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[August 15, 2014]
ROSTOCK VENTURES CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD-LOOKING STATEMENTS This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to shares of our common stock.
As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Rostock Ventures Corp., unless otherwise indicated.
CORPORATE HISTORY We were incorporated on November 2, 2006, under the laws of the State of Nevada.
The original business plan of our company was to engage in the acquisition and exploration of mineral properties. We are currently an exploration stage company. We have since changed our business focus to the operation of a technology platform designed to connect consumers with cannabis vendors.
CURRENT BUSINESS Effective March 12, 2014, we entered into a patent, technical information and trade mark license agreement with Windward International LLC pursuant to which our company acquired an exclusive license to use certain patents, technical information and trademarks for a term of 500 years, in exchange for 4,000,000 shares of our company's common stock and a 2% royalty on all net sales derived from the use of the patents, technical information and trademark.
12 Under the license agreement, our company acquired an exclusive license to make, use, sell and offer for sale licensed products during the term. The licensed products include the domain names www.iWeeds.com, and www.iWeedz.com, the platform that powers iWeedz.com, the Apple Developer license, Google Play license, iWeedz trademark, self-serve ad platform and augmented reality platform. Further, our company acquired an exclusive license to use the technical information during the term to make licensed products. The technical information includes any and all unpublished research and development information, the formulation of proprietary products, method, unpatented inventions, know-how, trade secrets, and technical data in the possession of Windward at the effective date of the license agreement, or generated or developed at any time prior to the termination or expiration of the license agreement.
We operate iWeedz.com, a technology platform that we acquired from Windward pursuant to the license agreement to connect consumers with cannabis vendors and promote local marijuana commerce. We will operate our technology platform through our website located at www.iWeedz.com and through our mobile application for Apple iOS and Android operating systems. We will strive for simplicity and ease of use in our iWeedz website and mobile application, which we believe will set us apart from our competition. As of the date of this report, our website is functional however, our application for Apple iOS and Android operating systems has not been released.
iWeedz will provide a simple and quick process for consumers to find the right cannabis products to meet their needs. Consumers who wish to use iWeedz must first create an account with iWeedz. Membership for consumers is free. Once an account is created, the member will be able to use iWeedz to locate local cannabis dispensaries to shop for cannabis products and to communicate with the dispensaries. As the member uses the iWeedz website and application, the iWeedz technology will gather specific information about the member by tracking accessed content, 'liked' items, purchased items and the member's profile.
iWeedz will then use this information to match the member with the right cannabis vendor or to find deals that may be of interest to the member.
Members who are smart phone users will be able to take advantage of iWeedz's mobile application which will automatically register a member's geographic location and utilize proximity advertising to notify a member of real-time offers, coupons and discounts from vendors within the member's vicinity. Members will be able to easily redeem offers that they receive from local vendors by displaying mobile coupons from the iWeedz application at the point of purchase.
Unlike other popular internet advertising sites such as Groupon or Living Social, iWeedz customers will be able to redeem coupons without having to pay for them before making a purchase.
iWeedz for cannabis vendors will provide a cloud based solution to manage their inventory, post daily deals, attract new customers with proximity marketing via mobile phones, and engage with customers via e-mail and text messaging. With iWeedz, vendors will also be able to deploy a targeted marketing campaign to attract iWeedz members and build their customer base. For example, vendors could target local iWeedz customers by utilizing proximity advertising to offer real-time discounts on their products to iWeedz members who agree to provide their e-mail addresses and/or phone numbers. When these iWeedz members redeem the discount and make a purchase, the vendor can market future discounts and deals to the customer via sms (text messaging) or e-mail. A cannabis vendor will also be required to create an account to become a member. Membership for a vendor is free if the vendor only wishes to be listed as a dispensary on the website and application. However, if the member wants to be able to offer promotions and discounts or to interact with member consumers, they will be required to pay a monthly service fee, the amount of which has yet to be determined. We believe that our proximity marketing will attract a wide audience of consumers who are actively seeking and redeeming marijuana coupons. We further believe that the self-serve coupon feature will appeal to other cannabis vendors looking to reach local customers.
iWeedz will generate revenue by charging member cannabis vendors a monthly fee and by selling banner space on its website and application to these vendors. The banners will be viewable by iWeedz consumer members who are within the vendor's geographic location and who indicate an interest in the vendor or its products, based on the member's profile or specific user information gathered by the iWeedz technology. We believe iWeedz's targeted market intelligence will allow us to charge a premium for ad space. As of the date of this report, we have not yet determined the cost to our vendors for banner space.
13 RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED JUNE 30, 2014 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2013.
Our operating expenses for the three and six month periods ended June 30, 2014 and June 30, 2013 are outlined in the table below: Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2014 2013 2014 2013 ---------- ---------- ---------- ---------- Consulting fees $ Nil $ Nil $ 9,800 $ Nil General and administrative $ 720 $ 791 $ 1,410 $ 5,436 License fee $ Nil $ Nil $ 396,000 $ Nil Management fees $ 6,000 $ 6,000 $ 12,000 $ 12,000 Professional fees $ 11,198 $ 7,600 $ 23,198 $ 16,600Interest and amortization expense $ 8,014 $ 4,254 $ 14,743 $ 8,063 ---------- ---------- ---------- ---------- Net Loss $ (25,932) $ (18,645) $ (457,151) $ (42,099) ========== ========== ========== ========== OPERATING REVENUES From November 2, 2006 (date of inception) to June 30, 2014, our company did not record any revenues.
OPERATING EXPENSES AND NET LOSS Operating expenses for the three months ended June 30, 2014 were $17,918 compared with $14,391 for the three months ended June 30, 2013. The increase in operating expenses were attributed to an increase in professional fees of $3,598, and a decrease in general and administrative costs of $71.
Operating expenses for the six months ended June 30, 2014 were $442,408 compared with $34,036 for the six months ended June 30, 2013. The increase in operating expenses were attributed to $396,000 for license fees relating to the fair value of common shares issued as part of the license agreement, $9,800 in consulting fees for services rendered, and $6,598 in professional fees.
Net loss for the six months ended June 30, 2014 was $457,151 compared with $42,099 for the six months ended June 30, 2013. In addition to operating expenses, our company incurred interest and amortization expense of $14,743 (2013 - $8,063) relating to interest incurred on the outstanding debt, and amortization of the discount for the convertibility feature of convertible debentures.
LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL As at As at June 30, December 31, 2014 2013 ---------- ---------- Current Assets $ 149 $ 4,524 Current Liabilities $ 328,268 $ 308,734 ---------- ---------- Working Capital (deficiency) $ (328,119) $ (304,210) ========== ========== 14 CASH FLOWS Six Months Six Months Ended Ended June 30, June 30, 2014 2013 ---------- ---------- Net cash used in operating activities $ (25,890) $ (22,800) Net cash used in investing activities $ Nil $ Nil Net cash provided by financing activities $ 21,515 $ 22,800 ---------- ---------- Net decrease in cash $ (4,375) $ Nil ========== ========== As at June 30, 2014, our cash balance and total assets were $149 compared to $4,524 as at December 31, 2013. The decrease in cash and total assets was due to the fact that the Company used all financing proceeds for operating costs.
As at June 30, 2014, we had total liabilities of $336,369 compared with total liabilities of $309,170 as at December 31, 2013. The increase in total liabilities was due to an increase in accounts payable and accrued liabilities of $7,804, an increase in amounts due to related parties of $11,730, and an increase in long-term notes payable of $7,665 due in part to the issuance of $21,515 of new convertible debentures, less unamortized discount of $15,337 for the conversion feature.
As at June 30, 2014, we had a working capital deficit of $328,119 compared with a working capital deficit of $304,210 as at December 31, 2013. The increase in working capital is due to the fact that proceeds received from the issuance of convertible debentures were used primarily for operating activities.
CASHFLOW FROM OPERATING ACTIVITIES During the six months ended June 30, 2014, we used $25,890 of cash for operating activities compared to the use of $22,800 of cash for operating activities during the six months ended June 30, 2013. The increase is due to timing differences as the Company was also limited to the amount of cash flow available for operating costs due to lack of sufficient cash flow.
CASHFLOW FROM INVESTING ACTIVITIES During the three months ended June 30, 2014 and 2013, we did not have any investing activities.
CASHFLOW FROM FINANCING ACTIVITIES During the six months ended June 30, 2014, we received proceeds of $21,515 in financing activities from the issuance of convertible notes payable, which are unsecured, bears interest at 10% per annum, and are due two years from the date of issuance. During the six months ended June 30, 2013, we received proceeds of $22,800 relating from the issuance of a note payable from a related party.
GOING CONCERN We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
15 OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
FUTURE FINANCINGS We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
CRITICAL ACCOUNTING POLICIES Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management. Our fiscal year end is December 31.
USE OF ESTIMATES The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our company regularly evaluates estimates and assumptions related to the recoverability of mineral properties, share based compensation, and deferred income tax asset valuation allowances. Our company bases our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
CASH AND CASH EQUIVALENTS Our company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2014 and December 31, 2013, there were no cash equivalents.
ASSET RETIREMENT OBLIGATIONS Our company follows the provisions of ASC 410, ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.
16 BASIC AND DILUTED NET LOSS PER SHARE Our company computes net income (loss) per share in accordance with ASC 260, EARNINGS PER SHARE. ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
FOREIGN CURRENCY TRANSLATION Our company's functional and reporting currency is the United States dollar.
Foreign currency transactions are primarily undertaken in Canadian dollars.
Foreign currency transactions are translated to United States dollars in accordance with ASC 830, FOREIGN CURRENCY TRANSLATION MATTERS, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
FINANCIAL INSTRUMENTS Pursuant to ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Our company's financial instruments consist principally of cash, accounts payable and accrued liabilities, note payables, and amounts due to related party. Pursuant to ASC 820, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
17 IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
INCOME TAXES Our company accounts for income taxes using the asset and liability method in accordance with ASC 740, ACCOUNTING FOR INCOME Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
COMPREHENSIVE LOSS ASC 220, COMPREHENSIVE INCOME, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at June 30, 2014 and December 31, 2013, our company has no items representing comprehensive income or loss.
STOCK-BASED COMPENSATION Our company records stock-based compensation in accordance with ASC 718, COMPENSATION - STOCK COMPENSATION using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. As at June 30, 2014 and December 31, 2013, our company did not grant any stock options.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company has limited operations and is considered to be in the development stage. During the period ended May 31, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.
Our company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and our company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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