares of the sole general partner of KG, KWICK! Community Beteiligungs GmbH.
On
February 28, 2012 the Company signed a convertible note with Michael Pisani. This is a 1 year note that was convertible at $0.025
per share in the amount of $50,000. In the event that any portion of any outstanding Company promissory note, preferred share,
warrant or stock option held of record by a non-affiliate of the Company is converted, exercised or exchanged for common shares
of the Company at a conversion price or conversion rate less than $0.025 per one (1) common share anytime any part of the outstanding
principal amount of this note is outstanding, the conversion rate of this note shall automatically be adjusted to such
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
13.
DERIVATIVE CONVERSION FEATURES (continued)
lower
conversion rate. The Company evaluated this conversion contingency under the guidance at ASC 815-40-15 and determined that this
conversion feature should be bifurcated from the host contract and measures at fair value. The Company valued this conversion
feature utilizing a Black-Scholes valuation model and a probability analysis with regard to the reset provision of the conversion
price. The Company determined the initial value to be $55,241, with $50,000 recorded as a debt discount and the remainder as interest
expense-derivative conversion features. The discount is being amortized over the life of the note. A total of $8,333 in amortization
expense was recorded during the twelve months ended December 31, 2013. As of December 31, 2013 this debt plus accrued interest
was paid in full.
The
Company accounted for the conversion features underlying these convertible debentures in accordance with ASC 815-40, Contract
in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal
and related accrued interest being converted to a variable number of the Company’s common shares. The Company determined
the value of the derivate conversion features of the new advances under these debentures under these terms at the relevant commitment
dates to be $2,444,269 utilizing a Black-Scholes valuation model. The fair value of the derivative conversion features was determined
to be $14,482,427 at December 31, 2014. The change in fair value of the liability for the conversion feature resulted in income
of $30,075 for the year ended December 31, 2014, which is included in Other Income (Expense) in the accompanying financial statements.
14.
COMMITMENTS AND CONTINGENCIES
We
maintain offices for our operations at 330 W. 42th Street, New York, New York 10036, for approximately 990 square feet. This lease
requires initial minimum monthly rentals of $3,833 plus tenants’ share of utility/cam/property tax charges which average
approximately $291 per month. During 2013 the Company successfully negotiated a 5 year lease, with future minimum rentals as follows:
2015
$47,854
2016
49,289
2017
50,768
2018
47,847
In
May 2010 the Company negotiated a lease of an apartment in New York City for the CEO in order to reduce travel costs. The lease
was for 12 months at $2,775 per month through May 31, 2011. In May 2011 the lease was extended through August 31, 2011 at the
rate of $2,837. In August 2011 the lease was extended through December 31, 2011 at the rate of $2,837 per month. In December 2011
the lease was again extended through May 31, 2012 with no change in the base rent. In May 2012 the lease was extended through
December 31, 2012 at a monthly rate of $2,943, this lease was then extended through December 31, 2013 at the same terms. In December
2013 the lease was extended through May 31, 2014. This lease was again extended to May 31, 2015 in May of 2014.
Kwick!
has operating leases related to office space in Weinstadt, Germany along with vehicle leases. The office lease is renewable quarterly
at a rate of $2,000 per month plus utilities. Kwick also has a vehicle lease which will be terminated January 31, 2014 at a rate
of $1,077 per month. Kwick has a sublease arrangement with Jaumo GmBh a related party (see Note 15). Kwick’s operating leases
relate to leases of land and vehicles with lease terms of between 3 and 5 years. All operating lease contracts over 5 years contain
clauses for yearly market rental reviews. The Company does not have an option to purchase the leased office at the expiration
of the lease period. These commitments were only in effect through December 18, 2013.
Our
total rent expenses were $83,129 and $113,364 during the year ended December 31, 2014 and 2013, respectively.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
14.
COMMITMENTS AND CONTINGENCIES (continued)
During
the third quarter of 2010 the Chief Technology Officer took over the position of Chief Executive Officer with no changes to the
above terms, running through July 30, 2011. On October 6, 2010, the terms of the consulting agreement were modified. The new terms
called for a reduced monthly consulting fee of $16,667, and for $100,000 to be prepaid on January 1, 2011 thru June 30, 2011.
During the fourth quarter of 2011 this agreement was extended through December 31, 2012. During the fourth quarter of 2012 this
agreement was again extended through December 31, 2013 with the same prepayment provision. During the fourth quarter of 2013 the
terms of this agreement were modified. The new terms called for an increased monthly consulting fee to $18,333 effective January
1, 2014 through December 31, 2014. During the fourth quarter of 2014 the terms of this agreement were modified. The new terms
have the same monthly consulting fee as 2013, $18,333 a month, however; the prepayment provision called for the entire amount
payable in advance and as soon as practicable following the execution and delivery of this restated agreement. Payment for the
period January 1, 2015 through December 31, 2015 was made on November 20, 2014 in accordance with the terms of this new agreement.
There were no changes to the stock compensation portion of any earlier agreement.
In
the year ended December 31, 2014 and December 31, 2013 this officer was granted 1,200,000 shares.
15.
FAIR VALUE
Some
of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that
approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables.
Effective
July 1 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain
financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. This guidance supersedes all other accounting pronouncements that
require or permit fair value measurements. The Company accounted for the conversion features underlying certain convertible debentures
in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible
debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s
common shares.
Effective
July 1 2009, the Company adopted ASC 820-10-55-23A, Scope Application to Certain Non-Financial Assets and Certain Non-Financial
Liabilities, delaying application for non-financial assets and non-financial liabilities as permitted. ASC 820 establishes
a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1 — quoted
prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of
the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange- traded securities and
exchange-based derivatives.
Level 2 — inputs
other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable
through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income
securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3 — unobservable
inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement
date. Financial assets and liabilities utilizing Level 3
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
15.
FAIR VALUE (continued)
inputs
include infrequently- traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value
pricing models. The company values the conversion liabilities using the Black-Scholes model and the assumptions are updated using
independent data such as the risk free rate, volatility and expected life for each valuation date based on changes over time.
For
2013, the fair value of the embedded conversion liabilities was determined using the Black-Scholes model calculating fair value
based on the conversion discount as well as the term and short-term bond rate. During the year ended December 31, 2014 the following
assumptions were used: (1) conversion discounts of 50%; (2) a look back period of 10 days (3) bond rates of 0.01% to 0.10% and
(4) volatility range of 174% to 936%.
For
2014, the fair value of the embedded conversion liabilities was determined using the Black-Scholes model calculating fair value
based on the conversion discount as well as the term and short-term bond rate. During the year ended December 31, 2014 the following
assumptions were used: (1) conversion discounts of 50%; (2) a look back period of 10 days (3) bond rates of 0.01% to 0.04% and
(4) volatility range of 67% to 883%.
Fluctuation
in value is largely based on the change in the daily share price accompanied by the conversion discount. The change in volatility
has the greater affect on the conversion liability during each reporting period, as higher volatility levels will yield larger
values.
The
following table reconciles, for the years ended December 31, 2013 and 2014, the beginning
and
ending
balances for financial instruments that are recognized at fair value in the consolidated financial
statements: |
Conversion
Liability at January 1, 2013 | |
$ | 13,797,679 | |
Value of beneficial conversion features of new debentures | |
| 2,307,402 | |
Change in value of beneficial conversion features during
period | |
| (4,036,848) | |
Conversion Liability at December 31,2013 | |
| 12,068,233 | |
| |
| | |
Value of beneficial conversion features of new debentures | |
| 2,444,269 | |
Change in value of beneficial conversion features during
period | |
| (30,075) | |
Conversion Liability at December 31, 2014 | |
$ | 14,482,427 | |
The
fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for
the calculated value. The Company recognizes interest expense for the recognition of the conversion liability.
16.
PREFERRED STOCK
Preferred
stock is non-voting, $.001 par value per share with 3,000,000 shares authorized.
Cumulative
Preferred Stock has 2,500 shares designated of which 1 share is issued and outstanding. The total Cumulative Preferred Stock at
December 31, 2006 is $0 with a liquidation price of $100,000. As of December 31, 2014, there was $9,000 of cumulative preferred
dividends in arrears representing $9,000 per cumulative preferred share.
Series
A of the Senior Convertible Preferred Stock series which was issued in 2000 has 300,000 shares designated, 22,000 shares issued
and outstanding. The total outstanding Series A Senior Convertible Preferred Stock at December 31, 2014 is $22 with a liquidation
price of $120,000. The following is a description of the Series A convertible preferred stock:
| (1) | The
holders of said shares of Series A Senior Preferred shall be entitled to receive
cumulative dividends at the rate of seven percent (7%) per annum during the first annual
period after issuance, increasing by increments of one half of one percent for every
year thereafter until the rate reaches ten percent (10%) per annum at which time it will
remain at 10% payable semi-annually when declared by the Board of Directors, before any
dividend shall be declared, set apart for, or paid upon the Common Stock of the Company.
The Dividend Rate shall accrue on the Liquidation Price of each share of the Series A
Senior Preferred. The dividends on the Series A Senior Preferred, payable in cash, shall
be cumulative, so that if the Company fails in any fiscal year to pay such dividends
on all the issued and outstanding Series A Senior Preferred, such deficiency in the dividends
shall be fully paid, but without interest, before any dividends shall be paid on or set
apart for the Cumulative Preferred Stock or the Common Stock. |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to Financial Statements
16.
PREFERRED STOCK (continued)
| (2) | The
Series A Senior Preferred shall with respect to dividend rights and liquidation rights
rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock,
and on a par with the Series B, C and D Senior Convertible Preferred Stock. |
| (3) | In
the event of any liquidation, of the Company, whether voluntary or otherwise, after payment
or provision for payment of the debts and other liabilities of the Company, the holders
of the Series A Senior Preferred shall be entitled to receive, out of the remaining net
assets of the Company, the amount of Five ($5.00) dollars for each share of Series A
Senior Preferred (the "Liquidation Price") held of record by such holder, payable
in cash or in shares of stock, securities or other consideration, the value of which
stock, securities or other consideration shall be fixed by the Board of Directors, plus
the amount of all dividends in arrears on each such share up to the date fixed for distribution,
provided, however, that such remaining net assets are sufficient to cover all the before
mentioned payments and also like payments to holders of Series B and C Senior Preferred,
before any distribution shall be made to the holders of Common Stock or Cumulative Preferred
Stock of the Company. In case such remaining net assets are insufficient to cover all
such payments to holders of Series A, B, C and D Senior Preferred, the holders of these
series shall receive payments on a pro rata basis. |
| (4) | The
Company shall have the right to redeem pro rata any or all of its Series A Senior Preferred
issued and outstanding at any time, with the Board of Directors of the Company in its
sole discretion deciding how many shares to redeem, provided, however, that any such
shares called for redemption have been issued and outstanding for a minimum of three
(3) years at the time of notice of redemption to the holders of such shares, by paying
to the holders thereof the Liquidation Price for each share of Series A Senior Preferred
held by such holder plus a "call premium" of 15% of the Liquidation Price,
together with the amount of any accrued and unpaid dividends as may have accumulated
thereon at the time of redemption (the "Redemption Price"). |
| (5) | Each
share of Series A Senior Preferred shall be convertible at any time prior to the Redemption
Date, at the holder’s option, into such number (the "Conversion Ratio")
of shares of the Common Stock of the Company as arrived at by dividing the Liquidation
Price by one hundred fifty (150) percent of the market price of the Common Stock of the
Corporation ("Market Price") on the earlier of the dates such share of Series
A Senior Preferred is subscribed for or issued (the "Effective Date"). |
As
of December 31, 2014 there were $154,664 Series A Senior Convertible Preferred share dividends accrued and unpaid representing
$6.53 per share.
Series
B of the Senior Convertible Preferred Stock series which was issued in 2000 has 350,000 shares designated, no shares issued and
outstanding. The total outstanding Series B Senior Convertible Preferred Stock at December 31, 2014 is $0. The following is a
description of the Series B Senior Convertible Stock:
| (1) | The
holders of said shares of Series B Senior Preferred shall be entitled to receive cumulative
dividends thereon at the rate of seven percent (7%) per annum, payable semi-annually
when declared by the Board of Directors, before any dividend shall be declared, set apart
for, or paid upon the Common Stock of the Company. The Dividend Rate shall accrue on
the Liquidation Price of each share of the Series B Senior Preferred. The dividends on
the Series B Senior Preferred, payable in cash, shall be cumulative, so that if the Company
fails in any fiscal year to pay such dividends on all the issued and outstanding Series
B Senior Preferred, such deficiency in the dividends shall be fully paid, but without
interest, before any dividends shall be paid on or set apart for the Cumulative Preferred
Stock or the Common Stock. |
| (2) | The
Series B Senior Preferred shall, with respect to dividend rights and liquidation rights,
rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock,
and on a par with the Series A, C and D Senior Convertible Preferred Stock. |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
| (3) | In
the event of any liquidation of the Company, whether voluntary or otherwise, after payment
or providing for payment of the debts and other liabilities of the Company, the holders
of the Series B Senior Preferred shall be entitled to receive, out of the remaining net
assets of the Company, the amount of nine ($9.00) dollars for each share of Series B
Senior Preferred (the "Liquidation Price") held of record by such holder, payable
in cash or in shares of stock, securities or other consideration, the value of which
stock, securities or other consideration shall be fixed by the Board of Directors, plus
the amount of all dividends in arrears on each such share up to the date fixed for distribution,
provided however, that such remaining net assets are sufficient to cover all the before
mentioned payments and also like payments to holders of Series A and C Senior Preferred,
before any distribution shall be made to the holders of Common Stock or Cumulative Preferred
Stock of the Company. In case such remaining net assets are insufficient to cover all
such payments to holders of Series A, B, C and D Senior Preferred, the holders of these
series shall receive payments on a pro rata basis. |
| (4) | The
Company shall have the right to redeem pro rata any or all of its Series B Senior Preferred
issued and outstanding at any time, with the Board of Directors of the Company in its
sole discretion deciding how many shares to redeem, provided, however, that any such
shares called for redemption have been issued and outstanding for a minimum of three
(3) years at the time of notice of redemption of the holders of such shares, by paying
to the holders thereof the Liquidation Price for each share of Series B Senior Preferred
held by such holder plus a "call premium" of 10% of the Liquidation Price,
together with the amount of any accrued and unpaid dividends as may have accumulated
thereon at the time of redemption (the "Redemption Price"). |
| (5) | Each
share of Series B Senior Preferred shall be convertible at any time prior to the Redemption
Date, at the holder’s option, into shares of Common Stock of the Company on the
basis of ten (10) shares of Common Stock for 1 share of Series B Senior Preferred. |
As
of December 31, 2014 there were no Series B Senior Convertible Preferred share dividends accrued and unpaid.
Series
C of the Senior Convertible Preferred Stock series which was issued in 2000 has 120,000 shares designated. There were no shares
of Series C Senior Convertible Preferred Stock outstanding at December 31, 2014. The following is a description of the Series
C Senior Convertible Stock:
| (1) | The
holders of said shares of Series C Senior Preferred shall be entitled to receive cumulative
dividends thereon at the rate of seven percent (7%) per annum, payable monthly, before
any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company.
The Dividend Rate shall accrue on the Liquidation Price (as hereinafter defined) of each
share of the Series C Senior Preferred. The dividends on the Series C Senior Preferred,
payable in cash, shall be cumulative, so that if the Company fails in any fiscal year
to pay such dividends on all the issued and outstanding Series C Senior Preferred, such
deficiency in the dividends shall be fully paid, but without interest, before any dividends
shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock. |
| (2) | The
Series C Senior Preferred shall with respect to dividend rights and liquidation rights
rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock,
and on a par with the Series A, B and D Senior Convertible Preferred Stock. |
(3)
In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or provision for payment of the
debts and other liabilities of the Company, the holders of the Series C Senior Preferred shall be entitled to receive, out of
the remaining net assets of the Company, the amount of nine ($9.00) dollars for each share of Series C Senior Preferred (the "Liquidation
Price") held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value
of which stock, securities or other consideration shall be fixed by the Board of Directors,
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
plus
the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such
remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A and
B Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the
Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior
Preferred, the holders of these series shall receive payments on a pro rata basis.
| (4) | The
Company shall have the right to redeem pro rata any or all of its Series C Senior Preferred
issued and outstanding at any time, with the Board of Directors of the Company in its
sole discretion deciding how many shares to redeem, provided, however, that any such
shares called for redemption have been issued and outstanding for a minimum of three
(3) years at the time of notice of redemption to the holders of such shares, by paying
to the holders thereof the Liquidation Price for each share of Series C Senior Preferred
held by such holder plus a "call premium" of 10% of the Liquidation Price together
with the amount of any accrued and unpaid dividends as may have accumulated thereon at
the time of redemption (the "Redemption Price"). |
| (5) | Each
share of Series C Senior Preferred shall be convertible at any time prior to the Redemption
Date, at the holder’s option, into shares of Common Stock of the Company on the
basis of ten (10) shares of Common Stock for 1 share of Series C Senior Preferred. |
As
of December 31, 2014 there were no Series C Senior Convertible Preferred share dividends accrued and unpaid.
Series
D of the Senior Convertible Preferred Stock series which was issued in 2000 has 500,000 shares designated, 63,890 shares issued
and outstanding. The total outstanding Series D Senior Convertible Preferred Stock at December 31, 2014 is $64 with a liquidation
price of $575,010. The following is a description of the Series D Senior Convertible Stock:
| (1) | The
holders of said shares of Series D Senior Preferred shall be entitled to receive cumulative
dividends thereon at the rate of seven percent (7%) per annum, payable semi-annually
when declared by the Board of Directors before any dividend shall be declared, set apart
for, or paid upon the Common Stock of the Company. The Dividend Rate shall accrue on
the Stated Value (the "Stated Value"), which Stated Value shall be noted on
the certificate issued to the holder, of each share of the Series D Senior Preferred.
The dividends on the Series D Senior Preferred, payable in cash, shall be cumulative,
so that if the Company fails in any fiscal year to pay such dividends on all the issued
and outstanding Series D Senior Preferred, such deficiency in the dividends shall be
fully paid, but without interest, before any dividends shall be paid on or set apart
for the Cumulative Preferred Stock or the Common Stock. |
| (2) | The
Series D Senior Preferred shall with respect to dividend rights and liquidation rights
rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock,
and on a par with the Series A, B and C Senior Convertible Preferred Stock. |
| (3) | In
the event of any liquidation of the Company, whether voluntary or otherwise, after payment
or provision for payment of the debts and other liabilities of the Company, the holders
of the Series D Senior Preferred shall be entitled to receive, out of the remaining net
assets of the Company, an amount equal to the Stated Value of each share of Series D
Senior Preferred held of record by such holder, payable in cash or in shares of stock,
securities or other consideration, the value of which stock, securities or other consideration
shall be fixed by the Board of Directors, plus the amount of all dividends in arrears
on each such share up to the date fixed for distribution, provided, however, that such
remaining net assets are sufficient to cover all the before mentioned payments and also
like payments to holders of Series A, B and C Senior Preferred, before any distribution
shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.
In case such remaining net assets are insufficient to cover all such payments to holders
of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments
on a pro rata basis. |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
| (4) | The
Company shall have the right to redeem pro rata any or all of its Series D Senior Preferred
issued and outstanding at anytime, with the Board of Directors of the Company in its
sole discretion deciding how many shares to redeem, provided, however, that any such
shares called for redemption have been outstanding for a minimum of three (3) years at
the time of notice of redemption to the holders of such shares, by paying to the holders
thereof the Stated Value for each share of Series D Senior Preferred held by such holder
plus a "call premium" of 10% of the Stated Value, together with the amount
of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption
(the "Redemption Price"). |
| (5) | Each
share of Series D Senior Preferred shall be convertible at any time prior to the Redemption
Date, at the holder’s option, into shares of Common Stock of the corporation on
the basis of ten (10) shares of Common Stock for 1 share of Series D Senior Preferred. |
As
of December 31, 2014 there were $580,991 Series D Senior Convertible Preferred share dividends accrued and unpaid representing
$8.32 per share.
Series
E of the Senior Convertible Preferred Stock series which was issued in 2005 has 500,000 shares designated, with no shares issued
and outstanding.
| (1) | The
holders of said shares of Series E Senior Preferred shall be entitled to receive cumulative
dividends at the rate of six percent (6%) per annum, payable at the time said shares
are converted into shares of common stock of the Company and when declared by the board
of Directors, before any dividend shall be declared, set apart for, or paid upon the
Common Stock and any other Preferred Stock of the Company. The Dividend Rate shall accrue
on the Stated Value, which Stated Value shall be noted on the certificate issued to the
holder of each share of the Series E Senior Preferred. The dividends on the Series E
Senior Preferred, payable in cash, shall be cumulative, so that if the company fails
in any fiscal year to pay such dividends on all the issued and outstanding Series E Senior
Preferred, such deficiency in the dividends shall be fully paid, but without interest,
before any dividends shall be paid on or set apart for any other class of Preferred Stock
or the Common Stock. The holders of the currently outstanding shares of Series E Senior
Convertible Stock have waived their right for dividends, consequently, no dividends have
been accrued on this stock. |
| (2) | The
Series E Senior Preferred shall with respect to dividend rights rank prior to all classes
and series of Common Stock, Cumulative Preferred Stock, and the Series A, B, C, and D
Senior Convertible Preferred Stock and, with respect to liquidation rights rank prior
to all classes and series of Common Stock, the Cumulative Preferred Stock, and be on
a par with the Series A, B, C and D Senior Convertible Preferred Stock. |
In
the event of any liquidation, dissolution, or winding up of the affairs of the Company, whether voluntary or otherwise, after
payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series E Senior Preferred
shall be entitled to receive, out of the remaining net assets of the Company, an amount equal to the Stated Value of each share
of Series E Senior Preferred held of record by such holder, payable in cash or in shares of stock, securities or other consideration,
the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends
in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
| (3) | sufficient
to cover all the before mentioned payments and also like payments to holders of Series
A, B, C and D Senior Preferred, before any distribution shall be made to the holders
of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining
net assets are insufficient to cover all such payments to holders of Series A, B, C,
D and E Senior Preferred, the holders of these series shall receive payments on a pro
rata basis. |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
| (4) | The
holders of said shares of Series E Senior Preferred shall not be entitled to any voting
rights. |
| (5) | Shares
of Series E Senior Preferred which have been issued and reacquired in any manner, including
shares purchased or converted into Common Stock exchanged or redeemed, shall be canceled
on the books of the Company and shall not be considered outstanding for any purpose. |
| (6) | During
such time as there exist unpaid cumulative dividends due on the Series E Senior Preferred,
no reclassification of the shares of the Company or capital reorganization of the Company
in any manner provided by law shall be valid unless (a) the holders of a majority of
all the Series E Senior Preferred approve, and (b) provision is made for the payment
of the aggregate unpaid cumulative dividends then in arrears. |
| (7) | Each
share of Series E Senior Preferred shall automatically convert, on the date six months
after the date of issuance (the “Conversion Date”) which Conversion Date
shall be noted on the certificate issued to the holder of each share of the Series E
Senior Preferred, into shares of Common Stock of the Company on the basis of one hundred
(100) shares of Common Stock for 1 share of Series E Senior Preferred. The holder of
any shares of Series E Senior Preferred shall surrender, as soon as practicable on or
after the Conversion Date, at the principal office of the Company or at such other office
or agency maintained by the Company for that purpose, the certificate or certificates
representing the shares of Series E Senior Preferred due for conversion. As promptly
as practicable, and in any event within ten business days after surrender of such certificates,
the Company shall deliver or cause to be delivered certificates representing the number
of validly issued, fully paid and non-assessable shares of Common Stock of the Company
to which such holder of Series E Senior Preferred so converted shall be entitled. Such
conversion shall be deemed to have been made at the close of business on the Conversion
Date, so that the rights of the holders of the Series E Senior Preferred shall thereafter
cease except for the right to receive Common Stock of the Company in accordance herewith,
and such converting holder of Series E Senior Preferred shall be treated for all purposes
as having become the record holder of such Common Stock of the Company at such time. |
| (8) | In
the event that, prior to the conversion of the Series E Senior Preferred Stock by the
holder thereof into Common Stock of the company, there shall occur any change in the
outstanding shares of Common Stock of the Company by reason of the declaration of stock
dividends, or through a re-capitalization resulting from stock splits or combinations,
without the receipt by the Company of fair consideration therefore in the form of cash,
services or property, the conversion ratio of the Series E Senior Preferred Stock into
Common Stock of the Company shall be adjusted such that any holder of Series E Senior
Preferred Stock converting such stock into Common Stock subsequent to such change in
the outstanding shares of Common Stock of the Company be entitled to receive, upon such
conversion, a number of shares of Common Stock of the Company representing the same percentage
of common shares outstanding as presented by the shares that he would have received had
he converted his Series E Senior Preferred Stock to Common Stock prior to such change
in the outstanding shares of Common Stock of the Company. |
As
of December 31, 2014 there were no Series E Senior Convertible Preferred share dividends accrued.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
Series
G of the Senior Convertible Preferred Stock series which was issued in 2007 has 43,610 shares designated. All such shares were
issued and outstanding at December 31, 2008. In February 2009, these shares automatically converted into 17,857,142 common shares,
leaving no Series G preferred shares outstanding at December 31, 2014.
| (1) | The
holders of said shares of Series G Senior Convertible Preferred shall not be entitled
to receive dividends. |
| (2) | The
Series G Senior Preferred shall with respect to dividend rights rank junior to all classes
and series of Common Stock, Cumulative Preferred Stock, and the Series A, B, C, D, E
and F Senior Convertible Preferred Stock and, with respect to liquidation rights rank
prior to all classes and series of Common Stock, the Cumulative Preferred Stock, and
be on a par with the Series A, B, C, D, E and F Senior Convertible Preferred Stock. |
| (3) | In
the event of any liquidation, dissolution, or winding up of the affairs of the Company,
whether voluntary or otherwise, after payment or provision for payment of the debts and
other liabilities of the Company, the holders of the Series E Senior Preferred shall
be entitled to receive, out of the remaining net assets of the Company, an amount equal
to the Stated Value of $11.46526 for each share of Series G Senior Preferred held of
record by such holder, payable in cash or in shares of stock, securities or other consideration,
the value of which stock, securities or other consideration shall be fixed by the Board
of Directors, plus the amount of all dividends in arrears on each such share up to the
date fixed for distribution, provided, however, that such remaining net assets are sufficient
to cover all the before mentioned payments and also like payments to holders of Series
A, B, C, D, E and F Senior Preferred, before any distribution shall be made to the holders
of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining
net assets are insufficient to cover all such payments to holders of Series A, B, C,
D, E and F Senior Preferred, the holders of these series shall receive payments on a
pro rata basis. |
| (4) | The
holders of said shares of Series G Senior Preferred shall not be entitled to any voting
rights. |
| (5) | Shares
of Series G Senior Preferred which have been issued and reacquired in any manner, including
shares purchased or converted into Common Stock exchanged or redeemed, shall be canceled
on the books of the Company and shall not be considered outstanding for any purpose. |
| (6) | No
cumulative dividends shall be payable on Series G Senior Preferred. |
| (7) | Upon
the second anniversary of the Agreement and Plan of Reorganization, dated February 19,
2007, all the issued and outstanding shares of Series G Senior Preferred automatically
converted into shares of common stock based on the “Market Price”, which
was determined by dividing the conversion value of $500,000 by the average sales price
of a common share for the twenty successive trading days preceding the second anniversary
date of the agreement, subject to a minimum of 10 million common shares. The outstanding
43,610 preferred shares converted into 17,857,142 common shares on February 19, 2009:
based on the average sales price for our common shares during the twenty trading days
period immediately preceding February 19, 2009, of $.028. Stock certificates for the
new common shares would have been issued upon surrender of the original preferred stock
certificates. |
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
16.
PREFERRED STOCK - (Continued)
| (8) | In
the event that, prior to the conversion of the Series G Senior Preferred Stock by the
holder thereof into Common Stock of the company, there shall occur any change in the
outstanding shares of Common Stock of the Company by reason of the declaration of stock
dividends, or through a re-capitalization resulting from stock splits or combinations,
without the receipt by the Company of fair consideration therefore in the form of cash,
services or property, the conversion ratio of the Series G Senior Preferred Stock into
Common Stock of the Company shall be adjusted such that any holder of Series G Senior
Preferred Stock converting such stock into Common Stock subsequent to such change in
the outstanding shares of Common Stock of the Company be entitled to receive, upon such
conversion, a number of shares of Common Stock of the Company representing the same percentage
of common shares outstanding as presented by the shares that he would have received had
he converted his Series G Senior Preferred Stock to Common Stock prior to such change
in the outstanding shares of Common Stock of the Company. |
17.
INCOME TAXES
The
income tax provision (benefit) is comprised of the following:
| |
Year Ended December
31, |
| |
2014 | |
2013 |
State current
provision (benefit) | |
$ | 0 | | |
$ | 7,167 | |
| |
$ | 0 | | |
$ | 7,167 | |
The
Company’s total deferred tax asset and valuation allowance are as follows:
| |
December 31, |
| |
2014 | |
2013 |
Total deferred tax asset, noncurrent | |
$ | 14,650,000 | | |
$ | 15,265,000 | |
Less valuation allowance | |
| (14,650,000 | ) | |
| (15,265,000 | ) |
Net deferred tax asset,
noncurrent | |
$ | 0 | | |
$ | 0 | |
The
differences between income tax benefits in the financial statements and the tax benefit computed at the combined state and U.S.
Federal statutory rate of 40% are as follows:
| |
Year Ended December
31, |
| |
2014 | |
2013 |
Tax benefit | |
| 40 | % | |
| 40 | % |
Valuation allowance | |
| (40 | %) | |
| (40 | %) |
Effective tax rate | |
| — | | |
| — | |
At
December 31, 2013, the Company has available approximately $41,000,000 of net operating losses to carry-forward and which may
be used to reduce future federal taxable income and expire between December 31, 2014 and 2034.
At
December 31, 2013, the Company has available approximately $11,500,000 of net operating losses to carry-forward and which may
be used to reduce future state taxable income which expire between December 31, 2014 and 2034.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
17.
INCOME TAXES (Continued)
The
Company believes that all of its positions taken in tax filings are more likely than not to be sustained upon examination by tax
authorities. The Company is subject to examination by the tax authorities for the period January 1, 2011 and forward.
18.
STOCK BASED COMPENSATION
During
2014 and 2013 the Company issued the following securities to officers, directors, and non-employees as part of their compensation.
Andre
Scholz (president and Chief Executive Officer): During 2014 and 2013 earned 1,200,000 restricted shares (100,000 per month) valued
at $5,400 and $8,040, respectively, based on the commitment date fair value of the shares granted. 1,200,000 and 1,200,000 of
these shares were issued in 2014 and 2013, respectively.
Joseph
J. Tomasek (Director): In each of the years ended December 31, 2014 and 2013 Mr. Tomasek earned options for 1,200,000 restricted
shares, valued at $11,880.
At
December 21, 2013 we granted 1,550,000 of restricted common stock to five individuals (employees and consultants) valued at $0.005
per restricted common share, the public market price of the Company’s common shares traded in the over-the-counter market
on December 21,2013. These shares were issued in December 2013.
19.
STOCK OPTION PLANS
In
April 1996, Magnitude, Inc. adopted its 1996 Stock Incentive Plan (“the 1996 Plan”). The 1996 Plan provides that certain
options granted thereunder are intended to qualify as “incentive stock options” (ISO) within the meaning of Section
422A of the United States Internal Revenue Code of 1986, while non-qualified options may also be granted under the Plan. The initial
plan and subsequent amendments provided for authorization of up to 480,000 shares. Pursuant to the above described stock exchange
offer on July 2, 1997, all options under the 1996 Plan were converted into shares of the Company at a rate of 3.4676 shares of
Magnitude, Inc. to 1 share of the Company.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
19.
STOCK OPTION PLANS (continued)
In
September 1997, the Company adopted its 1997 Stock Incentive Plan (“the 1997 Plan”). The 1997 Plan provides that certain
options granted thereunder are intended to qualify as “incentive stock options” (ISO) within the meaning of Section
422A of the United States Internal Revenue Code of 1986, while non-qualified options may also be granted under the Plan. The initial
plan and subsequent amendments provided for the grant of options for up to 1,000,000 shares. The purchase price per share of common
stock deliverable upon exercise of each ISO shall not be less than 100% of the fair market value of the common stock on the date
such option is granted. If an ISO is issued to an individual who owns, at the time of grant, more than 10% of the total combined
voting power of all classes of the Company’s common stock, the exercise price of such option shall be at least 110% of the
fair market value of the common stock on the date of grant and the term of the option shall not exceed five years from the date
of grant. The purchase price of shares subject to non-qualified stock options shall be determined by a committee established by
the Board of Directors with the condition that such prices shall not be less than 85% of the fair market value of the common stock
at the time of grant.
In
May 2000 the Company adopted its 2000 Stock Incentive Plan (“the 2000 Plan”). The 2000 Plan provides that certain
options granted thereunder are intended to qualify as “incentive stock options” (ISO) within the meaning of Section
422A of the United States Internal Revenue Code of 1986, while nonqualified options may also be granted under the Plan. The initial
Plan provides for the grant of options for up to 5,000,000 shares. The purchase price per share of common stock deliverable upon
exercise of each ISO shall not be less than 100% of the fair market value of the common stock on the date such option is granted.
If an ISO is issued to an individual who owns, at the time of grant, more than 10% of the total combined voting power of all classes
of the Company’s common stock, the exercise price of such option shall be at least 110% of the fair market value of the
common stock on the date of the grant, and the term of the option shall not exceed five years from the date of grant. The purchase
price of shares subject to non-qualified stock options shall be determined by a compensation committee established by the Board
of Directors.
|
|
Qualified
and Non-Qualified Shares Under Option Pursuant to the 1997 Plan
December
31, |
|
|
2014 |
|
2013 |
Outstanding,
beginning of year |
|
- |
|
- |
Granted
during the year |
|
- |
|
- |
Expired
during the year |
|
- |
|
- |
Surrendered
during the year |
|
- |
|
- |
Outstanding,
end of year |
|
- |
|
- |
Eligible,
end of year for exercise |
|
- |
|
- |
At
December 31, 2014 and 2013, no options were outstanding.
At
December 31, 2014, there were 1,000,000 shares reserved for future option grants.
Kiwibox.Com,
Inc.
Notes
to the Financial Statements
STOCK
OPTION PLANS - (Continued)
|
Qualified
and Non-Qualified Shares Under Option Pursuant to the 2000 Plan
December
31, |
|
|
2014 |
|
2013 |
Outstanding,
beginning of year |
|
- |
|
- |
Granted
during the year |
|
- |
|
- |
Exercised
during the year |
|
- |
|
- |
Surrendered
during the year |
|
- |
|
- |
Expired
during the year |
|
- |
|
- |
Outstanding,
end of year |
|
- |
|
- |
Eligible,
end of year for exercise |
|
- |
|
- |
At
December 31, 2014 and 2013, no options were outstanding.
At
December 31, 2014, there were 5,000,000 shares reserved for future option grants.
At
December 31, 2014 the company has two stock-based employee compensation plans, which are described more fully above. The company
accounts for those plans under the recognition and measurement principles of the Financial Accounting Standards Board Accounting
Standards Codification (ASC) 718, Compensation-Stock Compensation. The Company has not granted any options under these
plans to employees during 2014 or 2013.
The
Company also issues options outside of the Stock Incentive Plans which are comprised as follows:
| |
December 31, | |
December 31, |
| |
2014 | |
2013 |
Outstanding,
beginning of year | |
| 4,900,000 | | |
| 8,850,000 | |
Granted during the year | |
| 1,200,000 | | |
| 1,200,000 | |
Exercised during the year | |
| — | | |
| — | |
Surrendered or cancelled
during the year | |
| — | | |
| | |
Expired
during the year | |
| (1,600,000 | ) | |
| (5,150,000 | ) |
Outstanding,
end of year (at $0.05) | |
| 4,500,000 | | |
| 4,900,000 | |
| |
| | | |
| | |
Eligible
for exercise, end of year (at $0.05) | |
| 4,500,000 | | |
| 4,900,000 | |
| |
| | | |
| | |
At
December 31, 2014 and 2013 the weighted average exercise price and weighted average remaining contractual life were $0.05 and
$0.05 per share, and 2 years and 2 year 10 months, respectively.
The
weighted average exercise price for options granted during the years ended December 31, 2014 and 2013 were $0.05 and $0.05, respectively.
The weighted average exercise price for options expired during the years ended December 31, 2014 and 2013 were $0.03 and $0.05,
respectively. The weighted average grant date fair value of options granted during the years ended December 31, 2014 and 2013
was $0.05 and $0.04, respectively.
20.
WARRANTS
| | The
Company granted common stock purchase warrants between January 1, 2013 and December 31,
2014 which are comprised as follows: |
| |
December 31, |
| |
2014 | |
2013 |
Outstanding,
beginning of year | |
| 26,500,000 | | |
| 127,231,315 | |
Granted during the year | |
| — | | |
| — | |
Exercised during the year | |
| — | | |
| — | |
Surrendered /cancelled
during the year | |
| — | | |
| — | |
Expired
during the year | |
| (13,750,000 | ) | |
| (100,731,315 | ) |
Outstanding, end of year
(at prices ranging from $.025 to $.075) | |
| 12,750,000 | | |
| 26,500,000 | |
| |
| | | |
| | |
Eligible,
end of year (at prices ranging from $.025 to $.075) | |
| 12,750,000 | | |
| 26,500,000 | |
| |
| | | |
| | |
At
December 31, 2014 and 2013, the weighted average exercise price and weighted average remaining contractual life is $0.04 and $0.04
per share and 1 years 5 months and 2 years7 months, respectively.
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
21.
RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2014 and 2013 one outside director of the Company who also serves as the Company’s general and
securities counsel, incurred an aggregate $34,288 and $33,708, respectively, for each period for legal services. The director
also received 100,000 common stock options per month during the year ended December 31, 2014, valued at $11,880. The director
also received 100,000 common stock options per month during the year ended December 31, 2013, valued at $11,880. The balance due
to this director at December 31, 2014 and 2013 was $0 and $9,620, respectively.
For
the year ended December 31, 2014 and 2013 we incurred an aggregate $389,055 and $513,591, respectively, to companies controlled
by the Chief Executive Officer of the Company, for website hosting, website development and technical advisory services, server
farm installations and IT equipment purchases. The officer also earned 100,000 common shares per month during the year ended December
31, 2014 under a consulting agreement, valued at $5,400. The officer also received $220,000 in November 2014 for prepaid consulting
fees towards 2015 under the terms of a consulting agreement. The balance due to this officer and/or his affiliated companies at
December 31, 2014 and 2013 was $65,909 and $23,992, respectively.
During
2013, Kwick entered into a barter agreement with Interscholz GmbH & Co. KG (“Interscholz KG”), whereby Kwick agreed
to provide media services (graphics and development) in exchange for server hosting services provided by Interscholz KG. Revenue
and expenses from this barter agreement were approximately $99,000 for the year ended December 31, 2013.
During
2014 and 2013, approximately 10% of the Company’s voting stock was beneficially held by Discovery Advisory Company, located
in the Bahamas, and Cambridge Services Inc., Kreuzfeld, Ltd. and Vermoegensverwaltungs-Gesellschaft Zurich Ltd. (VGZ) of Switzerland.
Discovery Advisory Company, Cambridge Services Inc., Kreuzfeld, Ltd. and VGZ are major creditors, having advanced operating capital
against issuance by the Company of convertible promissory notes during 2013 and 2014.
During
the year ended December 31, 2014, Cambridge Services Inc. advanced an additional $720,000, Discovery Advisory Company advanced
an additional $485,000 and Kreuzfeld, Ltd advanced an additional $70,001. During the year ended December 31, 2013, Cambridge Services
Inc. advanced $1,145,000. At December 31, 2014, $3,706,722 and $3,080,060 of such notes were outstanding and owed to Discovery
Advisory Company and Cambridge Services Inc, respectively and $3,634,959 and $771,958 owed to Kreuzfeld, Ltd. and VGZ, respectively.
During
2014, the Company loaned $30,000 to its former Subsidiary Kwick. At December 31, 2014 the full $30,000 was outstanding. Additionally,
the Company through an advertising agreement with Triple Double U (TDU) has an ”Ads-Delivery” program whereby revenue
is received through the former subsidiary Kwick. This revenue in 2014 amounted to $36,703.
At December 31, 2014 $28,146 in A/R was outstanding.
During
2013, a shareholder loaned Kwick $899,794 plus accrued interest of $19,849. These loans carry an interest rate of 6% and are payable
on demand. A portion of this loan was used to pay off a bank line of credit. The balance was eliminated upon deconsolidation of
the Company’s Kwick subsidiary.
Kiwibox.Com,
Inc.
Notes
to Financial Statements
22.
GOODWILL FROM THE ACQUISITION OF KWICK!
The
excess of purchase price over tangible net assets acquired from Kwick at September 30, 2011 was initially allocated to goodwill
in the amount of $6,138,210. During 2013, management determined based on qualitative and quantitative factors that there was an
impairment to goodwill.
The
goodwill was tested by the management of the Company in qualitative assessments throughout 2013. These assessments lead management
to identify impairment indicators related to goodwill. Management therefore performed the two-step impairment test for goodwill,
utilizing a market approach to the valuation. In estimating the fair value of the reporting unit, Kwick, management considered
comparable per user values from recent acquisitions in the industry, as well as the effect of the economic recession and continuing
deterioration of the use of social networks in Germany..Based on the impairment test during the period ending December 18, 2013
goodwill of $6,138,210 was determined to be impaired and was written off.
23.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash,
accounts receivable, accounts payable, accrued expenses, notes payable, long-term debt and capitalized lease obligations: The
carrying amount approximates fair value because of the short term maturity of these instruments.
Limitations
Fair
value estimates are made at a specific point in time, based on relevant information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the estimates
Kiwibox.Com,
Inc. and Subsidiary
Notes
to the Financial Statements
24.
FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In
August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under this amendment, management is now required
to determine every interim and annual period whether conditions or events exist that raise substantial doubt about an entity’s
ability to continue as a going concern within one year after the date the financial statements are issued. If management indicates
that it is probable the entity will not be able to meet its obligations as they become due within the assessment period, then
management must evaluate whether it is probable that plans to mitigate those factors will alleviate that substantial doubt. The
Company is currently evaluating the possible impact of ASU 2014-15, but does not anticipate that it will have a material impact
on the Company's consolidated financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying financial statements.
25.
LITIGATION
At
the time of this report, the Company is not a party in any legal proceedings.
26.
BUSINESS SEGMENTS
The
Company operates in only one business segment - youth targeted online social networks - through its dedicated proprietary internet
website.
27.
SUBSEQUENT EVENTS
During
January through April 2015 we received an aggregate $275,000 working capital loans from one accredited investor, which is covered
by convertible promissory notes carrying interest at 10% per year.
At
January 1, 2015 the board of directors of the company granted and authorized the issuance of 1,200,000 stock grants of restricted
common stock to five individuals (employees and consultants), valued at $0.00142 per restricted common share, the public market
price of the Company’s common shares traded in the over-the-counter market on the commitment date. The consultants and the
respective stock grants to these individuals were as follows:
Andre
Scholz: 400,000 restricted common shares
Anke
Schmid: 200,000 restricted common shares
Joseph
J. Tomasek: 200,000 restricted common shares
Craig
Cody: 200,000 restricted common shares
Perry
Ptashnik: 200,000 restricted common shares
At
January 1,2015 the board of directors authorized the issuance of 1,200,000 stock grants of restricted common stock to Andre Scholz;
100,000 of which shares were earned by Mr. Scholz for each of the twelve months during the period, January 1,2014 through December
31,2014.
EXHIBIT
31.1
CERTIFICATION
PURSUANT TO
SECTION
302 OF
THE
SARBANES-OXLEY ACT OF 2002
I, Andre
Scholz, certify that:
1.
I have reviewed this annual report on Form 10-K of Kiwibox.Com, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4.
|
The
small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: |
De(a)
signed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's
most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5.
The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the Registrant's auditors and the audit committee of the small business issuer’s
board of directors (or persons performing the equivalent functions):
| a. | All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
Registrant's ability to record, process, summarize and report financial information;
and |
| b. | Any
fraud, whether or not material, that involves management or other employees who have
a significant role in the Registrant's internal control over financial reporting. |
|
|
|
|
Dare: |
April
15, 2014 |
/s/
Andre Scholz |
|
|
|
Andre Scholz |
|
|
|
President
and Chief Executive Officer
|
EXHIBIT
31.2
CERTIFICATION
OF ANNUAL REPORT
I, Craig
S. Cody, certify that:
1.
I have reviewed this annual report on Form 10-K of Kiwibox.Com, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4.
|
The
small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: |
(a(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated
the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d)Disclosed
in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's
most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5.
The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information;
and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's
internal control over financial reporting.
|
|
|
|
Date: |
April
15, 2014 |
/s/
Craig Cody |
|
|
|
Craig Cody |
|
|
|
|
Exhibit
32.01
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
WRITTEN
STATEMENT OF THE CHIEF EXECUTIVE OFFICER
Solely
for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I,
Andre Scholz, the undersigned President and Chief Executive Officer of Kiwibox.Com, Inc. (the “Company”), hereby certify,
based on my knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2011 (the “Report”)
as filed with the Securities and Exchange Commission on the date hereof:
1. |
Fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
That the information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
|
/s/
Andre Scholz |
|
Andre
Scholz |
|
President,
Chief Executive Officer |
(principal executive officer)
Dated:
April 15, 2015
Exhibit 32.02 CERTIFICATION PURSUANT TO
18
U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
WRITTEN
STATEMENT OF THE CHIEF FINANCIAL OFFICER
Solely
for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I,
Craig Cody, the undersigned Chief Financial Officer of Kiwibox.Com, Inc. (the “Company”), hereby certify, based on
my knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2011 (the “Report”)
as filed with the Securities and Exchange Commission on the date hereof:
1. |
Fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
That the information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
|
/s/
Craig Cody |
|
Craig
Cody |
|
Chief
Financial Officer
(principal financial officer and principal accounting officer) |
Dated:
April 15, 2015
Kiwibox com (CE) (USOTC:KIWB)
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Kiwibox com (CE) (USOTC:KIWB)
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