RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2014 |
RELATED PARTY TRANSACTIONS | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 10 – RELATED PARTY TRANSACTIONS |
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Effective May 2, 2014, the Company entered into an asset purchase agreement with Kae Park (the “Seller”), who became a related party upon the closing of the acquisition, which occurred on June 23, 2014. |
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Under this agreement, the Company agreed to acquire approximately 7,500 cannabis related Internet domain names, in exchange for which, the Company: |
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(a) |
Issued to the Seller on the closing date 78.5 million shares of the Company’s restricted common stock which represented approximately 81% of the Company’s issued and outstanding common stock upon the closing; |
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(b) |
Issued to the Seller a promissory note in the principal amount of $500,000. The note originally bore interest at the rate of 3.25% per annum and was payable as follows: upon the Company’s receipt of an aggregate of $1,000,000 in funding (whether debt or equity), $100,000 was to be paid, and the Company was required to pay the remaining balance of $400,000 in thirty-six equal monthly installments, commencing on the fifteenth day following the first month the Company realizes at least $150,000 in gross revenue; and |
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(c) |
Is obligated to pay a monthly royalty to the Seller equal to the product of (i) six percent (6%) and (ii) the excess of the Company’s gross monthly revenue over $150,000 (“Royalty Payment”). The Royalty Payment is payable for a period of thirty six months from and after the first month in which the Company has gross revenues in excess of $150,000. |
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On July 25, 2014, the Company amended and restated the promissory note to provide that it would make the first $100,000 installment payment due under the Note on July 25, 2014 (earlier than required), in exchange for which Kae Yong Park agreed to waive all interest due over the term of the note. Thereafter, Kae Yong Park waived the requirement that the Company pay the $100,000 due under the Amended and Restated Note, until August 25, 2014, at which point such $100,000 was paid. |
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In addition, the Seller is required to provide such consulting services as the Company may require during the twelve month period following the closing of the acquisition. In consideration for these services, the Company is required to pay the Seller $9,500 per month, for a period of twelve months, commencing on the closing date and, on the first of each month thereafter. |
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The Company is headquartered in Scottsdale, Arizona where it rents space from Kuboo, Inc., its former parent company and a significant shareholder. Currently, the Company is renting approximately 1500 square feet of space on a month-to-month basis. The monthly rent for this facility is $4,500. This is an arrangement under which the landlord pays taxes, utilities and maintenance and repairs. The monthly rent also includes internet, and a shared conference room and employee lounge area. |
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In connection with certain capital raises, as a further inducement to the purchasers, the Company entered into an agreement as of September 25, 2014 with Kae Yong Park, pursuant to which Ms. Park agreed, in exchange for payment from the Company of $75,500 (or $0.02 per share), to transfer to each purchaser of the Company’s securities that number of shares of common stock equal to the number of shares the purchaser purchased directly from the Company. The purchasers did not pay Ms. Park any additional consideration for these transfers. Consequently, in connection with the Company’s sale of an aggregate 3,775,000 shares of common stock, Ms. Park transferred an aggregate of 3,775,000 shares of common stock to the purchasers in the offerings. |
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During the nine months ended September 30, 2014, the Company paid an aggregate of $166,350 to the spouse of the Company’s controlling shareholder, Kae Yong Park, in consideration for the purchase of cannabis related internet domain names and related services rendered. |
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The Company also paid a cash finder’s fee of $25,000 and accrued a finder’s fee or $25,000 payable in 100,000 shares of the Company’s common stock to its CEO, John Bluher, for services rendered in conjunction with its capital raise. |
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During the three and nine months ended September 30, 2014, the Company paid a total of $121,000 and $124,500, respectively to Kuboo, Inc. as payment for rent as well as its portion of salaries/consulting fees related to its use of certain Kuboo employees and consultants, one of whom is John Venners, a director, and one of whom is Howard Baer, the spouse of our controlling shareholder. Payments made to Kuboo, Inc. during the three months ended September 30, 2014 included reimbursements to Kuboo, Inc. for consulting services rendered by Howard Baer, the spouse of the Company’s majority shareholder of $15,000 and John Venners, one of the Company’s directors of $10,000. During these same time periods the Company recognized rent expense of 13,500 and 20,500 and salary and consulting expenses of 95,500 and 105,500, respectively. At September 30, 2014, the Company had a payable to Kuboo, Inc. of $48,726 for rent, consulting fees and contract labor. |
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On September 16, 2014, the Company paid $10,000 to Energy Plus, LLC, a company owned by John Venners, one of the Company’s directors, for consulting services rendered during July and August 2014. |
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On September 3, 2014, the Company’s controlling shareholder, Kae Yong Park, gifted an aggregate 2,100,000 shares to two related parties of the Company as follows: 2,000,000 shares to John Venners, one of the Company’s directors and the President and CEO of Kuboo, Inc (a significant shareholder) and 100,000 shares to John Gorman, an employee and former director of the Company. The Company recorded a non-cash expense of $4,599,000 ($2.19 per share) for the fair value of the shares given which is included in consulting expense – related party on the condensed statement of operations. |
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