Source: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10162145
Timestamp: 2018-01-20 19:11:30
Document Index: 487229639

Matched Legal Cases: ['arty 287', 'arty 21', 'arty 55', 'arty 964', 'arty 3', 'arty 55']

Monster Arts Inc. (Form: 10-Q, Received: 08/19/2014 15:49:56)
806 East Avenido Pico, Suite I-288
(877) 733-6133
As of August 18, 2014, the registrant’s outstanding common stock consisted of 968,498,328 shares, $0.001 par value. Authorized – 75,000,000 shares.
Unaudited Statements of Operations 5
(Formerly MONSTER OFFERS)
Cash $ 194,677 $ 46,234
accounts of $1,250 7,775 4,173
Loan receivable to related party 287,130 290,532
Interest receivable to related party 21,083 15,577
Prepaid expenses — 139,996
Total Current Assets 510,665 496,512
Property and equipment, net 66 460
Total Fixed Assets 66 460
Available-for-sale securities 40,200 6,000
Total Other Assets 40,200 6,000
Total Assets $ 550,931 $ 502,972
Accounts payable & accrued expenses $ 19,468 $ 67,586
Accounts payable & accrued expenses to related parties 164,879 169,577
Accrued interest 33,854 11,659
Deferred revenues 18,605 18,359
Loan from officer 14,004 17,021
Notes payable 10,183 10,161
Notes payable to related party 55,980 57,480
Convertible notes payable 699,295 261,945
Derivative Liability 10,047,485 21,876,947
Total Liabilities 11,063,753 22,490,735
Series A preferred stock, $.001 par value 20,000,000 shares
authorized, 20,000,000 shares issued and outstanding, respectively
Common stock, $0.001 par value 730,000,000 shares 20,000 20,000
authorized, 539,310,446 and 29,201,615 shares issued and
outstanding, respectively 539,310 29,202
Additional paid in capital 19,579,655 6,121,441
Stock subscription payable 476,469 493,673
Accumulated Comprehensive Gain / (Loss) 30,200 (4,000 )
Deficit accumulated during the development stage (31,158,456 ) (28,628,079 )
Total stockholders' equity (deficit) (10,512,822 ) (21,987,763 )
Total Liabilities and Stockholders' Equity $ 550,931 $ 502,972
For the Three Months Ended For the Six Months Ended (February 23, 2007) to
Commissions $ — $ 2,500 $ — $ 13,750 $ 207,385
Commissions- related parties — — — — 337,717
License revenues — — — — 100,000
Services 40,144 3,500 97,463 3,500 109,174
Services- related party 964 — 1,227 3,200 79,815
41,108 6,000 98,690 20,450 834,091
Cost of services — — — — 266,860
Gross Profit 41,108 6,000 98,690 20,450 567,231
General and administration 69,081 48,898 98,694 59,650 761,577
Consulting 403,374 21,716 620,256 314,684 2,653,203
Wages 41,940 42,218 80,833 100,568 518,131
Marketing and promotions 25,059 4,883 25,355 6,086 78,353
Depreciation and amortization 197 11,609 394 23,218 69,933
Professional fess 73,533 54,830 90,016 85,035 633,115
Total operating expenses 613,184 184,154 918,548 589,241 4,714,312
Income (Loss) from operations (572,076 ) (178,154 ) (818,858 ) (568,791 ) (4,147,081 )
Interest expense (17,555 ) (1,916 ) (26,797 ) (4,587 ) (122,638 )
Interest expense- derivative (1,689,122 ) (621,935 ) (1,689,122 ) (621,935 ) (23,566,069 )
Interest income 2,200 2,263 4,400 5,243 19,202
Financing expense — — — — (160,987 )
Loss on debt settlement — — — — (2,700,000 )
Debt forgiveness — — — — 10,552
Refund on expenses — — — — 34,000
Impairment expense — — — — (525,435 )
Total other income and (expenses) (1,704,477 ) (621,588 ) (1,711,519 ) (621,279 ) (27,011,375 )
Net loss before taxes $ (2,276,553 ) $ (799,742 ) $ (2,530,377 ) $ (1,190,070 ) $ (31,158,456 )
Tax provisions — — — — —
Net loss after taxes $ (2,276,553 ) $ (799,742 ) $ (2,530,377 ) $ (1,190,070 ) $ (31,158,456 )
Gain (Loss) on Available-for-Sale Securities (43,800 ) 34,200 — 30,200
Other Comprehensive Income (Loss) $ (2,320,353 ) $ (799,742 ) $ (2,496,177 ) $ (1,190,070 ) $ (31,128,256 )
Basic & diluted loss per share $ (0.01 ) $ (0.16 ) $ (0.01 ) (0.26 )
Weighted average shares outstanding 415,099,852 4,968,186 376,552,316 4,628,095
Net Loss for the period $ (2,530,377 ) $ (1,190,070 ) $ (31,158,456 )
Impairment loss — — 525,435
License revenues- non cash — — (100,000 )
Available-for-sale securities revenues (9,423 ) — (12,473 )
Non-cash compensation — — 8,400
Forgiveness of debt — — (846 )
Financing fees — — 160,987
Derivative expense 1,689,122 621,935 23,566,069
Stock for services 157,858 193,492 2,030,967
Stock options for services — — 134,291
Stock for note extension — — 15,000
Convertible Note issued consulting services 127,900 — 127,900
Bad debt — — 1,250
Discount on notes payable — — 15,000
Loss on debt settlement — 30,000 2,700,000
Strategic alliance costs — — 45,878
Effect from share exchange — — 24,618
Master purchase agreement — (298,745 ) (298,745 )
Depreciation and amortization 394 394 77,738
(Increase) decrease in prepaids 139,996 262 139,996
(Increase) decrease in accounts receivable (3,602 ) (1,000 ) (9,025 )
Increase in interest receivable (5,506 ) (2,350 ) (21,083 )
Decrease in unamortized financing fees — (2,875 )
Increase (decrease) in loan receivable to related party 3,402 163,562 293,934
Increase in unearned revenues 246 — 18,605
Increase (decrease) in accounts payable and accrued expenses (13,017 ) 77,068 54,569
Increase in accounts payable to related parties (14,698 ) 14,721 154,879
Increase (decrease) in accrued interest 22,195 (454 ) 33,854
Net cash (used) in operating activities (435,510 ) (391,185 ) (1,474,133 )
Proceeds from sale of stock — 168,875 515,845
Stock subscription payable — 12,000 7,000
Proceeds from officer loan 14,565 119,290
Payments on officer loan (3,107 ) (102,269 ) (105,376 )
Proceeds from convertible notes 593,721 119,800 1,121,086
Payments on convertible notes — — (6,000 )
Proceeds from notes payable — — 10,161
Payments on notes payable (5,161 ) (5,161 )
Payments on notes payable to related party (1,500 ) — 10,980
Contributed Capital — — 985
Net Cash Provided by Financing Activities 583,953 212,971 1,668,810
Net (Decrease) Increase in Cash 148,443 (178,214 ) 194,677
Cash at Beginning of Period 46,234 182,820 —
Cash (Overdraft) at End of Period $ 194,677 $ 4,606 $ 194,677
Convertible note payable issued for consulting services $ 127,900 $ — $ 127,900
Stock issued for purchase of license $ — $ — $ 450,000
Stock issued for conversion of convertible notes payable $ 279,088 $ 15,000 $ 839,495
Stock issued for debt settlement $ — $ — $ 2,700,000
Increase in prepaid stock compensation $ — $ — $ 257,419
On May 2, 2013, Monster Arts, Inc. (the “Company”) amended its articles of incorporation to change its name from Monster Offers to Monster Arts, Inc. The Company was incorporated under the laws of the State of Nevada, as Tropical PC Acquisition Corporation on February 23, 2007 ("Inception"). On December 11, 2007, the Company amended its Articles of Incorporation changing its name from Tropical PC Acquisition Corporation to Monster Offers. On November 9, 2012 the Company executed a share exchange agreement with Ad Shark, Inc., a privately-held California corporation incorporated April 12, 2011. As a result of the share exchange agreement, Ad Shark, Inc. became a wholly owned subsidiary of the Company. In February of 2014, Ad Shark, Inc. was dissolved as a California corporation. The Company organizes advertising sales efforts by constructing media and advertising delivery systems for Smartphone and Tablet application developers including the delivery of mobile banners, mobile video, mobile text messaging, and mobile email advertising.
On March 4, 2013, the Company entered into a Master Purchase Agreement with Iconosys, Inc., a private California corporation whom shares a common officer with the Company, whereby the Company acquired a 10% interest in Iconosys, Inc. (Referenced in the Master Purchase Agreement in Note 14).
On August 8, 2013, the Company approved the execution of an asset purchase agreement with Iconosys, Inc., a private California corporation which shares an officer with the Company, for the rights to domain names, web site content and trademark assignments of Travel America Visitor Guide (“TAVG”) which is a division of Iconosys.
On April 25, 2014, the Company entered into a subscription agreement to buy 53,000 shares of common stock of Candor Homes Corporation, (“CH, Inc.”) for $10,000 which represents 53% of the equity interest in CH, Inc. As of June 30, 2014, there has been no activity with CH, Inc. and the Company has recorded accounts payable to related party balance of $10,000. The only two directors of CH, Inc. are our chief executive officer, Wayne Irving II and his sister. CH, Inc. is activity analyzing potential land investments in Central Iowa where new homes could be built.
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Since inception (February 23, 2007) through June 30, 2014, the Company incurred an accumulated deficit during development stage of approximately $31,158,456. The Company's ability to continue as a going concern is contingent upon its ability to achieve and maintain profitable operations and its ability to raise additional capital as required.
The accompanying unaudited quarterly financial statements have been prepared on a basis consistent with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. The results of operations for the periods are not necessarily indicative of the results expected for the full year or any future period. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC on April 15, 2014 (the “2013 Annual Report”).
The Company is currently a development stage enterprise reporting under the provisions of FASB ASC Topic 915 , Development Stage Entity . The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
On April 9, 2012, the Company executed a 300 to 1 reverse stock split, which was retrospectively applied to the financial statements.
The Company considers all short-term investments with a maturity of three months or less at the date of purchase to be cash equivalents. As of June 30, 2014 and December 31, 2013, there are no cash equivalents.
At June 30, 2014, the Company had multiple convertible debentures outstanding that if-converted would result in 190,425,090 new common shares being issued.
Accounts receivable are stated at the amount management expects to collect from balances outstanding at year end. Management provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance. As of June 30, 2014 and December 31, 2013, we have $9,025 and 5,423, respectively, in accounts receivable and $1,250 charged to allowance for doubtful accounts.
The Company recognizes the costs associated with developing a website in accordance with FASB ASC 350-50 “ Website Development Costs”. Accordingly costs associated with the website consist primarily of website development costs paid to a third party. These capitalized costs are amortized based on their estimated useful life over two years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred.
The Company follows Financial Accounting Standard Board’s (FASB) Codification Topic 350-10 (“ASC 350-10”), “Intangibles - Goodwill and Other” to determine the method of amortization of its intangible assets. The Company’s intangible assets are capitalized at historical cost and are amortized over their useful lives. The Company amortizes its license of SSL5 intellectual property using the straight-line method over an estimated useful life of 10 years.
On November 1, 2013, the Company executed a joint venture agreement with Intelligent Living, Inc. (“ILIV”). You can read the full agreement in the registrant’s SEC Form 8-K filing on November 5, 2013. The Company will provide ILIV comprehensive and end-to-end turnkey business function through its development of smartphone and tablet apps. The Company’s revenue sharing will be 35% of gross payments from app sales from Google Play and 50% of gross payments from app sales through Amazon, Nook, iTunes, and others. The Company will be paid in the form of stock by ILIV which is a publically traded company trading on the OTCQB under the symbol “ILIV”. The Company will be paid 36,600,000 common shares of ILIV in quarterly installments over a period of 2 years from the date of the agreement. The Company has been paid an initial 10,000,000 common shares upon closing of the agreement which were valued at the closing price of ILIV stock on November 1, 2013 which was $0.001. This resulted in the Company recording an available-for-sale securities asset of $10,000. The available-for-sale securities asset was revalued at June 30, 2014 using the ILIV closing stock price of $0.0012 per share which resulted in the Company recording an unrealized loss on available-for-sale securities of $34,200 for the three months ended June 30, 2014. In the six months ended June 30, 2014, the Company recorded $12,000 as revenues earned pursuant to the agreement. As of June 30, 2014 and December 31, 2013, the Company had an available-for-sale securities asset balance of $40,200 and $6,000.
NOTE 5 – PROPERTY & EQUIPMENT
Property and equipment consists of the following at June 30, 2014 and December 31, 2013:
Property and equipment, net $ 2,364 $ 2,364
Less: accumulated depreciation 2,298 1,904
Property and equipment, net $ 66 $ 460
The Company acquired the property and equipment through the share exchange agreement with Ad Shark, Inc. on November 9, 2012. Therefore the Company only recognized depreciation on the equipment after the share exchange date. Depreciation expense for the six months ended June 30, 2014 and 2013 was $394.
NOTE 6 – ASSET PURCHASE AGREEMENT WITH ICONOSYS (TAVG)
On August 8, 2013, the Company approved the execution of an asset purchase agreement with Iconosys, Inc., a private California corporation which shares an officer with the Company for the rights to domain names, web site content and trademark assignments of Travel America Visitor Guide (“TAVG”) which is a division of Iconosys. Iconosys shall sell, convey, transfer and assign to the Company and the Company shall purchase all right, title and interest in and to the assets of Iconosys as follows: (i) the Iconosys trademarks (the "Trademarks"); (ii) the Iconosys domain name (the "Domain Name") together with all associated service marks, copyrights, trade names and other intellectual property associated with the Domain Name; (iii) the Iconsys web site content (the "Web Site"), together with all associated intellectual property rights to the Web Site.
In accordance with the terms and provisions of the Asset Purchase Agreement, the Company shall pay to Iconosys a purchase price of $250,000 as follows: (i) $50,000 of the Purchase Price shall be paid in cash with a cash payment of $5,000 and $45,000 to be satisfied with the issuance of a promissory note dated August 8, 2013, due August 7, 2014, and with annum interest of 4%. The remaining $200,000 of the purchase price shall be paid in stock through a stock purchase agreement dated August 8, 2013 whereby the Company will issue Iconosys 1,052,632 common shares with a fair market price of $.0.19 (based on the closing trading price of the Company's shares of common stock on the OTCQB as of August 8, 2013.
Being Iconosys is a related party to the Company, it was management’s decision to not record an intangible asset related to the asset purchase. As of December 31, 2013, the Company has not yet issued the 1,052,632 shares and has recorded them as a stock payable.
In the six months ended June 30, 2014, the Company recognized $26,419 in services income relating to the TAVG asset. The Company also recorded deferred revenues of $13,423 relating to TAVG membership sales which will be recognized over the one year subscription term.
On April 11, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $42,500 convertible note payable with interest of 8% per annum, unsecured, and due January 14, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion. The entire principle balance of $42,500 was converted into 5,606,783 common shares of the Company.
On May 13, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $63,000 convertible note payable with interest of 8% per annum, unsecured, and due February 17, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion. The entire principle balance of $63,000 was converted into 38,283,516 common shares of the Company.
On June 14, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $37,500 convertible note payable with interest of 8% per annum, unsecured, and due March 18, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion. The entire principle balance of $37,500 was converted into 25,333,333 common shares of the Company.
On July 10, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $37,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance. As of June 30, 2014, the entire principle balance of $37,500 was converted into 34,210,025 shares of common stock in the Company.
On September 12, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $32,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance. As of June 30, 2014, the entire principle balance of $32,500 was converted into 43,779,046 shares of common stock in the Company.
On December 23, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $60,000, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance. As of June 30, 2014, Asher converted $23,440 of debt into 53,875,000 shares of common stock, 28,250,000 shares were not issued till July of 2014 and recorded as a stock payable. This left a balance remaining on this note of $36,560 as of June 30, 2014.
On February 14, 2014, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $22,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance. As of June 30, 2014, there has been no conversion of debt pertaining to this outstanding convertible promissory note.
In the six months ended June 30, 2014, Asher converted $191,950 of convertible debt and $5,900 of accrued interest into 166,111,049 common shares of the Company. In the year ended December 31, 2013, Asher Enterprises converted $44,490 of convertible notes payable into 7,265,116 common shares.
Premier Venture Partners, LLC (“Premier”)
On October 24, 2013, the Company entered into a court ordered settlement with Premier Venture Partners, LLC in the amount of $63,063. Premier Venture Partners, LLC purchased bona fide accounts payable vendor accounts of the Company in the amount of $63,063 which pursuant to the courts judgment will be settled in the form of common stock of the Company. Premier’s entitled to receive the number of common shares equal to a number, “with an aggregate value equity to (i) the sum of the claim amount plus a 10% settlement fee and plaintiff’s reasonable attorney fees and expense, (ii) divided by the lower of the following: (1) fifty percent of the closing bid price for the trading day immediately preceding the order date or (2) fifty percent of the arithmetic average of the individual daily VWAPs for any five trading days within the calculation period”.
The sum of the claim amount plus a 10% settlement fee and plaintiff’s reasonable attorney fees and expenses were calculated as follows:
Claim amount $ 63,063
10% settlement fee 6,306
Attorney fees 5,770
Total $ 75,139
Management calculates the conversion price to be $0.00114 using fifty percent of the arithmetic average of the individual daily VWAPs for any five trading days within the calculation period. Accordingly, Premier is entitled to receive 65,911,456 common shares of the Company as part of the settlement. In the six months ended June 30, 2014, the Company issued 48,637,933 common shares to Premier pursuant to the court ordered settlement. As of June 30, 2014, the Company must issue approximately 10,030,106 additional common shares to Premier to settle the court order.
In the year ended December 31, 2013, the Company has issued 7,243,417 common shares to Premier and was required to issue an additional 58,668,039 shares of common stock in the Company.
On May 22, 2013 the Company executed a convertible debenture agreement with Dennis Pieczarka for a $2,500 convertible note payable with interest of 9% per annum, unsecured and due on May 22, 2014. The holder has the right to convert the principle plus interest into common shares of the Company at a conversion rate of $0.15 per share.
On April 1, 2013, the Company entered into a Securities Purchase Agreement with Christopher Thompson for a $10,000 convertible note payable due interest at 9% per annum, unsecured, and due April 1, 2014. The note is convertible into common shares of the Company at a conversion rate of $.10per share. On May 27, 2014, Christopher Thompson assigned his $10,000 note with accrued interest of $1,025 to WHC Capital, LLC.
On May 1, 2014, the Company entered into a Securities Purchase Agreement and convertible promissory note with Christopher Thompson in the amount of $15,000. The convertible promissory note has interest at 9.9% per annum, unsecured, and due May 1, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 60% of the lowest closing bid price in the ten days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
On June 26, 2013, the Company entered into a Securities Purchase Agreement with Michael Lace for a $2,800 note payable due interest at 9% per annum, unsecured, and due June 26, 2014. The note is convertible into common shares of the Company at a conversion rate of $.05 per share. In the year ended December 31, 2013, Mr. Lace exercised his conversion rights to convert $2,800 of convertible debt and $11 of accrued interest into 56,221 common shares.
On July 9, 2013, the Company entered into a Securities Purchase Agreement with Charles Knoop for a $1,000 note payable due interest at 9% per annum, unsecured, and due July 9, 2014. The note is convertible into common shares of the Company at a conversion rate of $.095 per share.
On August 8, 2013, the Company entered into a Securities Purchase Agreement with Balamurugan Shanmugam for a $5,000 note payable due interest at 9% per annum, unsecured, and due August 8, 2014. The note is convertible into common shares of the Company at a conversion rate of $.10per share. On September 26, 2013, Balamurugan exercised his right to convert his $5,000 of convertible debt and $60 of accrued interest into 50,604 common shares.
On March 7, 2014, the Company entered into a convertible promissory note with LG Capital Funding, LLC for an amount of $32,000 with 8% per annum and a maturity date of March 7, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 60% of the lowest closing bid price in the fifteen days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
On June 16, 2014, the Company entered into a convertible promissory note with LG Capital Funding, LLC for an amount of $42,000 with 8% per annum and a maturity date of June 16, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 55% of the lowest closing bid price in the fifteen days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
On March 15, 2014, the Company entered into a convertible promissory note with JMJ Financial for up to $500,000 with 0% for the first three months, then 12% per annum thereafter. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 60% of the lowest closing bid price in the twenty-five days prior to conversion. In March of 2014, the Company received $30,000 pursuant to the convertible promissory note with JMJ Financial. In June of 2014, the Company received an additional $30,000 pursuant to the convertible promissory note with JMJ Financial. As of June 30, 2014, the Company has received only $60,000 pursuant to this convertible promissory note. There has been no principle converted as of June 30, 2014.
On April 24, 2014, IBC Funds, LLC, a Nevada limited liability company, acquired by assignment, debts owed by Monster Arts, Inc. to fourteen (14) creditors in the amount of $208,321. Likewise, on April 24, 2014, IBC Funds and Monster Arts, Inc. executed that certain Settlement Agreement and Stipulation, whereby Monster Arts, Inc. agreed to settle the debt of $208,321, and to pay the debt by the issuance of shares pursuant to Section 3(a)(10) of the Securities Act, which provides that the issuance of shares are exempt from the registration requirement of Section 5 of the Securities Act. In relevant part, Section 3(a)(10) of the Securities Act provides an exemption from the registration requirement for securities: (i) which are issued in exchange for a bona fide claim, (ii) where the terms of the issuance and exchange are found by a court to be fair to those receiving shares, (iii) notice of the hearing is provided to those to receive shares and they are afforded the opportunity to be heard, (iv) the issuer must advise the court prior to its hearing that it intends to rely on the exemption provided in Section 3(a)(10) of the Securities Act, and (v) there cannot be any impediments to the appearance of interested parties at the hearing.
On April 25, 2014, in a court proceeding styled IBC Funds, LLC, a Nevada limited Liability Company, Plaintiff vs. Monster Arts, Inc ., a Nevada corporation, Defendant, bearing Civil Action in the Circuit Court in the Twelfth Judicial Circuit in and for Sarasota County, Florida , after due notice, the court entered an order approving the Settlement Agreement and Stipulation. In satisfaction of the debt, we agreed to issue shares of our common stock in one or more tranches to IBC Funds in the manner contemplated in the Settlement Agreement and Stipulation at a conversion price of 50% discount to market as calculated as the lowest closing trading price in the 15 (15) days prior to a conversion notice. In accordance with the terms of the Settlement Agreement and Stipulation, the court was advised of our intention to rely upon the exception to registration set forth in Section 3(a)(l0) of the Securities Act to support the issuance of the shares.
As set forth in the order, the court found that the terms and conditions of the exchange were fair to Monster Arts, Inc. and IBC Funds within the meaning of Section 3(a)(10) of the Securities Act, and that the exchange of the debt for our securities was not made under Title 11 of the United States Code.
As of June 30, 2014, as permitted by the court order and the Settlement Agreement and Stipulation, the Company has issued 95,000,000 shares to IBC LLC for the conversion of $56,000. The shares were issued free of any restrictions as permitted by Section 3(a)(10) of the Securities Act.
On May 27, 2014, Christopher Thompson assigned his $10,000 convertible note payable with accrued interest of $1,025 to WHC Capital, LLC. The original convertible note payable and securities purchase agreement is dated April 1, 2013,in the amount of $10,000 with interest of 9% per annum, unsecured, and due April 1, 2014. As of June 30, 2014, there has been $10,000 of principle and $1,051 in accrued interest converted on this note leaving a remaining balance of $0 on this note.
On April 30, 2014, the Company entered into a convertible promissory note with WHC Capital, LLC in the amount of $220,000 , with interest of 12% per annum, unsecured, and due April 30, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 55% of the lowest closing bid price in the fifteen days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
On June 27, 2014, the Company entered into a convertible promissory note with Beaufort Capital Partners LLC in the amount of $50,000 with 12% interest per annum and a maturity date of December 27, 2014. The convertible note’s principle and accrued interest may be converted into common shares of the Company’s after the maturity date at a discount of 50% off the lowest traded price during the prior 20 trading days to a notice of conversion. As of June 30, 2014, there has been no debt converted on this note.
On May 1, 2014, the Company entered into a convertible promissory note with Jennifer Salwender in the amount of $20,000 with 9.9% interest per annum and a maturity date of May 1, 2015. The convertible note’s principle and accrued interest may be converted into common shares of the Company’s after 180 days from the issuance date at a discount of 40% off the lowest closing traded price during the prior 10 trading days to a notice of conversion. As of June 30, 2014, there has been no debt converted on this note.
On May 2, 2014, the Company entered into a convertible promissory note with ADAR BAYS, LLC in an amount of $30,000 with 8% per annum and a maturity date of May 2, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 50% of the lowest closing bid price in the fifteen days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
On April 16, 2014, the Company entered into a convertible promissory note with Brent Denlinger in an amount of $15,000 with 9.9% per annum and a maturity date of April 16, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 60% of the lowest closing bid price in the ten days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
On June 13, 2014, the Company entered into a convertible promissory note with KBM Worldwide, Inc. in an amount of $63,000 with 8% per annum and a maturity date of March 17, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 55% of the lowest closing bid price in the ten days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
Jessie Redmayne
On April 4, 2014, the Company entered into a convertible promissory note with Jessie Redmayne in an amount of $5,000 with 9.9% per annum and a maturity date of April 4, 2015. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 60% of the lowest closing bid price in the ten days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
Anubis Capital Partners
On April 1, 2014, the Company executed a convertible promissory note with Anubis Capital Partners in the amount of $127,900 with interest of 10% per annum and a maturity date of April 1, 2015. The convertible promissory note was executed in return for consulting services provided to the Company. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 50% of the lowest closing bid price in the twenty days prior to conversion. As of June 30, 2014, there has been no debt converted on this note.
The following table summarizes the total outstanding principle on convertible notes payable:
Convertible Notes Payable- Asher Enterprises, Inc. $ 59,060 $ 228,510
Convertible Notes Payable - Tangier Investors, LLP — —
Convertible Note Payable- Premier Venture Partners LLC — 17,370
Convertible Note Payable- Dennis Pieczarka 2,500 2,500
Convertible Note payable - Christopher Thompson 15,000 10,000
Convertible Note payable - James Ault 2,565 2,565
Convertible Note payable - Charles Knoop 1,000 1,000
Convertible Note payable - LG Capital Funding 74,000 —
Convertible Note payable - JMJ Financial 60,000 —
Convertible Note payable - IBC Funds, LLC 152,321 —
Convertible Note payable - WHC Capital, LLC 21,949 —
Convertible Note payable - ADAR BAYS, LLC 30,000 —
Convertible Note payable - Beaufort Capital 50,000 —
Convertible Note payable - Brent Denlinger 15,000 —
Convertible Note payable - Jessie Redmayne 5,000 —
Convertible Note payable - Jennifer Salwender 20,000 —
Convertible Note payable - Anubis Capital Partners 127,900 —
Convertible Note payable - KBM Worldwide 63,000 —
Total $ 699,295 $ 261,945
The accrued interest on convertible notes payable at June 30, 2014 and December 31, 2013 was $33,854 and 11,695, respectively.
At June 30, 2014 and December 31, 2013, the Company had $10,047,485 and 21,876,947 in derivative liability pertaining to the outstanding convertible notes. The Company calculates the derivative liability using the Black Scholes Model which takes into consideration the stock price on the grant date, exercise price with discount to market conversion rate, stock volatility, expected life of the note, risk-free rate, annual rate of quarterly dividends, call option value and put option value.
On July 19, 2013, the Company amended its articles of incorporation to increase its authorized shares from 75,000,000 to 750,000,000 of which 730,000,000 were designated as common stock and 20,000,000 were designated as preferred stock. The stocks have a par value of $0.001. The Company then designated 10,000,000 preferred shares as Series A Preferred Stock. Each share of Series A Preferred Stock can vote equal to 100 shares of common stock and can be converted to common stock at a rate of 1 to 1.
The Company has designated 20,000,000 preferred shares as Series A Preferred Stock, par value $0.001. Each share of Series A Preferred Stock can vote equal to 100 shares of common stock and can be converted to common stock at a rate of 1 to 1.
The Company has 20,000,000 Series A preferred shares issued and outstanding as of June 30, 2014 all of which were issued to the Company’s chief executive officer, Wayne Irving II, for services rendered.
In the year ended December 31, 2013, the Company issued 26,136,087 common shares of which 861,751 shares were for $454,300 cash ($278,425 received in 2012), 7,355,667 shares were to consultants for services, 14,775,358 shares were for the reduction of $128,083 in convertible debt and $82 of accrued interest, and 3,143,311 shares were for the conversion of 13,767,684 shares of Ad Shark. The shares to consultants were valued at the closing stock price on the date of the executed agreement. This resulted in a consulting expense of $814,275 being recorded for the year ended December 31, 2013. The uncompleted portions of the consulting contracts for future services were recorded as prepaid expenses (See Note 4 for further details). At December 31, 2013, the Company recorded $139,996 in prepaid expenses pursuant to future consulting services to be performed in 2014 pursuant to contract obligations. Of the 7,355,667 shares issued to consultants, 323,833 shares were incorrectly issued and later returned and cancelled.
In the six months ended June 30, 2014, the Company issued 510,108,831 common shares of which 166,111,049 were issued to Asher Enterprises, Inc. for the conversion of $191,950 in convertible debt and $5,900 in accrued interest, 48,637,933 shares were issued to Premier Venture Partners, LLC pursuant to the court ordered settlement, 95,000,000 shares to IBC, LLC for the conversion of $56,000, 100,000,000 shares to our chief executive officer, Wayne Irving, for the reduction of $25,000 in accrued payroll liability, 22,325,475 to WHC Capital, LLC for the conversion of $11,051 in convertible dent, 19,222,681 shares were issued to Ad Shark, Inc. shareholders for the conversion of their Ad Shark, Inc. shares at a ratio of 4.38 Ad Shark shares to Monster Arts Inc. shares and 84,055,110 shares were to consultants for services by June 30, 2014. The Company valued the 84,055,110 shares to consultants at the closing share price on the date of issuance which resulted in the Company recording a non-cash consulting expense of $137,858.
NOTE 9 – CONTINGENCY AGREEMENTS
On March 4, 2013, the Company and Iconosys, a privately held corporation, which shares an officer with the Company, entered into a Master Purchase Agreements in order for the Company to purchase, and for Iconosys to sell, certain intellectual property assets, including, without limitation, domain names, trademarks, smart phone apps. In addition, the Company received 15,046,078 shares of Iconosys common stock, $0.001 par value, as consideration for the cancellation of $295,862 in advances to Iconosys and $2,884 in accrued interest receivable. The Iconosys stock received accounts for approximately 10% of the 150,460,781 shares of Iconosys issued and outstanding as of June 30, 2014. Since this agreement was between related parties, being the two company’s share an officer, the Company did not record an asset for the excess consideration received but recorded the debit to additional paid in capital.
Management Service Agreement with Iconosys
On July 16, 2013, the Company executed a management service agreement with a subdivision of Iconosys called Text Kills. Iconosys shares an officer with the Company. The Company will provide service and management support for Text Kills events which includes but is not limited to raising awareness, public education campaigns, and managing the Text Kills tour bus. In the six months ended June 30, 2014 and in the year ended December 31, 2013 the Company recognized $250 and $5,387 in commission revenues from related parties relating to Text Kills.
Joint Venture agreement with Intelligent Living Inc.
On November 1, 2013, the Company executed a joint venture agreement with Intelligent Living, Inc. (“ILIV”). You can read the full agreement in the registrant’s SEC Form 8-K filing on November 5, 2013. The Company will provide ILIV comprehensive and end-to-end turnkey business function through its development of smartphone and tablet apps. The Company’s revenue sharing will be 35% of gross payments from app sales from Google Play and 50% of gross payments from app sales through Amazon, Nook, iTunes, and others. The Company will be paid in the form of stock by ILIV which is a publically traded company trading on the OTCQB under the symbol “ILIV”. The Company will be paid 36,600,000 common shares of ILIV in quarterly installments over a period of 2 years from the date of the agreement. The Company has been paid an initial 10,000,000 common shares upon closing of the agreement which were valued at the closing price of ILIV stock on November 1, 2013 which was $0.001. This resulted in the Company recording an available-for-sale securities asset of $10,000. The available-for-sale securities asset was revalued at June 30, 2014 using the closing price of ILIV of $0.0012 per share which resulted in the Company recording an unrealized gain on available-for-sale securities of $34,200.
Employment Agreement with Chief Executive Officer, Wayne Irving
On August 1, 2011, the Company’s wholly owned subsidiary, Ad Shark, entered into an employment agreement with its President Wayne Irving. The term of employment shall be three (3) years, commencing on the August 1, 2011 and terminating on July 31, 2014, or at a later mutually agreeable date. Salary compensation is to be paid at the rate of $88,500 annually, payable on a monthly basis. On the anniversary of employment, this rate will increase 5% annually. Monster Arts, Inc. absorbed the employment agreement when Ad Shark was dissolved in early 2014. As of June 30, 2014 and December 31, 2013, the Company had accrued wages of $151,039 and $155,706, respectively which are included in accounts payable and accrued expenses to related party balance. In the six months ended June 30, 2014, the Company entered into a debt settlement agreement with its chief executive officer, Wayne Irving, whereby the Company issued 100,000,000 shares of common stock for the reduction of $25,000 in accrued payroll liability.
Consulting Agreement with Mind Solutions, Inc.
On February 19, 2014, the Company entered into a consulting agreement with Mind Solutions, Inc., whereby Mind Solutions, Inc. will provide the Company with thought controlled software development services over a one year term. The Company will pay Mind Solutions, Inc. four quarterly payments of $50,000 in restricted common stock of the Company. In the six months ended June 30, 2014, the Company issued 39,583,333 shares of common stock.
The Company has 10,000,000 Series A preferred shares issued and outstanding as of June 30, 2014 which were issued to the Company’s chief executive officer, Wayne Irving II, for services rendered.
In August of 2014, the Company appointed Tisha Lawton as the Secretary, Treasurer and Chief Financial Officer of the Company. Ms. Lawton is a sibling of our Chief Executive Officer, Wayne Irving II.
Equity interest in Candor Homes Corporation
Debt Settlement Agreement with Wayne Irving, II
In the six months ended June 30, 2014, the Company entered into a debt settlement agreement with its chief executive officer, Wayne Irving, whereby the Company issued 100,000,000 shares of common stock for the reduction of $25,000 in accrued payroll liability.
Asset Purchase Agreement with Iconosys for TAVG
The Company approved the execution of certain asset purchase and domain name, web site content and trademark assignment agreement dated August 8, 2013 with Iconosys, Inc., a private California corporation which shares an officer with the Company.
On July 16, 2013, the Company executed a management service agreement with a subdivision of Iconosys called Text Kills. Iconosys shares an officer with the Company. The Company will provide service and management support for Text Kills events which includes but is not limited to raising awareness, public education campaigns, and managing the Text Kills tour bus. In the six months ended June 30, 2014 and for the year ended December 31, 2013 the Company recognized $250 and $5,387 of commission revenues from related parties relating to Text Kills.
In 2012, the Company had certain debts paid directly by Iconosys, a private California corporation which shares an officer with the Company. The amounts paid on behalf of the Company totaled $13,250 as of June 30, 2014 and December 31, 2013. They were recorded as a note payable to related party. The note payable has terms of 0% interest and is payable on demand.
Pursuant to the asset purchase agreement with Iconosys executed on August 8, 2013, further described in Note 7, the Company issued a promissory note to Iconosys in the amount of $45,000, due August 7, 2014, with annum interest of 4%.
At June 30, 2014 and December 31, 2013, the Company had notes payable to related parties balance of $55,980 and $57,480.
The Company’s subsidiary, Ad Shark Inc., has a $300,000 line of credit agreement with Iconosys. The line of credit agreement has terms of 4%, payable on demand. Iconosys is a private California corporation which shares an officer with the Company. Mr. Irving was appointed CFO in May of 2012 and then appointed CEO in late 2012. Iconosys was at one time the parent company to Ad Shark, Inc. At June 30, 2014 and December 31, 2013, the total loan receivable balance advanced to Iconosys is $313,333 and $290,532, respectively. At June 30, 2014 and December 31, 2013, the accrued interest receivable to related party balance was $21,083 and $15,577, respectively.
On August 1, 2011, the Company’s wholly owned subsidiary, Ad Shark, entered into an employment agreement with its President Wayne Irving. The term of employment shall be three (3) years, commencing on the August 1, 2011 and terminating on July 31, 2014, or at a later mutually agreeable date. Salary compensation is to be paid at the rate of $88,500 annually, payable on a monthly basis. On the anniversary of employment, this rate will increase 5% annually. Monster Arts, Inc. absorbed the employment agreement when Ad Shark was dissolved in early 2014. As of June 30, 2014 and December 31, 2013, the Company had accrued wages of $151,039 and $155,706, respectively which are included in accounts payable and accrued expenses to related party balance.
The accounts payable to related parties balance at June 30, 2014 and December 31, 2013 was $154,879 and $169,577.
The Company was loaned money by Wayne Irving, the chief executive officer of the Company, with 0% interest and payable on demand. At June 30, 2013 and December 31, 2013 the loan from officer balance was $14,004 and $17,021.
As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full and effect and to honor a Line of Credit Agreement dated June 19, 2012 (the “LOC Agreement”) between Ad Shark, as “Lender,”, and Iconosys, as “Borrower.” This is a $300,000 revolving line of credit, pursuant to which, as of the effective time of the Merger, Iconosys has an obligation to repay Ad Shark approximately $271,000 in borrowings. This represents funds borrowed by Iconosys from Ad Shark on various dates during the period June 19, 2012 through October 9, 2012. Monster Offers agreed to assume Ad Shark’s rights and obligations under the LOC Agreement as an integral part of this Merger. As of the Effective Time of the Merger, Monster Offers also owed Iconosys approximately $75,000 in repayments of monies previously borrowed by Monster Offers from Iconosys, and which obligation, as agreed to by Monster Offers and Ad Shark in the Merger Agreement, may be offset by Iconosys against Iconosys’ repayment obligations to Monster Offers under the LOC Agreement.
1. On July 11, 2014, the Company entered into a Securities Exchange and Settlement Agreement (SE&S) with WHC Capital, LLC (WHC, LLC), whereby WHC, LLC purchased $5,161 of note payables debt due to Jennifer Salwender pursuant to an Assignment of Debt Agreement.
2. On July 14, 2014, the Company entered into a Debt Purchase Agreement with Sojourn Investments, LP whereby the Company issued an aggregate principle amount of $37,500 in convertible debt for a purchase price of $25,000. The convertible note has interest of 12% per annum and is convertible into common shares of the Company at a conversion rate of 50% off the lowest trading market price for 20 days prior to conversion.
3. On July 30, 2014, the Board of Directors of the Company authorized and approved the execution of a settlement agreement with the Company’s chief executive officer, Wayne Irving II, whereby the Company will issue 250,000,000 restricted common shares in return for the reduction in $62,500 in accrued liabilities payable to Mr. Irving pursuant to an employment agreement.
4. From July 1, 2014 to the date of this filing, the Company issued 419,187,882 additional common shares of the Company of which 158,411,684 shares were for the reduction of $57,883 in convertible debt from four unrelated third parties, 10,776,198 shares for consulting services and 250,000,000 shares to our chief executive officer for the reduction of $25,000 of accrued payroll liabilities.
5. On August 8, 2014, our Board of Directors and majority shareholders, believing it to be in the best interests of the Company and its shareholders, approved the amendment to the Company's Articles to increase the shares of blank check preferred stock, $0.001 par value per share, from 20,000,000 to 100,000,000 shares (the "Preferred Stock”).
6. On August 8, 2014, our Board of Directors and majority shareholders, approved a reverse stock split upon receipt of all necessary regulatory approvals and the passage of all necessary waiting periods. The reverse split would reduce the number of outstanding shares of our common stock at a ratio of 100 to 1 but have no effect on the number of authorized shares of Common Stock or Preferred Stock.
7. In August of 2014, the Company amended is articles of incorporation to increase the number of authorized common shares from 730,000,000 to 5,000,000,000 with a par value of $0.001.
8. In August of 2014, the Company appointed Tisha Lawton as the Secretary, Treasurer and Chief Financial Officer of the Company. Ms. Lawton is a sibling of our Chief Executive Officer, Wayne Irving II.
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
On May 2, 2013, the Company amended its articles of incorporation to change its name from Monster Offers to Monster Arts, Inc. Monster Arts, Inc. (the “Company") was incorporated in the State of Nevada on February 23, 2007, under the name Tropical PC Acquisition Company. On December 11, 2007, the Company amended its Articles of Incorporation changing its name from Tropical PC Acquisition Inc., to Monster Offers. The Company was originally incorporated as a wholly owned subsidiary of Tropical PC, Inc., a Nevada corporation. Tropical PC was incorporated September 22, 2004.
On November 9, 2012, the Monster Offers, Monster Offers Acquisition Corporation, a Nevada corporation and Ad Shark, Inc., a privately-held California corporation (“Ad Shark”), entered into a Acquisition Agreement and Plan of Merger pursuant to which the Company, through its wholly-owned subsidiary, Merger Sub, acquired Ad Shark in exchange for approximately 27,939,705 shares of the Company's unregistered restricted common stock, which were issued to the holders of Ad Shark stock based on their pro-rata ownership.
On August 8, 2013, the Company approved the execution of an asset purchase agreement with Iconosys, Inc., a private California corporation which shares an officer with the Company for the rights to domain names, web site content and trademark assignments.
Amendment to Articles of Incorporation- Name Change
Amendment to Articles of Incorporation- Increase Series A Preferred Stock
In March of 2014, the Company amended its articles of incorporation with the State of Nevada to increase the number of Series A Preferred Shares from 10,000,000 to 20,000,000.
Amendment to Articles of Incorporation- Increase Authorized Preferred Stock
On August 8, 2014, our Board of Directors and majority shareholders, believing it to be in the best interests of the Company and its shareholders, approved the amendment to the Company's Articles to increase the shares of blank check preferred stock, $0.001 par value per share, from 20,000,000 to 100,000,000 shares (the "Preferred Stock”).
Amendment to Articles of Incorporation- Approval of Reverse Stock Split
On August 8, 2014, our Board of Directors and majority shareholders, approved a reverse stock split upon receipt of all necessary regulatory approvals and the passage of all necessary waiting periods. The reverse split would reduce the number of outstanding shares of our common stock at a ratio of 100 to 1 but have no effect on the number of authorized shares of Common Stock or Preferred Stock.
Amendment to Articles of Incorporation- Increase in authorized Common Shares
In August of 2014, the Company amended is articles of incorporation to increase the number of authorized common shares from 730,000,000 to 5,000,000,000 with a par value of $0.001.
Appointment of Secretary, Treasurer and Chief Financial Officer
On April 1, 2013, the Company entered into a Securities Purchase Agreement with Christopher Thompson for a $10,000 note payable due interest at 9% per annum, unsecured, and due April 1, 2014. The note is convertible into common shares of the Company at a conversion rate of $.10/share. As the conversion rate is fixed and below the market price of the Company’s stock at June 30, 2013, the Company calculated a derivative expense of $27,483 at June 30, 2013 using the Black Scholes Model.
On April 11, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $42,500 convertible note payable with interest of 8% per annum, unsecured, and due January 14, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion. As the conversion rate is floating in nature, the Company calculated a derivative expense of $112,016 at June 30, 2013 using the Black Scholes Model.
On May 13, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $63,000 convertible note payable with interest of 8% per annum, unsecured, and due February 17, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion. As the conversion rate is floating in nature, the Company calculated a derivative expense of $212,766 at June 30, 2013 using the Black Scholes Model.
On May 22, 2013 the Company executed a convertible debenture agreement with Dennis Pieczarka for a $2,500 convertible note payable with interest of 9% per annum, unsecured and due on May 22, 2014. The holder has the right to convert the principle plus interest into common shares of the Company at a conversion rate of $0.15 per share. As the conversion rate is fixed and below the market price of the Company’s stock at June 30, 2013, the Company calculated a derivative expense of $27,483 at June 30, 2013 using the Black Scholes Model.
On June 14, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $37,500 convertible note payable with interest of 8% per annum, unsecured, and due March 18, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion. As the conversion rate is floating in nature, the Company calculated a derivative expense of $256,584 at June 30, 2013 using the Black Scholes Model.
On June 26, 2013, the Company entered into a Securities Purchase Agreement with Michael Lace for a $2,800 note payable due interest at 9% per annum, unsecured, and due June 26, 2014. The note is convertible into common shares of the Company at a conversion rate of $.05/share. As the conversion rate is fixed and below the market price of the Company’s stock at June 30, 2013, the Company calculated a derivative expense of $10,169 at June 30, 2013 using the Black Scholes Model.
On July 10, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $37,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance.
On September 12, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $32,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance.
On July 9, 2013, the Company entered into a Securities Purchase Agreement with Charles Knoop for a $1,000 note payable due interest at 9% per annum, unsecured, and due July 9, 2014. The note is convertible into common shares of the Company at a conversion rate of $.095/share.
On August 8, 2013, the Company entered into a Securities Purchase Agreement with Balamurugan Shanmugam for a $5,000 note payable due interest at 9% per annum, unsecured, and due August 8, 2014. The note is convertible into common shares of the Company at a conversion rate of $.10/share. On September 26, 2013, Balamurugan exercised his right to convert his $5,000 of convertible debt and $60 of accrued interest into 50,604 common shares.
On March 15, 2014, the Company entered into a convertible promissory note with JMJ Financial for up to $500,000 with 0% for the first three months, then 12% per annum thereafter. The convertible note’s principle and accrued interest may at any time be converted into shares of the Company’s stock at a conversion rate equal to 60% of the lowest closing bid price in the twenty-five days prior to conversion. As of June 30, 2014, the Company has received only $30,000 pursuant to this convertible promissory note. There has been no principle converted as of June 30, 2014.
The Board of Directors of the Company approved the execution of certain asset purchase and domain name, web site content and trademark assignment agreement dated August 8, 2013 (the "Asset Purchase Agreement") with Iconosys, Inc., a private California corporation ("Iconosys"). In accordance with the terms and provisions of the Asset Purchase Agreement, Iconosys shall sell, convey, transfer and assign to the Company and the Company shall purchase all right, title and interest in and to the assets of Iconosys as follows: (i) the Iconosys trademarks (the "Trademarks"); (ii) the Iconosys domain name (the "Domain Name") together with all associated service marks, copyrights, trade names and other intellectual property associated with the Domain Name; (iii) the Iconsys web site content (the "Web Site"), together with all associated intellectual property rights to the Web Site.
In further accordance with the terms and provisions of the Asset Purchase Agreement, the Company shall pay to Iconsys a purchase price of $250,000 as follows: (i) $50,000 of the Purchase Price shall be paid in cash with a cash payment of $5,000 to be paid within five days of closing and the balance of the $45,000 to be paid pursuant to the terms and provisions of that certain promissory note described below; and (ii) $200,000 of the Purchase Price shall be paid in the form of the issuance to Iconosys of 1,052,632 shares of the Company's restricted common stock at a per share price of $0.19 per share (which per share price was based on the closing trading price of the Company's shares of common stock on the OTC Bulletin Board as of August 8, 2013.
Iconosys is a leading developer of innovative mobile and stationary telecommunication applications and technologies. It develops safety, security, and privacy-oriented technologies for modern-age personal devices and platforms. As a leader in the mobile communications market, Iconosys develops its technologies into retail grade Smart Device and web applications (apps) that promote an enhanced user experience. Iconosys has developed nearly 500 Smart Device retail grade apps since 2009.
Iconosys develops both client-side and server-side applications that are not only unique trendsetters, but also designed to serve the time-sensitive, constantly evolving needs of today’s and tomorrow’s consumers. Iconosys and its client-side app development team are specialists in developing solutions for Android, iPhone, BlackBerry, Palm, Windows, Chrome, Windows Phone/Windows Mobile and Symbian platforms. Iconosys cultivates compelling competitive advantages in three primary areas of its business focus: research and development; hands-on client services; and mobile marketing strategies.
In conjunction with the Asset Purchase Agreement, on August 8, 2013, the Board of Directors approved the execution of that certain promissory note dated August 8, 2013 in the principal amount of $45,000 issued to Iconosys (the "Note"). Interest accrues on the Note at a rate of 4% per annum with a maturity date of August 7, 2014.
On March 4, 2013, the Company and Iconosys, a privately held corporation which shares an officer with the Company, entered into a Master Purchase Agreements in order for the Company to purchase, and for Iconosys to sell, certain intellectual property assets, including, without limitation, domain names, trademarks, and smart phone apps, and 15,046,078 shares of Iconosys common stock, $0.001 par value, in consideration for the Company’s cancellation of $295,862 in advances to Iconosys and $2,884 in accrued interest receivable. The Company valued the 15,046,078 shares received from Iconosys at the fair market value of $0.10 which was calculated from the average stock price paid by cash investors. This resulted in valuing the stock received at $1,504,608. The stock received accounts for approximately 10% of the 150,460,781 shares of Iconosys issued and outstanding as of June 30, 2013. Since this agreement was between related parties, the Company did not record an asset for the excess consideration received but recorded the debit to additional paid in capital.
On August 8, 2013, the Company approved the execution of an asset purchase agreement with Iconosys, Inc., a private California corporation which shares an officer with the Company for the rights to domain names, web site content and trademark assignments. Iconosys shall sell, convey, transfer and assign to the Company and the Company shall purchase all right, title and interest in and to the assets of Iconosys as follows: (i) the Iconosys trademarks (the "Trademarks"); (ii) the Iconosys domain name (the "Domain Name") together with all associated service marks, copyrights, trade names and other intellectual property associated with the Domain Name; (iii) the Iconsys web site content (the "Web Site"), together with all associated intellectual property rights to the Web Site.
In accordance with the terms and provisions of the Asset Purchase Agreement, the Company shall pay to Iconosys a purchase price of $250,000 as follows: (i) $50,000 of the Purchase Price shall be paid in cash with a cash payment of $5,000 and $45,000 to be satisfied with the issuance of a promissory note dated August 8, 2013, due August 7, 2014, and with annum interest of 4%. The remaining $200,000 of the purchase price shall be paid in stock through a stock purchase agreement dated August 8, 2013 whereby the Company will issue Iconosys 1,052,632 common shares with a fair market price of $.0.19 (based on the closing trading price of the Company's shares of common stock on the OTC Bulletin Board as of August 8, 2013.
Being Iconosys is a related party to the Company, it was management’s decision to not record an intangible asset related to the asset purchase. As of September 30, 2013, the Company has not yet issued the 1,052,632 shares and has recorded them as a stock payable.
IBC Funds Settlement Agreement
On April 24, 2014, our Board of Directors authorized the execution of that certain settlement agreement and stipulation dated April 24, 2014 (the "Settlement Agreement") with IBC Funds LLC, a Nevada limited liability company ("IBC Funds").
We had certain payables outstanding due and owing to creditors aggregating $208,320.82 (collectively, the "Payables"). IBC Funds purchased the Payables from their respective holders and subsequently filed a claim against us in the Circuit Court of the Twelfth Judicial Circuit in and for Sarasota County, Florida for the payment of the Payables. Thus, we and IBC Funds desired to resolve and settle the Payables and entered into the Settlement Agreement.
On the dates listed below, IBC Funds delivered a conversion notice to us (the "Conversion Notice") proposing certain dollar amount conversions pertaining to the Settlement Agreement which were convertible into shares of common stock. The shares of common stock were exempt from registration under the Securities Act of 1933, as amended, in reliance upon Section 3(a)(10).
Date of Conversion Dollar Amount Number of Shares Issued
April 25, 2014 $ 6,300.00 7,000,000
May 6, 2014 5,950.00 7,000,000
May 15, 2014 5,250.00 7,000,000
May 22, 2014 4,000.00 8,000,000
May 28, 2014 4,000.00 8,000,000
June 4, 2014 4,500.00 8,000,000
June 10, 2014 4,500.00 10,000,000
June 16, 2014 4,500.00 10,000,000
June 24, 2014 4,500.00 10,000,000
June 27, 2014 6,000.00 10,000,000
July 8, 2014 5,500.00 10,000,000
July 11, 2014 4,500.00 10,000,000
July 11, 2014 3,000.00 10,000,000
July 23, 2014 3,000.00 10,000,000
July 29, 2014 3,000.00 10,000,000
The Board of Directors determined it was in the best interests of the Company and its shareholders to enter into the Settlement Agreement and resulting 3(a)(10) issuance of shares in order to ensure our successful operational aspects within the next six months and to accelerate the possibility of generation of revenue from multiple sources.
Monster Arts, Inc. is a daily deal aggregator, collecting daily deals from multiple sites in local communities across the U.S. and Canada. Focused on providing innovation and utility for daily deal consumers and providers, the company collects and publishes thousands of daily deals and allows consumers to organize these deals by geography or product categories, or to personalize the results using keyword search.
Results of Operations for the Three Month Ended June 30, 2014 and 2013
During the three month ended June 30, 2014 and 2013, the Company generated $41,108 in revenues as compared to $6,000 for the three months ended June 30, 2013. To date, the Company has earned minimal revenues and there can be no assurances that the Company can be profitable or that the Company will not incur operating losses in the future.
During the three month ended June 30, 2014, the Company incurred operating expenses of $613,184 as compared to operating expenses of $178,154 incurred during the three month ended June 30, 2013. Operating expenses for the three month ended June 30, 2014 increased by $435,030 compared to the prior year three months ended. The increase was due to the following:
Consulting expenses increased by $381,658 to $403,374 from $21,716 for the three months ended June 30, 2014 and 2013, respectively, primarily due to the issuance of stock for consulting services.
Salaries and wages decreased by $278 to $41,940 from $42,218 for the three months ended June 30, 2014 and 2013, respectively. The decrease was minimal as wages have stayed fairly consisitent with the presence of the same staff payroll and employment agreement with the Company’s chief executive officer, Wayne Irving II.
Professional fees increased by $73,533, to $54,830 from $18,703 for the three months ended June 30, 2014 and 2013, respectively, primarily due to increase in legal and accounting fees.
Therefore, during the three month period ended June 30, 2014, the Company incurred a loss from operations of $572,076 as compared to a loss from operations of $178,154 during the three month period ended June 30, 2013.
During the three month ended June 30, 2014, the Company further incurred: (i) interest income of $2,200 (2013: $2,263); (ii) interest expense of $17,555 (2013: $1,916); (iii) interest expense – derivative of $1,689,122 (2013: $621,935).
As a result of the above, the Company incurred a net loss of $2,276,553 and of $799,742 for the three month ended June 30, 2013, respectively.
Results of Operations for the Six Month Ended June 30, 2014 and 2013
During the six month ended June 30, 2014 and 2013, the Company generated $98,690 in revenues as compared to $20,450 for the six months ended June 30, 2013. To date, the Company has earned minimal revenues and there can be no assurances that the Company can be profitable or that the Company will not incur operating losses in the future.
During the six month ended June 30, 2014, the Company incurred operating expenses of $917,548 as compared to operating expenses of $589,241 incurred during the six month ended June 30, 2013. Operating expenses for the six month ended June 30, 2014 increased by $328,307 compared to the prior year six months ended. The increase was due to the following:
Consulting expenses increased by $307,572 to $622,256 from $314,684 for the six months ended June 30, 2014 and 2013, respectively, primarily due to the issuance of stock for consulting services.
Salaries and wages decreased by $19,735 to $80,833 from $100,568 for the six months ended June 30, 2014 and 2013, respectively, primarily due to less wages as the Company transferred salaried work to outside consultants.
Professional fees increased by $4,981 to $90,016 from $85,035 for the six months ended June 30, 2014 and 2013, respectively, primarily due to increase in legal and accounting fees.
Therefore, during the six month period ended June 30, 2014, the Company incurred a loss from operations of $818,858 as compared to a loss from operations of $568,791 during the six month period ended June 30, 2013.
During the six month ended June 30, 2014, the Company further incurred: (i) interest income of $4,400 (2013: $5,243); (ii) interest expense of $26,797 (2013: $4,5787; (iii) interest expense – derivative of $1,689,122 (2013: 621,35).
As a result of the above, the Company incurred a net loss of $2,530,377 and of $1,190,070 for the six month ended June 30, 2013, respectively.
Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. The following table provides certain selected balance sheet comparisons between June 30, 2014 and December 31, 2013:
(10,553,088)
(21,994,223) 11,441,135 52.0%
Cash 194,677 46,234 148,443 Over 100%
Total Current Assets 510,665 496,512 14,153 2.9%
Total Assets 550,931 502,972 47,959 (9.5%)
Accounts payable and accrued liabilities 218,201 248,822 (30,621) (12.3%)
Loan from officer 14,004 17,021 (3,017) (17.7%)
Notes payable to related party 55,980 57,480 (1,500) (2.6)%
Convertible notes payable 699,295 261,945 437,350 Over 100%
Total current liabilities 11,063,753 22,490,735 (11,426,982) (50.8%)
Total liabilities 11,063,753 22,490,735 (11,426,982) (50.8%)
At June 30, 2014, our working capital deficit decreased when compared to December 31, 2013, primarily as a result of a decrease of $11,829,462 in derivative liability from the convertible notes issued.
Net cash used for continuing operating activities during the six months ended June 30, 2014 was $435,510. Non-cash items totaled approximately $2,094,867 which included the following:
$157,858 of stock for services representing the value of shares issued to consultants for services rendered to the Company
$127,900 of convertible notes payable issued for consulting services
$1,689,122 in derivative expense
• $394 in depreciation and amortization
• $9,423 increase in revenues from available-for-sale securities revenues
• $3,602 increase in accounts receivable
• $5,506 increase in interest receivable
$246 increase in deferred revenues
$3,402 increase in loans to related parties
• $13,017 decrease in accounts payable and accrued expenses
• $14,698 increase in accounts payable to related parties
• $22,195 increase in accrued interest
Net cash used for continuing operating activities during the six months ended June 30, 2013 was $391,185. Non-cash items totaled approximately $798,885 which included the following:
$193,492 of stock for services representing the value of shares issued to consultants for services rendered to the Company
$621,935 increase in derivative expense
• $394 of depreciation and amortization
• $262 increase in prepaids from stock issued to consultants for future services
• $2,350 increase in interest receivable
• $163,562 decrease in loan receivable to related party
• $77,068 increase in accounts payable and accrued expenses
• $14,721 increase in accounts payable to related parties
• $454 increase in accrued interest
We have financed our operations primarily from debt or the issuance of equity instruments. For the six months ended June 30, 2014, net cash flows provided from financing activities was $583,953 which consisted of $3,107 in payments on officer loans and $593,721 in proceeds from convertible notes.
For the six months ended June 30, 2013, net cash flows provided from financing activities was $212,971, which consisted of $180,875 in proceeds from the sale of stock, $119,800 in proceeds from convertible notes and $87,704 in payments on officer loan.
Going Concern - The Company has recognized an accumulated deficit since inception (February 23, 2007) through June 30, 2014 of $31,158,456. The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. The financial statements have been prepared assuming the Company will continue to operate as a going concern which contemplates the realization of assets and the settlement of liabilities in the normal course of business. No adjustment has been made to the recorded amount of assets or the recorded amount or classification of liabilities which would be required if the Company were unable to continue its operations. (See Financial Footnote 2).
As of April 20, 2014, we have two part-time employees and one full-time employee. We are also dependent upon our officers and director for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.
On August 1, 2011, the Company’s wholly owned subsidiary, Ad Shark, entered into an employment agreement with its President Wayne Irving. The term of employment shall be three (3) years, commencing on the August 1, 2011 and terminating on July 31, 2014, or at a later mutually agreeable date. Salary compensation is to be paid at the rate of $88,500 annually, payable on a monthly basis. On the anniversary of employment, this rate will increase 5% annually. Monster Arts, Inc. absorbed the employment agreement when Ad Shark was dissolved in early 2014. As of June 30, 2014 and December 31, 2013, the Company had accrued wages of $178,937 and $155,706, respectively which are included in accounts payable and accrued expenses balance.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2013. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of June 30, 2014.
We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the quarter ended June 30, 2014. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and the discussion in Item 1, above, under "Liquidity and Capital
None not previously disclosed
31 Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
August 19, 2014 By: /s/ Wayne Irving II
I, Wayne Irving, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of Monster Offers;
I, Tisha Lawton, certify that:
/s/ Tisha Lawton
I am the Principal Executive Officer of Monster Offers, a Nevada corporation (the “Company”). I am delivering this certificate in connection with the Form 10-Q of the Company for the quarter ended June 30, 2014 and filed with the U.S. Securities and Exchange Commission (“Form 10-Q”).
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Monster Offers (the “Company”) certifies to his knowledge that:
(1) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
I am the Principal Financial Officer of Monster Offers, a Nevada corporation (the “Company”). I am delivering this certificate in connection with the Form 10-Q of the Company for the quarter ended June 30, 2014 and filed with the U.S. Securities and Exchange Commission (“Form 10-Q”).