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.
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.
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.
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
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.
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)
========== ========== ========== ==========
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
LIQUIDITY AND CAPITAL RESOURCES
As at As at
June 30, December 31,
Current Assets $ 149 $ 4,524
Current Liabilities $ 328,268 $ 308,734
Working Capital (deficiency) $ (328,119) $ (304,210)
Six Months Six Months
June 30, June 30,
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
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.
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.
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.
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
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
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.
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
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.
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.
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.
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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