PotNetwork Holding Inc.
Unaudited Consolidated Financial Statements
As on
September 30, 2017
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PotNetwork Holding Inc.
Unaudited consolidated Balance Sheets
As of September 30, 2017, and December 31, 2016
Sep 30 Dec 31
2017 2016
Assets
Current Assets
Cash 576,880 100
Accounts Receivable 259,713 710
Purchases paid for, but in transit 483,956
Total Current assets $1,320,549 $810
Rent & Utility Deposits 33,673 33,673
TOTAL ASSETS $1,354,222 $34,483
Liabilities
Current Liabilities
Accounts Payable 24,750 24,750
Other Payables 5,273 0
Total Current Liabilities $30,023 $24,750
Note Payable - La Playa 150,000 0
Loans from Third Parties with accrued interest (Note 11) 240,904 228,494
Note Payable (Note 12) 2,418,624 2,018,264
Other liabilities 88,462 0
Total Liabilities $2,893,063 $2,238,228
Stockholders' Equity
Common: Authorized 1,000,000,000 shares, $ .00001 par value; and
569,920,485 Issued and outstanding at September 30, 2017 and
89,571,121 Issued and outstanding at December 31, 2016 respectively. 87,573 87,573
Preferred Stock Class A Authorized - 50,000 shares, $ .00001 Par
value; and 32,682 Issued and outstanding at September 30, 2017 and
None Issued and outstanding at December 31, 2016 respectively. 200 200
Preferred Stock Class D Authorized - 6,000 shares, $ .00001 par
value; and 460 Issued and outstanding at September 30, 2017 and 460
Issued and outstanding at December 31, 2016 respectively. 200 200
Additional paid in capital 263,131 263,131
Retained Earnings (1,924,895) (2,588,129)
Total Stockholders' Equity (1,538,841) (2,203,745)
Total Liabilities & Equity $1,354,222 $34,483
The accompanying notes are an integral part of these financial statements.
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PotNetwork Holding Inc.
Unaudited consolidated Income Statement
For the nine months ended September 30, 2017 and 2016
Nine Months Ended
Sep 30 Sep 30
2017 2016
Sales $ 9,522,425 $ 772,088
Cost of Goods Sold $ 5,990,334 $ 435,975
Gross Profit (Loss) $ 3,532,090 $ 336,113
Expenses:
Advertisement $ 513,594 $ 25,853
Shipping [Pkg. supplies/FedEx/UPS/USPS] $ 579,759
email Marketing $ 31,150
Marketing - Payments made to Vendors $ 757,785
Marketing - Website Expenses $ 25,551
Marketing - Travel: Air Ticket, etc. $ 161,875
Marketing - Travel: Boarding & Lodge $ 180,807
Marketing - Travel: Rent a car/Taxi $ 42,481
Legal & Professional $ 91,355 $ 16,193
Licenses & Taxes $ 37,836
Payroll $ 149,361 $ 30,104
Rent $ 15,221 $ 39,046
Insurance $ 49,918 $ 12,827
Admin - Auto Expenses $ 18,918
Admin - Bank Charges $ 5,446
Admin - Computers $ 30,586
Admin - Dues & Subscriptions $ 20,461
Admin - Misc. $ 794 $ 13,127
Admin - Office Supplies $ 39,868 $ 7,424
Admin - Repairs & Maintenance $ 63,491
Admin - Telephone $ 35,786
Admin - Utilities $ 4,402
Interest $ 12,410 $ 117,387
Total Expenses $ 2,868,857 $ 261,958
Profit (Loss) before Income Tax $ 663,234 $ 74,155
Provision for Income Tax $ - $ -
Net Profit (Loss) $ 663,234 $ 74,155
The accompanying notes are an integral part of these financial statements.
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PotNetwork Holding Inc.
Unaudited consolidated Statement of Cash Flows
For the nine months ended September 30, 2017 and 2016
Nine Months Ended
Sep 30 Sep 30
2017 2016
Operating Activities
Net Income (Loss) $664,904 $74,155
Adjustments to reconcile net income (loss) to net
cash provided by operations
Accounts Receivable ($259,003) ($3,817)
Purchases Paid for, but in-Transit ($483,956)
Accts payable ($6,505)
Other Payables under current liabilities $5,273
Accrued interest $12,410
Notes Payable - La Playa $150,000
Notes Payable - SIGN $400,360
Other liabilities $88,462 ($62,850)
Total Adjustments to reconcile net income (loss)
to net cash provided by operations $576,780 $983
Investing Activities
Loans Receivable $0
Net cash provided by investing activities $0 $983
Financing Activities
Net cash provided by financing activities $0 $0
NET CASH INCREASE (DECREASE) For PERIOD $576,780 $983
Cash, Beginning $100 $1,083
Cash, Ending $576,880 $100
The accompanying notes are an integral part of these financial statements.
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PotNetwork Holding Inc.
Unaudited consolidated Statement of Stockholders Equity
As of September 30, 2017
Description Shares Amount Additional Surplus
Paid-in
Capital (Deficit)
Common Stock as on Dec. 31, 2015 7,621,650,000 $87,573 $1,461,532 ($2,068,107)
1 for 1000 split reduction (7,614,028,350)
After the split 7,621,650
Shares Issued 51,678,750 ($755,729)
Shares Issued
30,271,121 ($442,672)
Net Profit (Loss) ($520,022)
Common Stock as on Dec. 31, 2016
89,571,521 $87,573 $263,131 ($2,588,129)
Shares Issued
59,348,964
Shares Issued - First Capital Venture [March 2017]
300,000,000
Shares Issued - Q1-2017 Conversion "Sign"
39,000,000
Shares Issued - Q3-2017 Conversion "Sign"
82,000,000
Shares Cancelled
Net Profit (Loss) - DiamondCBD $663,234
Common Stock as on Sep. 30, 2017
569,920,485 $87,573 $263,131 ($1,924,895)
Number of shares as of Sep. 30, 2017 is agreement with the statement received from the Share Transfer Agent
The accompanying notes are an integral part of these financial statements.
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PotNetwork Holding Inc.
NOTES TO FINANCIAL STATEMENTS
For the nine months ended September 30, 2017
Unaudited
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
On 3rd March 2017, PotNetwork Holding Inc. was reincorporated following its
acquisition of First Capital Venture Holdings Co. Coinciding with that event, the
company entered a triangular merger pursuant Colorado law, which is the financial and
substantive equivalent to that set forth in “Section 251(g) of the Delaware General
Corporation Law”. The principal purpose of this reorganization strategy was designed
to insulate the newly acquired entity, First Capital Venture Co., from the liabilities of
predecessor issuer. As such, while those liabilities must still be reflected as part of the
consolidated financial statements, the successor issuer or the public entity as currently
constituted, PotNetwork Holding Inc. and the subsidiary, First Capital Venture Co., are
legally insulated from, and not liable for, those liabilities for which the other
subsidiary is obligated.
The company was previously known as United Treatment Centers Inc., and changed
its name to PotNetwork Holding Inc. in July 2015.
• Formerly=United Treatment Centers, Inc. until 7-2015
• Formerly=United Treatment Centers, Inc. until 10-2013
• Formerly=MyMedicalCD, Ltd. until 1-2009
• Note=11-04 State of Incorporation Nevada changed to Wyoming
• Formerly=Interactive Solutions Corp. until 11-04
• Formerly=Araldica Wineries Ltd. until 2-00
• Formerly=H P Capital Corp. until 9-96
PotNetwork Holding Inc. is a publicly traded company with the ticker symbol as
"POTN."
On 31st January 2017, PotNetwork Holding Inc. acquired First Capital Venture Co.
Now, PotNetwork Holding, Inc has two wholly owned subsidiaries, First Capital
Venture Co., the makers of Diamond CBD Oils and Sunrise Auto Mall Inc., a preowned
auto dealership started in July 2014.
Going forward, POTN intends to focus only on the CBD business. Henceforth, the
financial statements of PotNetwork Holding Inc. reflect the only one business of
Diamond CBD.
Diamond CBD focuses on the research, development, and multi-national marketing of
premium hemp extracts that contain a broad range of cannabinoids and natural hemp
derivatives. Diamond’s CBD infused Chill Gummy line consists of a wide range of
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popular flavors such as traditional Gummy Bears, tasty Watermelon Slices, tart Sour
Snakes, sprinkled Rainbow Bites, yummy Gummy Worms, tangy Sour Bears,
quenching Ocean Gummies, nutty Choco Peanut Butter, chewy Gummy Rings,
puckering Sour Faces, citrusy Mini Fruit, and buttery Choco Nuts.
Since January 2016, Gary Blum leads PotNetwork Holding Inc. Effective October
2017, Richard Goulding, MD joined as the Chief Executive Officer. The management
team consists of hemp industry pioneers and natural product experts, chemists, and
scientists.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATIONS
The statements were prepared following generally accepted accounting
principles of the United States of America consistently applied.
USE OF ESTIMATES:
Use of estimates: Management uses estimates and assumptions in preparing
these financial statements in accordance with U.S. generally accepted
accounting principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
CASH AND CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid investments with maturities
of three months or less at the time of acquisition.
PROPERTY AND EQUIPMENT
Property and equipment are stated at the written-down value [after deducting
the depreciation from the cost]. This company adapted the depreciation rates as
provided in the IRS publications, using the Modified Accelerated Cost
Recovery System (MACRS). Computers and office equipment are considered
as 5-year property Office furniture and fixtures are 7-year property in MACRS
and apply the 200% declining balance method over a GDS recovery period.
Where possible, section 179 depreciation is also applied.
INTANGIBLE ASSETS
Initial Measurement: Intangible asset acquisitions in which the consideration
given is cash are measured by the amount of cash paid, which generally
includes the transaction costs of the asset acquisition. However, if the
consideration given is not in the form of cash (that is, in the form of noncash
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assets, liabilities incurred, or equity interests issued), measurement is based on
either the cost which shall be measured based on the fair value of the
consideration given or the fair value of the assets (or net assets) acquired,
whichever is clearer and, thus, more reliably measurable.
Subsequent Measurement: The company accounts for its intangible assets
under the Financial Accounting Standards Board ("FASB") Accounting
Standards Codification Subtopic ("ASC") 350-30-35 "Intangibles-- Goodwill
and Other--General Intangibles Other than Goodwill-Subsequent
Measurement". Under this method the company is required to test an
indefinite-lived intangible asset for impairment on at least an annual basis. This
is done by comparing the asset's fair value with its carrying amount. If the
carrying amount exceeds the asset's fair value, the difference in those amounts
is recognized as an impairment loss. The Company impaired the trade-mark as
of December 31, 2015.
INCOME TAXES:
The Company accounts for its income taxes in accordance with the Financial
Accounting Standards (“SFAS”) No.109, Accounting for Income Taxes. Under
this standard, deferred tax assets and liabilities represent the estimated tax
effects of future deductible or taxable amounts attributed to differences
between the financial statements carrying amounts and the tax bases of existing
assets and liabilities. The standard also allows recognition of income tax
benefits for loss carryforwards, credit carryforwards and certain temporary
differences for which tax benefits have not previously been recorded. Valuation
allowances are provided for uncertainties associated with deferred tax assets.
FINANCIAL INSTRUMENTS
Fair value measurements are determined based on the assumptions that market
participants would use in pricing an asset or liability. ASC 820-10 establishes a
hierarchy for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. FASB ASC 820
establishes a fair value hierarchy that prioritizes the use of inputs used in
valuation methodologies into the following three levels:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in
active markets. A quoted price in an active market provides the most
reliable evidence of fair value and must be used to measure fair value
whenever available.
Level 2: Significant other observable inputs other than Level 1 prices
such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data.
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Level 3: Significant unobservable inputs that reflect a reporting entity's
own assumptions about the assumptions that market participants would
use in pricing an asset or liability. For example, level 3 inputs would
relate to forecasts of future earnings and cash flows used in a
discounted future cash flows method.
The carrying amounts reported in the balance sheet for cash, accounts payable
and notes payable approximate their estimated fair market value based on the
short-term maturity of this instrument. In addition, FASB ASC 825-10-25 "Fair
Value Option" was effective for January 1, 2008. ASC 825-10-25 expands
opportunities to use fair value measurements in financial reporting and permits
entities to choose to measure many financial instruments and certain other
items at fair value.
NOTE 3 - GOING CONCERN
The financial statement of the Company has been prepared assuming that the
Company will continue as a going concern, which contemplates, among other things,
the realization of assets and the satisfaction of liabilities in the normal course of
business.
Receivables from our customers as on the balance sheet date, are less than 30 days old.
As the company has no uncertainties as on the balance sheet date, the financial
statements need no adjustments.
DiamondCBD is in business since 2015. In other words, it is considered as a business
with limited operating history. Hence, this business is subject to all risks inherent in a
developing business enterprise. Continued success depends on the problems,
difficulties, complications, and delays frequently encountered in the competitive and
regulatory environment in which it operates.
As a new industry, there are no established entities whose business model
DiamondCBD can follow or build on the success of. Perhaps, DiamondCBD can set
the standards in the years to come.
Regulatory risk: Hemp based CBD are often confused with marijuana based CBD
which remains Illegal under Federal Law.
Although DiamondCBD does not sell any marijuana based CBD products, its products
are could often be confused as being illegal by federal/state authorities and by
consumers.
The company is involved in a highly competitive industry where it may compete with
numerous other companies who offer alternative methods or approaches, who may
have far greater resources, more experience, and personnel perhaps more qualified
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than the company does. Such resources, experience and personnel may provide a
substantial competitive advantage to the competition.
NOTE 4 - PROVISION FOR INCOME TAXES
With the accumulated losses carried forward, no provision for tax liability has been
made in the financial statements.
Net operating loss carry-forward, expires twenty years from the date the loss was
incurred.
As of 31st December 2016, the Company had a net operating loss carryforward of
$2,588,129. However, the availability of a net operating loss carryforward and the
associated deduction, is subject to complex and restrictive federal income tax
provisions as codified by Internal Revenue Code section 172 and related Treasury
Regulations, all of which are subject to change in the availability of which can never
be free from doubt.
NOTE 5 - INVENTORY
This company has arranged to buy the exact quantity from the suppliers, based on the
customer orders and thereby has eliminated the need for holding inventory on hand at any
point of time.
Otherwise, this company values the inventory at the lower of cost or market.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
There are no commitments and contingencies that exist at present.
NOTE 7 – SALES DISCOUNT & RETURN POLICY
• This company allows free returns unopened items within 15 days of purchase.
• Free return labels are provided the returns, meaning that the company pays for
the shipping cost for the returns]
• The customers need not call the company for the returns because it can be
easily done online in the company web-site
• Experienced professional staff reviews the selling price on an ongoing basis.
• Exceptions are reviewed and approved by the manager.
• Sales return are insignificant and hence no reserves are provided.
NOTE 8 – BUDGET & INTERNAL CONTROL PROCEDURES
• Internal control procedures for inventory and cash control are being developed
and implemented on an ongoing basis to ensure higher levels of performances.
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• Annual financial budget is reviewed by the Board of Directors
• Quarterly variance reports are considered by the Board of Directors.
NOTE 9 – PAYROLL PROCEDURE
Based on the time punched in and out by the employees, pay roll is processed by an
independent payroll company to determine the taxes to be withheld and paid.
NOTE 10 - CAPITAL STOCK
• Common Stock: Authorized 1,000,000,000 shares, $ .00001 par value; and
569,920,485 Issued and outstanding as on the balance sheet date
• Preferred Stock Class A: Authorized – 50,000 shares, $ .00001 Par value; and
32,682 Issued and outstanding as on the balance sheet date.
• Preferred Stock Class D: Authorized - 6,000 shares, $ .00001 par value; and
460 Issued and outstanding as on the balance sheet date.
NOTE 11 – Loan from Third Parties
A. K.N. is the holder of a note dated Sep. 11, 2012 in the original principal
amount of $100,000. Part of the original note was acquired in private
transaction in June 2014. The security derives from 3 convertible promissory
notes dated Mar. 25, 2010 amount $150,000, Nov. 4, 2010 amount $50,000 and
Mar. 11, 2011 amount $25,000. The balance of the note at Dec. 31, 2016 is
$112,000.
a. The loan accrues interest @ the annual rate of eight percent (8%).
b. Interest for 2016 is $8,000.
c. Interest for the nine months ended September 30, 2017 is $6,000
d. As of 30th September 2017, balance due (including the accrued interest)
is $118,000
B. Southridge note is for $25,000
a. The loan accrues interest @ the annual rate of eight percent (8%).
b. Interest for 2016 is $1,000.
c. Interest for the nine months ended September 30, 2017 is $1,250
d. As of 30th September 2017, balance due (including the accrued interest)
is $27,250
C. Mammoth note is for $7,000
a. The loan accrues interest @ the annual rate of eight percent (8%).
b. Interest for 2016 is $280.
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c. Interest for the nine months ended September 30, 2017 is $420
d. As of 30th September 2017, balance due (including the accrued interest)
is $7,700
D. As explained in Note 1, the liability of the subsidiary $152,950 (including the
accrued interest) as of 30th September 2017, is taken to the consolidated
financial statements.
E. "Sign" is the holder of a note dated Apr. 28, 2016 in the original principal
amount of $42,000.
a. The loan accrues interest @ the annual rate of eight percent (8%).
b. Interest for 2016 is $2,240.
c. Interest for the nine months ended September 30, 2017 is 2,520
d. As of 30th September 2017, balance due (including the accrued interest)
is $46,760
F. "Sign" is holder of a note dated May 04, 2016 in the original principal amount
of $37,000.
a. The loan accrues interest @ the annual rate of eight percent (8%).
b. Interest for 2016 is $1,974
c. Interest for the nine months ended September 30, 2017 is 2,220
d. As of 30th September 2017, balance due (including the accrued interest)
is $41,194
Accrued
Loan Interest Total
A $100,000 $18,000 $118,000
B $25,000 $2,250 $27,250
C $7,000 $700 $7,700 $152,950
E $42,000 $4,760 $46,760
F $37,000 $4,194 $41,194 $87,954
$211,000 $29,904 $240,904
NOTE 12 – Notes Payable
A. This note is from the original promissory note dated June 2, 2014 for the
principal amount of $1,850,000
o $2,018,624 is the amount due as on 31st December 2016
o The annual interest was eight percent (8%). But the interest does not
accrue since the addendum agreement in exchange for a fixed
conversion. Refer the terms of a security purchase agreement, “Sign”
o 39,000,000 shares are converted in Q1-2017 for $117,000
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o As on 31st March 2017, the balance due on this note is $1,901,624
o 82,000,000 shares are converted in Q3-2017 for $246,000
o As on 30th September 2017, the balance due on this note is
$1,655,624.
B. In the second quarter of 2017, “Sign” wire-transferred $285,500 and the
company signed a new note with no interest, applying the addendum
agreement in exchange for a fixed conversion.
C. In the third quarter of 2017, “Sign” wire-transferred $477,500 and the
company signed a new note with no interest, applying the addendum
agreement in exchange for a fixed conversion.
A $1,655,624
B $285,500
C $477,500
$2,418,624
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