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PotNetwork Holding Inc. Unaudited Consolidated Financial Statements As on September 30, PDF

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