UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2013
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION FROM ____________ TO ___________
Commission File Number: 000-54418
NETWORKING PARTNERS, INC.
(Exact name of registrant as specified in its charter)
Nevada 45-0921541
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
857 Sarno Road
Melbourne, Florida 32935
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (321) 984-8858
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and
posted on its Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 20, 2013, there were
15,445,484 outstanding shares of the Registrant's Common Stock, $.001 par value.
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements ............................................... 3
Condensed Consolidated Balance Sheets at March 31, 2013 (unaudited) and
December 31, 2012 .......................................................... 4
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2013 and 2012 and for the Period November 2, 2010
(inception) through March 31, 2013 (unaudited) ............................. 5
Condensed Consolidated Statements of Stockholders' Equity for the
Period November 2, 2010 (inception) through March 31, 2013 (unaudited) ..... 6
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2013 and 2012 and for the Period November 2, 2010
(inception) through March 31, 2013 (unaudited) ............................. 7
Notes to Condensed Consolidated Financial Statements - March 31, 2013
(unaudited) ................................................................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Plan of Development Stage Activities ............................... 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk ......... 16
Item 4. Controls and Procedures ............................................ 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .................................................. 17
Item 1A. Risk Factors ...................................................... 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ........ 17
Item 3. Defaults Upon Senior Securities .................................... 17
Item 4. Mine Safety Disclosures ............................................ 17
Item 5. Other Information .................................................. 17
Item 6. Exhibits ........................................................... 18
SIGNATURES ................................................................. 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Networking Partners, Inc.
We have reviewed the accompanying balance sheet of Networking Partners, Inc. as
of March 31, 2013, and the related statements of income, comprehensive income,
stockholders' equity, and cash flows for the three-month period(s) ended March
31, 2013. These financial statements are the responsibility of the company's
management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with standards
of the Public Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Labrozzi & Co., P.A.
---------------------------------------
Labrozzi & Co., P.A.
Miami, Florida
May 20, 2013
3
NETWORKING PARTNERS, INC.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
March 31, December 31,
2013 2012
------------ ------------
(unaudited)
ASSETS
CURRENT ASSETS
Due from related party $ 5,301 $ 5,301
------------ ------------
TOTAL CURRENT ASSETS 5,301 5,301
------------ ------------
Intangible assets - Web Sites (Beta 1) 2,722,500 3,630,000
Intangible assets - Public Pages (Beta 2) 101,183 101,183
------------ ------------
TOTAL FIXED ASSETS 2,823,683 3,731,183
------------ ------------
TOTAL ASSETS $ 2,828,984 $ 3,736,484
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,760 $ 43,120
Advances payable 36,160 --
Due to shareholders 3,155 3,155
------------ ------------
TOTAL CURRENT LIABILITIES 63,075 46,275
------------ ------------
LONG TERM LIABILITIES
Notes payable 46,073 45,073
------------ ------------
TOTAL LIABILITIES 109,148 91,348
------------ ------------
STOCKHOLDERS' EQUITY
Common stock: 95,000,000 shares authorized; $0.001 par value,
15,445,484 shares issued and outstanding at March 31, 2013 and
December 31, 2012, respectively 15,445 15,445
Preferred stock: 5,000,000 shares authorized; $0.001 par value,
no shares issued and outstanding at March 31, 2013 and
December 31, 2012, respectively -- --
Additional paid in capital 3,806,874 3,806,874
Deficit accumulated during the development stage (1,102,483) (177,183)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,719,836 3,645,136
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,828,984 $ 3,736,484
============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements
4
NETWORKING PARTNERS, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(unaudited)
For the
Period from
November 2, 2010
For the Three Months Ended (inception)
March 31, through
----------------------------------- March 31,
2013 2012 2013
------------ ------------ ------------
Revenues $ -- $ -- $ 1,812
Cost of Sales -- -- 239
------------ ------------ ------------
Gross Profit -- -- 1,573
------------ ------------ ------------
OPERATING EXPENSES
General and Administrative 3,500 -- 80,461
Impairment of Web Sites 907,500 -- 907,500
Professional Services 13,300 2,500 106,831
------------ ------------ ------------
Total Operating Expenses 924,300 2,500 1,094,792
------------ ------------ ------------
OTHER EXPENSES
Interest Expense (1,000) (1,000) (9,264)
------------ ------------ ------------
Total Other Expenses (1,000) (1,000) (9,264)
------------ ------------ ------------
Net Loss $ (925,300) $ (3,500) $ (1,102,483)
============ ============ ============
Basic and Diluted Loss per Share $ (0.06) $ (0.00) $ (0.07)
============ ============ ============
Basic and Diluted Weighted Average
Number of Shares Outstanding 15,445,484 15,445,484 15,445,484
============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements
5
NETWORKING PARTNERS, INC.
(A Development Stage Company)
Condensed Consolidated Statement of Changes in Stockholders' Equity
For the Period from November 2, 2010 (inception) to March 31, 2013
(unaudited)
Deficit
Accumulated
Common Stock Additional during the Total
--------------------- Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
BALANCE AT INCEPTION NOVEMBER 2, 2010 -- $ -- $ -- $ -- $ --
Common stock subscribed 7,556,327 7,556 -- -- 7,556
Net loss for the period from November 2, 2010
(inception) through December 31, 2010 -- -- -- (3,500) (3,500)
----------- ----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 2010 7,556,327 7,556 -- (3,500) 4,056
Common stock issued for asset acquisition 7,260,000 7,260 3,622,740 -- 3,630,000
Common stock issued for debt conversion 629,157 629 184,134 -- 184,763
Net loss for the year ended December 31, 2011 -- -- -- (155,835) (155,835)
----------- ----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 2011 15,445,484 15,445 3,806,874 (159,335) 3,662,984
Net loss for the year ended December 31, 2012 -- -- -- (17,848) (17,848)
----------- ----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 2012 15,445,484 15,445 3,806,874 (177,183) 3,645,136
Net loss for the three months ended
March 31, 2013 -- -- -- (925,300) (925,300)
----------- ----------- ----------- ----------- -----------
BALANCE MARCH 31, 2013 15,445,484 $ 15,445 $ 3,806,874 $(1,102,483) $ 2,719,836
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements
6
NETWORKING PARTNERS, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the
Period from
November 2, 2010
For the Three Months Ended (inception)
March 31, through
----------------------------------- March 31,
2013 2012 2013
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (925,300) $ (3,500) $ (1,102,483)
Adjustments to reconcile net loss to net
cash used in operating activities:
Common stock issued for asset acquisition -- -- 7,260
Impairment of Web Sites 907,500 -- 907,500
Changes in operating assets and operating liabilities:
Accounts payable (19,360) 2,500 23,760
Advances payable 36,160 -- 36,160
Accrued interest 1,000 1,000 6,073
Loans to/from related parties -- -- (2,146)
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES -- -- (123,876)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Intangible assets - Web Sites (Beta 1) -- -- (3,630,000)
Intangible asset - Koiniclub.com (Beta v2) -- -- (101,183)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES -- -- (3,731,183)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock subscriptions -- -- 7,556
Common stock issued for converted debt -- -- 629
Proceeds from notes payable -- -- 40,000
Additional paid In capital -- -- 3,806,874
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 3,855,059
------------ ------------ ------------
NET CHANGE IN CASH -- --
CASH AT BEGINNING OF PERIOD -- -- --
------------ ------------ ------------
CASH AT END OF PERIOD $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: --
Cash paid for interest $ -- $ -- $ 3,190
============ ============ ============
Cash paid for taxes $ -- $ $ --
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES: $ -- $ -- $ --
============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements
7
NETWORKING PARTNERS, INC.
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(unaudited)
NOTE 1 - ORGANIZATION, BUSINESS, AND OPERATIONS
Networking Partners, Inc. (the "Company") was organized under the laws of the
State of Nevada on November 2, 2010. The Company's business is based on
developing tools and technology in connection with the acquisition of the same,
and partnering with compatible businesses for in-house developed projects aimed
at developing networking systems where children could interact electronically
with parental guidance. These applications include social networking at its
core. For children under thirteen to be introduced to the web and social
networking, the law requires parental consent. Children under thirteen have a
direct and moderated social networking experience, accompanied by online
encrypted security parameters, offered through a platform that ensures privacy
of information.
On November 5, 2010, the Company created a wholly owned foreign subsidiary named
Koini, Inc, (KOINI) a Canadian corporation located on Prince Edward Island,
Canada. Koini was setup as a special purpose company to manage and continually
develop koini.com and koiniclub.com, two fully functional social networking
web-sites purchased from a third party on December 21, 2010. The websites were
purchased by the Company to have Koini run and manage. Koini.com and
koiniclub.com's target market is young people between the ages of 7 and 13. The
functionality of the websites is comparable to the combination of FACEBOOK,
TWITTER and Myspace's networking applications. The websites' customizable
profiles and pages provide a MYSPACE feel and the functionality of its
`Friending' and "Groups" provide a FACEBOOK feel.
On August 20, 2011 the board of directors decided to change the legal name of
Koini Inc (Canada) to Networking Partners Canada Inc.
NOTE 2 - DEVELOPMENT STAGE ENTERPRISE
The Company is in the development stage as defined by Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 915,
Development Stage Entities. The Company is primarily engaged in the development
of social media platforms. The initial focus of the Company's research and
development efforts will be the generation of products and services for
web-sites geared toward the children's market. The production and marketing of
the Company's web-sites and its ongoing research and development activities will
be subject to extensive review by the Company's management and Board of
Directors. The Company's success will depend in part on its ability to generate
advertising sales. There can be no assurance of the Company's successful
efforts.
For the three month period ended March 31, 2013, there was no revenue. The
accompanying financial statements for the three month period ended March 31,
2013 have been prepared assuming the Company will continue as a going concern.
During the fiscal year 2013, management intends to raise additional debt and/or
equity financing to fund future operations and to provide additional working
capital.
However, there is no assurance that such financing will be consummated or
obtained in sufficient amounts necessary to meet the Company's financial needs.
Revenues are anticipated to commence once its advertising sales commence,
internal currency, Koini Credits system, paid competition, and many other
revenue streams are implemented.
The accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
possible inability of the Company to continue as a going concern.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which assumes the Company will realize its assets and discharge its
liabilities in the normal course of business. As reflected in the accompanying
financial statements, the Company had an accumulated deficit of $1,102,483 at
March 31, 2013. There was no revenue for the three month period ended March 31,
2013 and the Company had a working capital deficiency of $57,774 at March 31,
2013.
8
NETWORKING PARTNERS, INC.
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(unaudited)
NOTE 3 - GOING CONCERN (CONTINUED)
The Company's ability to continue as a going concern is dependent upon its
ability to generate future profitable operations and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. The accompanying financial statements do
not include any adjustments that might arise as a result of this uncertainty.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation- The consolidated financial statements include the
accounts of Networking Partners, Inc. and its wholly-owned subsidiary. All
significant intercompany accounts and transactions have been eliminated.
Investments in entities in which the Company can exercise significant influence,
but does not own a majority equity interest or otherwise control, are accounted
for using the equity method and are included as investments in equity interests
on the consolidated balance sheets. The Company has included the results of
operations of acquired companies from the date of acquisition.
Cash and Cash Equivalents- For purposes of the Statement of Cash Flows, the
Company considers liquid investments with an original maturity of three months
or less to be cash equivalents.
Management's Use of Estimates- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates. The financial statements above reflect all of the costs of
doing business.
Revenue Recognition. In October 2009, FASB amended the accounting standard for
multiple deliverable revenue arrangements, which provided updated guidance on
whether multiple deliverables exist, how deliverables in an arrangement should
be separated, and how consideration should be allocated. This standard
eliminates the use of the residual method and will require arrangement
consideration to be allocated based on the relative selling price for each
deliverable. The selling price for each arrangement deliverable can be
established based on vendor specific objective evidence ("VSOE") or third-party
evidence ("TPE") if VSOE is not available. The new standard provides additional
flexibility to utilize an estimate of selling price ("ESP") if neither VSOE nor
TPE is available.
The Company elected to early adopt this accounting standard, at inception, on a
prospective basis. The adoption of this standard did not have a significant
impact on the Company's revenue recognition for multiple deliverable
arrangements. Upon adoption, the selling prices for certain custom advertising
solutions may use the best estimate of selling price as provided under the new
standard. The adoption of this standard did not have a material impact on the
Company's consolidated financial position, cash flows, or results of operations
for the three month period ended March 31, 2013.
In all cases, revenue is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the service is
performed, and collectability of the related fee is reasonably assured. The
Company's arrangements generally do not include a provision for cancellation,
termination, or refunds that would significantly impact revenue recognition.
Revenue is generated from several offerings including the display of graphical
advertisements ("display advertising"), and other sources.
The Company recognizes revenue from display advertising on koini.com,
koiniclub.com and affiliate sites as "impressions" are delivered. Impressions
are delivered when an advertisement appears in pages viewed by users.
Arrangements for these services generally have terms of up to one year and in
some cases the terms may be up to three years. For display advertising on
affiliate sites, the Company will pay affiliates for the revenue generated from
the display of these advertisements on the affiliate sites. Traffic acquisition
costs ("TAC") are payments made to third-party entities that have integrated the
Company's advertising offerings into their Websites or other offerings and
payments made to companies that direct consumer and business traffic to
koini.com and/or koiniclub.com. The display revenue derived from these
arrangements that involve traffic supplied by affiliates is reported gross of
the TAC paid to affiliates as the Company is the primary obligor to the
advertisers who are the customers of the display advertising service.
The Company has not yet begun offering customized display advertising solutions
to advertisers. These customized display advertising solutions combine the
Company's standard display advertising with customized content, customer
insights, and campaign analysis. Due to the unique nature of these products, the
Company may not be able to establish selling prices based on historical
stand-alone sales or third-party evidence; therefore, the Company may use its
best estimate to establish selling prices. The Company establishes best
estimates within a range of selling prices considering multiple factors
including, but not limited to, class of advertiser, size of transaction,
seasonality, margin objectives, observed pricing trends, available online
9
NETWORKING PARTNERS, INC.
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
inventory, industry pricing strategies, and market conditions. The Company
believes the use of the best estimates of selling price allows revenue
recognition in a manner consistent with the underlying economics of the
transaction.
Comprehensive Income (Loss) - The Company reports Comprehensive income and its
components following guidance set forth by section 220-10 of the FASB Accounting
Standards Codification which establishes standards for the reporting and display
of comprehensive income and its components in the financial statements. There
were no items of comprehensive income (loss) applicable to the Company during
the period covered in the financial statements.
Net Income per Common Share- Net loss per common share is computed pursuant to
section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss
per share is computed by dividing net loss by the weighted average number of
shares of common stock outstanding during the period. Diluted net loss per share
is computed by dividing net loss by the weighted average number of shares of
common stock and potentially outstanding shares of common stock during each
period. There were no potentially dilutive shares outstanding as of March 31,
2013.
Deferred Taxes- The Company accounts for income taxes under Section 740-10-30 of
the FASB Accounting Standards Codification. Deferred income tax assets and
liabilities are determined based upon differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Deferred tax assets are reduced by a valuation allowance to
the extent management concludes it is more likely than not that the assets will
not be realized. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the statements of operations in the period that includes the enactment date.
Fair Value of Financial Instruments- The carrying amounts reported in the
balance sheet for cash, accounts receivable and payable approximate fair value
based on the short-term maturity of these instruments.
Impairment of Long-Lived and Intangible Assets- The Company evaluates the
recoverability of its fixed assets and other assets in accordance with section
360-10-15 of the FASB Accounting Standards Codification for disclosures about
Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds its expected cash flows. If so, it is considered to be impaired and is
written down to fair value, which is determined based on either discounted
future cash flows or appraised values. The Company adopted the statement on
inception. During the three month period ended March 31, 2013, the Company
identified and recorded impairment charges in connection with its assessment of
its intangible assets, consisting of web sites. The Company recognized an
impairment charge of $907,500, 25% of the initially recorded value of $3,630,000
for the web sites. The asset impairment charge was primarily due to lower future
revenue projections associated with its websites based upon 2012's full year
results which produced no revenue from the web sites.
Stock-Based Compensation- The Company has accounted for stock-based compensation
using the fair value method following the guidance set forth in section 718-10
of the FASB Accounting Standards Codification for disclosure about Stock-Based
Compensation. This section requires a public entity to measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award (with limited exceptions). That cost
will be recognized over the period during which an employee is required to
provide service in exchange for the award- the requisite service period (usually
the vesting period). No compensation cost is recognized for equity instruments
for which employees do not render the requisite service.
Fair Value for Financial Assets and Financial Liabilities- The Company follows
paragraph 825-10-50-10 of the FASB Accounting Standards Codification for
disclosures about fair value of its financial instruments and paragraph
820-10-35-37 of the FASB Accounting Standards Codification ("Paragraph
820-10-35-37") to measure the fair value of its financial instruments. Paragraph
820-10-35-37 establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America (U.S. GAAP), and
expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph
820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The three levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
10
NETWORKING PARTNERS, INC.
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
The Company does not have any assets or liabilities measured at fair value on a
recurring or a non-recurring basis, consequently, the Company did not have any
fair value adjustments for assets and liabilities measured at fair value at
March 31, 2013, nor gains or losses are reported in the statement of operations
that are attributable to the change in unrealized gains or losses relating to
those assets and liabilities still held at the reporting date for the three
month period ended March 31, 2013.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2010, the FASB issued Accounting Standard Update No. 2010-11
"Derivatives and Hedging" (Topic 815). ASU No. 2010-11 update provides
amendments to subtopic 815-15, Derivatives and hedging. The amendments clarify
about the scope exception in paragraph 815-10-15-11 and section 815-15-25 as
applicable to the embedded credit derivatives. The ASU is effective on the first
day of the first fiscal quarter beginning after June 15, 2010. Therefore, for a
calendar-year-end entity, the ASU becomes effective on July 1, 2010. Early
application is permitted at the beginning of the first fiscal quarter beginning
after March 5, 2010
In April 2010, the FASB issued Accounting Standard Update No. 2010-12. "Income
Taxes" (Topic 740). ASU No.2010-12 amends FASB Accounting Standard Codification
subtopic 740-10 Income Taxes to include paragraph 740-10-S99-4. On March 30,
2010 The President signed the Health Care & Education Affordable Care Act
reconciliation bill that amends its previous Act signed on March 23, 2010. FASB
Codification topic 740, Income Taxes, requires the measurement of current and
deferred tax liabilities and assets to be based on provisions of enacted tax
law. The effects of future changes in tax laws are not anticipated." Therefore,
the different enactment dates of the Act and reconciliation measure may affect
registrants with a period-end that falls between March 23, 2010 (enactment date
of the Act), and March 30, 2010 (enactment date of the reconciliation measure).
However, the announcement states that the SEC would not object if such
registrants were to account for the enactment of both the Act and the
reconciliation measure in a period ending on or after March 23, 2010, but notes
that the SEC staff "does not believe that it would be appropriate for
registrants to analogize to this view in any other fact patterns."
In April 2010, the FASB issued Accounting Standard Update No. 2010-13 "Stock
Compensation" (Topic 718). ASU No.2010-13 provides amendments to Topic 718 to
clarify that an employee share-based payment award with an exercise price
denominated in the currency of a market in which a substantial portion of the
entity's equity securities trades should not be considered to contain a
condition that is not a market, performance, or service condition. Therefore, an
entity would not classify such an award as a liability if it otherwise qualifies
as equity.
The amendments in this Update are effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2010. The
amendments in this Update should be applied by recording a cumulative-effect
adjustment to the opening balance of retained earnings. The cumulative-effect
adjustment should be calculated for all awards outstanding as of the beginning
of the fiscal year in which the amendments are initially applied, as if the
amendments had been applied consistently since the inception of the award. The
cumulative-effect adjustment should be presented separately. Earlier application
is permitted.
NOTE 5 - SEGMENT REPORTING
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131,"DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISES AND RELATED INFORMATION". This Statement requires companies to
report information about operating segments in interim and annual financial
statements. It also requires segment disclosures about products and services,
geographic areas, and major customers. The Company determined that it did not
have any separately reportable operating segments as of March 31, 2013.
11
NETWORKING PARTNERS, INC.
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(unaudited)
NOTE 6 - INCOME TAXES
Due to the operating loss and the inability to recognize an income tax benefit
there is no provision for current or deferred federal or state income taxes for
the three month period ended March 31, 2013.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for federal and state income tax purposes.
NOTE 7 - BALANCE SHEET INFORMATION
Due from related party - As of March 31, 2013, the Company held a receivable
from a Canadian entity, Anne's Diary Inc., in the amount of $5,301 in relation
to the purchase of the social networking websites.
Intangible Assets - consisted of the following at March 31, 2013.
Koini.com & Koiniclub.com $ 3,630,000
Koini - Public Pages (Beta V1) 101,183
-----------
Impairment Charge (907,500)
-----------
Total Intangible Assets $ 2,823,683
===========
On December 21, 2010, the Company acquired two web-sites, koini.com and
koiniclub.com, from a Canadian entity, Anne's Diary Inc., in the amount of
$3,630,000 via a stock subscription agreement. The agreement stated that the
Company must amend its Articles of Incorporation to increase authorized common
stock to enable the distribution of the appropriate amount of shares to Anne's
Diary Inc., in an amount equal 49% of issued and outstanding, immediately
following the approved Certificate of Amendment in the State of Nevada, no later
than 180 days of the transaction. On April 12, 2011, the Company issued
7,260,000 common shares to Anne's Diary, Inc consummating the purchase of
the social networking websites as per agreement.
The websites were valued using various methods including adherence to Emerging
Issues Task Force 002 (EITF-002), the market value approach, and the income
approach utilizing a capitalization rate calculated from the Ibbotson's build-up
method applied to projected future cash flows. The participants also considered
FAS 157's definition of fair value which is the amount at which the asset could
be bought or sold in a current transaction between willing parties, or
transferred to an equivalent party.
Intangible assets are carried at cost and amortized over their estimated useful
lives, generally on a straight-line basis. The Company reviews identifiable
amortizable intangible assets to be held and used for impairment whenever events
or changes in circumstances indicate that the carrying value of the assets may
not be recoverable. Determination of recoverability is based on the lowest level
of identifiable estimated undiscounted cash flows resulting from use of the
asset and its eventual disposition. Measurement of any impairment loss is based
on the excess of the carrying value of the asset over its fair value.
During the three month period ended March 31, 2013, the Company identified and
recorded impairment charges in connection with its assessment of its intangible
assets, consisting of web sites. The Company recognized an impairment charge of
$907,500, 25% of the initially recorded value of $3,630,000 for the web sites.
The asset impairment charge was primarily due to lower future revenue
projections associated with its websites based upon 2012's full year results
which produced no revenue from the web sites.
Advances payable - represents non-interest bearing advances to the Company from
a non-affiliated third party individual, utilized for payments to service
providers, and consisted of the following at March 31, 2013:
Advances payable $ 36,100
=========
Due to shareholders - represents non-interest bearing advances to the Company
from our former President, Pino G. Baldassarre, and consisted of the following
at March 31, 2013:
Due to shareholders $ 3,155
=========
12
NETWORKING PARTNERS, INC.
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(unaudited)
NOTE 7 - BALANCE SHEET INFORMATION (CONTINUED)
Stockholders' Equity -
A) COMMON STOCK
The company's amended Articles of Incorporation authorize the issuance of
95,000,000 common shares at $0.001 par value per share.
The Company had 15,445,484 issued and outstanding common stock shares as of
March 31, 2013. Details of the issued and outstanding common stock shares issued
without registration under the Securities Act of 1933, as amended, since our
incorporation on November 2, 2010, are presented below:
Amount of
Description Shares Issued
----------- -------------
Stock issued to private offering subscribers 7,556,327
Stock issued for acquisition of assets 7,260,000
Stock issued for conversion of debt 629,157
----------
Total common stock shares issued 15,445,484
==========
B) PREFERRED STOCK
The company's Articles of Incorporation authorize the issuance of 5,000,000
preferred shares at $0.001 par value per share. The Board of Directors has the
power to designate the rights and preferences of the preferred stock and issue
the preferred stock in one or more series.
No preferred shares have been issued.
NOTES PAYABLE -
Between May 25, 2011 and June 15, 2011, the company received loans totaling of
$71,684 from a company called Hatton Wireless Limited, a non-affiliate from the
United Kingdom. These loans would become due on November 15, 2011. The loans
would bear an interest at a rate of 10% and if there was a default, the interest
would increase from 10% to 25%.
On September 30, 2011 Hatton Wireless Limited elected to convert the $71,684
loan plus the $3,157 of accrued interest into 249,473 common restricted shares
at $.30 cents per share.
The Company also received advances totaling of $79,921 from Anne's Diary, Inc.
(a related party). These advances were converted into 319,684 common restricted
shares at $.25 cents per share.
During September and October of 2011 the Company executed Promissory Notes with
three unaffiliated individuals for an aggregate amount of $40,000 loaned to the
Company for working capital purposes. Each Promissory Note bears interest at the
rate of 10% and has a term of eighteen months. A $5,000 note was issued
September 1, 2011 and is due February 28, 2013; a $15,000 note was issued
September 1, 2011 and is due March 18, 2013; and a $20,000 note was issued
October 11, 2011 and is due April 10, 2013. The Promissory Notes are represented
on the Company's financial statements in the amount of $46,073. The $6,073
represents accrued interest on the outstanding principal amount of $40,000.
NOTE 8 - SUBSEQUENT INFORMATION
The three note holders in possession of Promissory Notes executed by the Company
with maturity dates between February and April of 2013 have verbally agreed to
extend the terms of their Promissory Notes at the same interest rate. The
Company is in the process of formalizing the amended terms with the note
holders.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
DEVELOPMENT STAGE ACTIVITIES.
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion and analysis of the results of operations and
financial condition of Networking Partners, Inc. should be read in conjunction
with the unaudited financial statements, and the related notes. References to
"we," "our," or "us" in this section refers to the Company and its subsidiaries.
Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions.. We use words such as "anticipate,"
"estimate," "plan," "project," "continuing," "ongoing," "expect," "believe,"
"intend," "may," "will," "should," "could," and similar expressions to identify
forward-looking statements.
Certain matters discussed herein may contain forward-looking statements
that are subject to risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the following:
* the volatile and competitive nature of our industry,
* the uncertainties surrounding the rapidly evolving markets in which we
compete,
* the uncertainties surrounding technological change of the industry,
* our dependence on its intellectual property rights,
* the success of marketing efforts by third parties,
* the changing demands of customers and
* the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should
any of the underlying assumptions prove incorrect, actual results of current and
future operations may vary materially from those anticipated.
OVERVIEW
On December 21, 2010, we bought two social networking web sites:
www.koiniclub.com and www.koini.com. from Anne's Diary, Inc. in exchange for
7,260,000 shares of our common stock. In April 2011, we hired the three people
who had designed and worked on the two web sites for Anne's Diary, Inc.
Our primary focus is on building social networking applications similar to
the major social networks, whose networking tools have changed the way people
communicate and interact with their friends, fellow students, organizations,
business associates and businesses all over the world. By the very nature of
their potential mass adoption, social networking tools and technology should
continue to provide huge opportunities for entrepreneurs and companies,
including ours, who focus their businesses and efforts on this sector.
Our Koini sites have been developed for all age groups, but uniquely, we
also have a separate system of parental controls for members under the age of
13. Through the development of internal applications that allow us to create
competitions and automate the management of these competitions, we have created
a marketing tool that is working very well. This internal application is now
being developed to work for businesses; both local and international, to use
this application to create their own competitions that can promote their
businesses. We believe the demographics of our Koini members will entice
companies to advertise on our Koini sites and create competitions in order to
promote their brands.
14
BUSINESS DEVELOPMENT
We are a development stage corporation and have recently started our
business operations, and have generated minimal revenues.
The accompanying financial statements have been prepared on a going concern
basis, which assumes the Company will realize its assets and discharge its
liabilities in the normal course of business. As reflected in the accompanying
financial statements, the Company had an accumulated deficit of $1,102,483 at
March 31, 2013. There was no revenue for the three month period ended March 31,
2013 and the Company had a working capital deficiency of $57,774 at March 31,
2013.
The Company's ability to continue as a going concern is dependent upon its
ability to generate future profitable operations and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. The accompanying financial statements do
not include any adjustments that might arise as a result of this uncertainty.
Our auditors have issued a going concern opinion. This means that our
auditors believe there is substantial doubt that we can continue as an on-going
business for the next twelve months unless we obtain additional capital to pay
our bills. It is our belief that if we become current with our regulatory
filings and raise $2,500,000 in an offering, such monies will last twelve months
and will allow us to fully implement our business plan.
RESULTS AND COMPARISON OF THE THREE MONTH PERIODS ENDED MARCH 31, 2013 AND 2012:
The Company had no revenue for the three month periods ended March 31, 2013
and 2012.
Operating expenses were $924,300 and $2,500 for the three month periods
ended March 31, 2013 and 2012, respectively. Operating expenses for the three
month period ended March 31, 2013 consisted of $13,300 of legal, auditing and
accounting professional services, $907,500 as an impairment charge relating to
our web sites and $3,500 of general and administration expenses. Operating
expenses for the three month period ended March 31, 2012 consisted of $2,500 of
legal and auditing professional services.
The Company incurred interest expenses of $1,000 in each of the three month
periods ended March 31, 2013 and 2012.
The Company incurred net losses of $925,300 and $3,500 for the three month
periods ended March 31, 2013 and 2012, respectively. Based on 15,445,484
weighted average shares outstanding for the three months ended March 31, 2013,
the loss per share was $0.06.
LIQUIDITY AND CAPITAL RESERVES:
For the three month period ended March 31, 2013, we had no income and our
operating expenses of $924,300 consisted primarily of an impairment charge
related to our web sites of $907,500.
As of March 31, 2013, the Company had no cash and a working capital deficit
of $57,774.
It is the Company's intention to seek additional capital through an equity
offering, which we plan to use to use for working capital and to implement a
marketing program to increase awareness of our websites and also to expand our
operations. Depending upon market conditions, the Company may not be successful
in raising sufficient additional capital for it to achieve its business
objectives. In such event, the business, prospects, financial condition, and
results of operations could be materially adversely affected.
15
The Company's executive offices are based in Melbourne (Florida) and have a
staff of one.
There is no guarantee that the Company will be successful in its attempt to
raise capital sufficient to meet its cash requirements for the next twelve
months. If the Company is not successful in its effort to raise sufficient
capital to meet its cash requirements, the business will fail and the Company
will cease to do business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures.
We conducted an evaluation under the supervision and with the participation
of our management, including Enzo Taddei, our Chief Executive Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. The term "disclosure controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
amended ("Exchange Act"), means controls and other procedures of a company that
are designed to ensure that information required to be disclosed by the company
in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures also include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the company's management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate, to
allow timely decisions regarding required disclosure. Based on this evaluation,
our Chief Executive Officer and principal financial officer concluded as of
March 31, 2013, that our disclosure controls and procedures have been improved
and were effective at the reasonable assurance level in our internal controls
over financial reporting discussed immediately below.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures
that:
(1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made
only in accordance with the authorization of our management and
directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
16
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over
financial reporting as of March 31, 2013 and found our internal control over
financial reporting to be effective. In making this assessment, management used
the framework set forth in the report entitled Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or COSO. The COSO framework summarizes each of the components of a
company's internal control system, including (i) the control environment, (ii)
risk assessment, (iii) control activities, (iv) information and communication,
and (v) monitoring. This quarterly report does not include an attestation report
of our registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permits us to provide only management's report in
this annual report.
IDENTIFIED MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the financial statements will not be prevented or detected.
Management identified no such material weakness or deficiency during its
assessment of our internal control over financial reporting as of March 31,
2013.
(b) Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2013, we did not make any changes in our
internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not aware of any threatened or pending litigation against
the Company.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
17
ITEM 6. EXHIBITS.
See Exhibit Index below for exhibits required by Item 601 of Regulation
S-K.
EXHIBIT INDEX
List of Exhibits attached or incorporated by reference pursuant to Item 601
of Regulation S-K:
Exhibit No. Description
----------- -----------
31.1 * Certification under Section 302 of Sarbanes-Oxley Act of 2002
31.2 * Certification under Section 302 of Sarbanes-Oxley Act of 2002
32.1 * Certification under Section 906 of Sarbanes-Oxley Act of 2002
32.2 * Certification under Section 906 of Sarbanes-Oxley Act of 2002
101 ** Interactive Data Files pursuant to Rule 405 of Regulation S-T
----------
* Filed herewith
** To be provided by Amendment
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NETWORKING PARTNERS, INC.
Date: May 20, 2013 /s/ Enzo Taddei
--------------------------------------------
Enzo Taddei
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Accounting and Financial Officer)
19