UNITED STATES

SECURITIES AND EXCHANGE COMMIS SION

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 June 30, 2017

 

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the transition period from ____________ to____________

 

Commission File Number: 000-53661

 

NORTHSIGHT CAPITAL, INC.

(Exact name of issuer as specified in its charter)

 

Nevada

 

26-2727362

(State or Other Jurisdiction of incorporation or organization)

 

(I.R.S. Employer I.D. No.)

 

7580 E Gray Rd., Ste 103

Scottsdale, AZ 85260

(Address of Principal Executive Offices)

 

(480) 385-3893

(Registrant’s Telephone Number, Including Area Code)

 

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 [X] No [   ]

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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 definition 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

[   ] (Do not check if a smaller reporting company)

Smaller reporting company

[X]

Emerging growth company

[   ]

 

 

 

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 CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:

 

Class

 

Outstanding as of August 18, 2017

Common Capital Voting Stock, $0.001 par value per share

 

117,718,241 shares



FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended.

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

June 30, 2017

 

C O N T E N T S

 

Balance Sheets (unaudited)

3

Statements of Operations (unaudited)

4

Statements of Cash Flows (unaudited)

5

Notes to Unaudited Financial Statements

6


2



NORTHSIGHT CAPITAL, INC.

BALANCE SHEETS

 

 

 

June 30,

 

 

 

 

2017

 

December 31,

 

 

(unaudited)

 

2016

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$

2,505

 

$

14,405

Total Current Assets

 

 

2,505

 

 

14,405

 

 

 

 

 

 

 

Property and equipment, net $11,626 and $9,763 depreciation

 

 

812

 

 

2,675

Web Development Costs, net $171,132 and $134,949 amortization

 

 

140,780

 

 

176,963

Investment in joint venture

 

 

17,361

 

 

17,361

Total Assets

 

$

161,458

 

$

211,404

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

223,128

 

$

224,272

Accounts payable and accrued expenses – related party

 

 

854,256

 

 

704,997

Notes payable – related party

 

 

1,732,765

 

 

1,542,217

Notes payable

 

 

79,900

 

 

196,433

Convertible notes payable

 

 

100,000

 

 

100,000

Total Current Liabilities

 

 

2,990,049

 

 

2,767,919

 

 

 

 

 

 

 

Noncurrent Liabilities

 

 

 

 

 

 

Notes payable – related party

 

 

400,000

 

 

400,000

Total Liabilities

 

 

3,390,049

 

 

3,167,919

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

-

 

 

-

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

Common stock - 200,000,000 shares authorized having a par value of $.001 per share; 115,868,241 and 112,836,581 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively

 

 

115,868

 

 

112,837

Subscription payable

 

 

-

 

 

62,000

Additional paid-in capital

 

 

17,718,075

 

 

17,552,058

Accumulated deficit

 

 

(21,062,534)

 

 

(20,683,410)

Total Stockholders' Deficit

 

 

(3,228,591)

 

 

(2,956,515)

Total Liabilities and Stockholders' Deficit

 

$

161,458

 

$

211,404

 

See accompanying notes to financial statements.


3



NORTHSIGHT CAPITAL, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

2017

 

2016 (revised)

 

2017

 

2016 (revised)

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

5,923

 

$

4,770

 

$

9,088

 

$

8,879

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

General administrative

 

65,151

 

 

102,525

 

 

121,316

 

 

255,350

Consulting expense - related party

 

45,000

 

 

45,000

 

 

90,000

 

 

90,000

Executive compensation

 

-

 

 

174,720

 

 

-

 

 

352,956

Professional fees

 

88,981

 

 

55,645

 

 

140,914

 

 

113,724

Rent - related party

 

34,500

 

 

34,500

 

 

69,000

 

 

69,000

Travel

 

-

 

 

-

 

 

-

 

 

2,327

Total operating expenses

 

233,632

 

 

412,390

 

 

421,230

 

 

883,357

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(227,709)

 

 

(407,620)

 

 

(412,142)

 

 

(874,478)

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

Loss on investments

 

-

 

 

-

 

 

-

 

 

(475,751)

Interest expense

 

(20,478)

 

 

(29,935)

 

 

(37,801)

 

 

(32,104)

Gain on settlement of debt

 

76,617

 

 

-

 

 

76,617

 

 

-

Loss on extinguishment of debt

 

(5,798)

 

 

-

 

 

(5,798)

 

 

-

Loss on deposit

 

-

 

 

(131,000)

 

 

-

 

 

(131,000)

 Total other income (expense)

 

 50,341

 

 

(160,935)

 

 

33,018

 

 

(638,855)

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

$

(177,368)

 

$

(568,555)

 

$

(379,124)

 

$

(1,513,333)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares

 

 

 

 

 

 

 

 

 

 

 

Outstanding - Basic and Diluted

114,480,880

 

112,761,581

 

113,847,866

 

112,761,581

Loss per Common Share - Basic and Diluted

$

(0.00)

 

$

(0.01)

 

$

(0.00)

 

$

(0.01)

 

 

 

 

See accompanying notes to financial statements.


4



NORTHSIGHT CAPITAL, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

2017

 

2016 (revised)

Cash Flows From Operating Activities

 

 

 

 

 

 

Net loss

 

$

(379,124)

 

$

(1,513,333)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation of property and equipment

 

 

1,863

 

 

2,073

Amortization of web development costs

 

 

36,183

 

 

36,182

Gain on settlement of obligations

 

 

(76,617)

 

 

-

Los on extinguishment of debt

 

 

5,798

 

 

-

Loss on deposit

 

 

-

 

 

131,000

Warrants issued for executive compensation

 

 

-

 

 

62,956

Loss on investments

 

 

-

 

 

475,751

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

-

 

 

400

Accounts receivable – related party

 

 

-

 

 

(10,363)

Advances to employees

 

 

-

 

 

(1,577)

Accounts payable and accrued expenses

 

 

40,988

 

 

302,167

Accounts payable - related party

 

 

151,548

 

 

191,623

Net Cash Used In Operating Activities

 

 

(219,361)

 

 

(323,121)

 

 

 

 

 

 

 

Cash Flows From by Investing Activities

 

 

-

 

 

-

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

Proceeds from the sale of common stock

 

 

25,000

 

 

-

Proceeds from convertible notes payable

 

 

-

 

 

100,000

Proceeds from notes payable – related party

 

 

272,949

 

 

274,050

Payments on notes payable – related party

 

 

(90,488)

 

 

(73,000)

Net Cash Provided by Financing Activities

 

 

207,461

 

 

301,050

 

 

 

 

 

 

 

Net Decrease In Cash

 

 

(11,900)

 

 

(22,071)

Cash, Beginning of Period

 

 

14,405

 

 

22,951

Cash, End of Period

 

$

2,505

 

$

880

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

$

158

Cash paid for income taxes

 

$

-

 

$

-

Non-Cash Activities

 

 

 

 

 

 

Common stock issued as settlement of obligations

 

$

82,048

 

$

-

Warrants issued in conjunction with joint venture

 

$

-

 

$

475,751

Issuance of common stock payable

 

$

62,000

 

 

-

See accompanying notes to financial statements.


5



NORTHSIGHT CAPITAL, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

June 30, 2017

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Northsight Capital Inc. (“Northsight” or “the Company”) is an early stage company incorporated in the State of Nevada on May 21, 2008. In May, 2011, Safe Communications, Inc. (n/k/a Kuboo, Inc.) acquired 80% of the Company’s issued and outstanding common stock, and, as a result, became its parent company. On June 25, 2014, the Company completed the acquisition of approximately 7,500 cannabis related Internet domain names, in exchange for which the Company issued 78.5 million shares of its common stock and a promissory note in the principal amount of $500,000. As a result of this transaction, the seller of the domain names became an 81% stockholder of the Company. Kuboo, Inc. continues to be a significant stockholder of the Company.  John Venners, a director of Kuboo, Inc., is our EVP, Operations and also sits on our board of directors.  See Note 14 - Related Party Transactions.

 

The Company’s principal business is to provide a wide variety of online directories for a broad range of businesses engaged in the lawful sale and distribution of cannabis and hemp related products. The following constitute the Company’s major product categories:  a monthly listing in one or more of the Company’s online directories, paid advertising in one or more of the Company’s online directories and leasing to customers one or more Internet domain names for the customer’s exclusive use.

 

The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The interim financial statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the period.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and six month periods ended June 30, 2017, are not necessarily indicative of the operating results for the full year.

 

NOTE 2 – LIQUIDITY/GOING CONCERN

 

The Company had net losses of $177,368 and $379,124 for the three and six months ended June 30, 2017, respectively, has accumulated losses of $21,062,534 and has had consistent negative cash flows from operating activities since inception (May 2008). These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. During the six months ended June 30, 2017 the Company received a net $182,461 in loans from related party shareholders to fund operations.  Management plans to (i) raise additional capital as soon as possible, to fund continued operations of the Company and (ii) continue its efforts to generate revenues and income from operations.

 

In the event the Company does not generate sufficient funds from revenues or financing through the issuance of its common stock or from debt financing, the Company will be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.

 

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

 

Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact on the Company’s financial position, results of operations or cash flows upon adoption.


6



NOTE 4 – INVESTMENT IN JOINT VENTURE

 

On February 29, 2016, the Company entered into a joint venture agreement with Tumbleweed Holdings, Inc. (“TW”), pursuant to which a newly formed joint venture company is developing an online dating service around the URL, www.jointlovers.com. The Company and TW own 60% and 40% respectively of equity of the joint venture company.  Under the joint venture agreement, the Company and TW agreed as follows:

 

The Company contributed the URL www.jointlovers.com to the joint venture entity, in exchange for 60% of the joint venture company. 

 

TW contributed $30,000 and agreed to contribute an additional $70,000 towards the development of the online web portal, in exchange for 40% of the joint venture company. With any additional funds required for development to be contributed 60% by the Company and 40% by TW (see Note 17 – Subsequent Events). 

 

Revenue from the joint venture company will be shared proportionally with a portion of operating income to be used to repay principal and income due under the convertible notes referenced below (up to $165,000 in principal amount of notes). 

 

TW agreed to purchase an aggregate of $150,000 in principal amount of convertible notes, convertible into shares of the Company’s common stock at a conversion price of $.20 per share. In addition to repayment of principal, if the joint venture company has revenues, the notes are entitled to receive a portion of the joint venture company’s operating income until they have received an amount equal to 50% of the face value of the notes (see Note 17 – Subsequent Events). 

 

During the year ended December 31, 2016, Tumbleweed contributed a total of $85,000 to the joint venture company. Tumbleweed has not contributed the remaining $15,000 as of the date of these financial statements.

 

Additionally, both parties agreed to issue the other a warrant to purchase 4.9% of their outstanding common stock. Pursuant to this agreement, TW agreed to issue a warrant to the Company to purchase 9,770,878 shares of its common stock at an exercise price of $0.02 per share, and the Company agreed to issue a warrant to TW to purchase 5,525,318 shares of the Company’s common stock at an exercise price of $0.08 per share, valued at $475,751. The warrants have a three-year term and a cashless exercise right (see Note 5 – Securities and Note 12 – Stock Warrants for details). As of the date of these financial statements, TW has not yet issued the warrants due to the Company. Therefore, the Company has not yet recorded their value on its balance sheet.

 

The Company’s ownership of the joint venture company is accounted for under the equity method of accounting, in accordance with ASC 323. Under the equity method of accounting, an Investee Company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the Investee Company is reflected as a gain or loss on the Company’s investment. Additionally, under the equity method of accounting, the Company’s initial investment in the joint venture company was recorded at the historic cost basis of the contributed domain of $0. Accordingly, the Company expensed $475,751 related to the value of warrants the Company issued and is included as a component of loss on investments in the Company’s Statements of Operations for the Six months ended June 30, 2016.

 

When the Company’s carrying value in an equity method Investee Company is reduced to zero, no further losses are recorded in the Company’s financial statements unless the Company guaranteed obligations of the Investee Company or has committed additional funding. When the Investee Company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.  During the three and six months ended June 30, 2017, the joint venture did not have a net income or loss.  During the three and six months ended June, 2016, the joint venture company experienced a net loss attributable to the Company’s 60% ownership of $1,326 and $2,941, respectively, which was not recorded as an adjustment to the Company’s investment account due to the Company having a zero book value in the investment.

 

As of June 30, 2017, Tumbleweed was in default under the terms of the joint venture agreement and owed the joint venture company the remaining $15,000 in development funding and the Company $50,000 for the final note purchase, both of which were due by April 29, 2016. Additionally, Tumbleweed owes the joint venture company $18,904, representing its 40% share of costs in excess of the first $100,000.

 

On August 15, 2016, the Company instituted a legal action in Arizona against, Tumbleweed Holdings Inc., (“TW”). The complaint alleged that (i) TW breached the joint venture agreement by failing to fund the remaining $15,000 due to the joint venture company by April 29, 2016, (ii) TW breached the joint venture agreement by failing to fund the last $50,000 convertible note due to the Company by April 29, 2016, and (iii) TW breached the joint venture agreement by failing to fund their respective 40% of development expense in excess of the initial $100,000. The Company seeks damages in the amount of $128,000 plus interest.


7



On September 22, 2016, Tumbleweed Holdings Inc., instituted a counterclaim in Arizona in response to the above legal action. The complaint alleged that (i) The Company breached the joint venture agreement by failing to leverage relationships and failing to provide budgeting and accounting records, (ii) the Company breached implied covenant of good faith and fair dealing by enticing TW into making significant contributions and then failing to perform under the agreement, (iii) the Company was unjustly enriched by having use of funds contributed by TW, (iv) the Company converted funds contributed by TW into its own assets, and (v) the Company has not provided accounting for all funds received by TW. See Note 17 - Subsequent Events.

 

Summary revenue information on the joint venture for the three months ended June 30, 2017 and 2016 is as follows:

 

 

For the Three Months Ended

 

June 30, 2017

 

June 30, 2016

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

Revenues

$

-

 

$

-

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

General administrative

 

-

 

 

2,210

Total operating expenses

 

-

 

 

2,210

 

 

 

 

 

 

Loss from operations

 

-

 

 

(2,210)

 

 

 

 

 

 

Net Loss

$

-

 

$

(2,210)

 

 

 

 

 

 

Company Share of Net Loss

$

-

 

$

(1,326)

 

Summary revenue information on the joint venture for the six months ended June 30, 2017 and 2016 is as follows:

 

 

For the Six Months Ended

 

June 30, 2017

 

June 30, 2016

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

Revenues

$

-

 

$

-

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

General administrative

 

-

 

 

4,902

Total operating expenses

 

-

 

 

4,902

 

 

 

 

 

 

Loss from operations

 

-

 

 

(4,902)

 

 

 

 

 

 

Net Loss

$

-

 

$

(4,902)

 

 

 

 

 

 

Company Share of Net Loss

$

-

 

$

(2,941)

 

NOTE 5 – SECURITIES

 

In conjunction with the formation of the joint venture discussed in Note 4, Tumbleweed Holdings agreed to issue the Company a warrant to purchase up to 9,770,878 shares of Tumbleweed Holdings, Inc. at an exercise price of $0.02 with an expiration date three years from the date of issuance. At June 30, 2017, Tumbleweed had not yet issued these warrants to the Company. See Note 17 - Subsequent Events.


8



NOTE 6 – WEB DEVELOPMENT COSTS AND DOMAIN NAMES ASSETS

 

In accordance with ASC 350-50, during the six months ended June 30, 2017 and the year ended December 31, 2016, the Company did not capitalize any expenses towards the development of multiple websites on which third parties can advertise the sale and distribution of cannabis related products and services: an online “yellow pages.” The Company does not intend to engage in the sale or distribution of marijuana or related products. During the six months ended June 30, 2017 and 2016 the Company recorded website development expenses of $3,430 and $8,654, respectively, which is included in general and administrative expenses on the Company’s consolidated statements of operations.

 

The Company amortizes these assets over their related useful lives (approximately 1 to 5 years), using a straight-line basis. Assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable, or at least annually. Measurement of the amount of impairment, if any, is based upon the difference between the asset's carrying value and estimated fair value. Fair value is determined through various valuation techniques, including market and income approaches as considered necessary. During the six months ended June 30, 2017 and 2016 the Company recorded amortization expense of $36,183 and $36,182, respectively, related to websites previously launched.  

 

 

 

As of

June 30,

2017

 

As of

December 31,

2016

 

Amortization

Period

Web development costs

 

 

311,912

 

 

311,912

 

5 years

Capitalized costs

 

 

-

 

 

-

 

 

Less: accumulated depreciation

 

 

(171,132)

 

 

(134,949)

 

 

 

 

$

140,780

 

$

176,963

 

 

 

NOTE 7 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at June 30, 2017 and December 31, 2016:

 

 

 

As of

June 30,

2017

 

As of

December 31,

2016

 

Estimated

Useful Life

Furniture and equipment

 

 

12,438

 

 

12,438

 

3 years

Total

 

 

12,438

 

 

12,438

 

 

Less: Accumulated depreciation

 

 

(11,626)

 

 

(9,763)

 

 

 

 

$

812

 

$

2,675

 

 

 

The Company records depreciation expense on a straight-line basis over the estimated life of the related asset (approximately 3 years). The Company recorded depreciation expense of $1,863 and $2,073 during the six months ended June 30, 2017 and 2016, respectively.

 

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES RELATED PARTY

 

At June 30, 2017, the Company had a balance in related party accounts payable and accrued expenses of $854,256 which consisted of the following:

 

Party Name:

Relationship:

 

 

Amount

Howard Baer

Spouse of majority shareholder

Consulting fees

 

360,500

Howard Baer

Spouse of majority shareholder

Accrued interest

 

84,523

John Venners

Director/EVP, President and CEO of Kuboo, Inc.

Consulting fees/salaries

 

233,466

John Venners

Director/EVP, President and CEO of Kuboo, Inc.

Advances

 

3,000

Kuboo, Inc.

Former parent company, significant shareholder

Rent

 

167,476

John Lemak

Significant shareholder

Accrued interest

 

5,219

 

 

 

$

854,256


9



NOTE 9 – NOTES PAYABLE RELATED PARTY

 

On May 19, 2015, the Company issued Kae Yong Park and her spouse Howard Baer (together, “Park”) a non-interest bearing, unsecured demand promissory note to evidence all unpaid advances received by the Company to that point and to cover all additional advances received afterward.  Unpaid principal under the note is due and payable upon the earlier of (i) an “event of default” (as defined), (ii) written demand and (iii) the Company’s receipt of capital (to the extent of net proceeds received) from any capital raising transaction after May 15, 2015, whether in the form of debt, equity or otherwise.

 

On September 30, 2015, the Company amended and restated its promissory note to Park to include all advances to date and provide certain assets, including all internet domain names, websites and related assets as collateral.  Repayment terms remain the same, and Park has to date not enforced the provision requiring repayment upon receipt of net proceeds from capital raising transactions.

 

During the six months ended June 30, 2017, Park advanced an aggregate of $52,650 on an unsecured basis to the Company for short-term capital needs.  During this period, the Company also repaid $24,550 of its secured debt to Park and recaptured $65,938 worth of payroll expenses for Park’s use of Company personnel.  Amounts recaptured for use of Company personnel have been treated as repayments on the Company’s Statements of Cash Flows. At June 30, 2017, the Company had a note payable to Park for these advances of $1,376,829 which is secured by the assets of the Company.  Due to the on demand nature of this amount, the company has classified it as a current liability.

 

The following table summarizes the Company’s balance for these advances for the six months ended June 30, 2017:

 

Amount due - December 31, 2016

$

1,414,667

Advances received from Park

 

52,650

Repayments made to Park

 

(24,550)

Recapture of Company expenses

 

(65,938)

Balance due–June 30, 2017

$

1,376,829

 

On June 23, 2014, the Company issued a $500,000 promissory note in conjunction with the purchase of approximately 7,500 cannabis-related internet domain names. The note originally bore interest at the rate of 3.25% per annum and the first $100,000 of which was payable upon the Company’s receipt of an aggregate of $1,000,000 in funding (whether debt or equity). The remaining $400,000 is payable in thirty-six equal monthly installments, commencing on the fifteenth day following the first month the Company realizes at least $150,000 in gross revenue (see Note 15 - Commitments and Contingencies).

 

On July 25, 2014, the Company amended and restated its promissory note in the principal amount of $500,000 owing to Kae Yong Park (the Company’s then majority shareholder) to provide that it would make the first $100,000 installment payment due under the Note on July 25, 2014 (earlier than required), in exchange for which Kae Yong Park agreed to waive all interest due over the term of the note. Thereafter, Kae Yong Park waived the requirement that the Company pay the $100,000 due under the Amended and Restated Note until August 25, 2014, at which time it was paid.  The Company subsequently recaptured all previously recorded interest expense related to the note.

 

Between December 1, 2016 and March 16, 2017, the Company received aggregate proceeds of $101,299 from a related party and significant shareholder for which notes were issued bearing 8% interest annually. On April 1, 2017, the Company issued a note for $102,465 consisting of $101,000 in principal and $1,465 in accrued interest for the previous notes. The $299 forgiven as part of the note restructure was recorded as a gain on extinguishment of debt. The note is non-interest bearing, matures on October 1, 2017 and is unsecured.

 

Between December 15, 2016 and January 13, 2017, the Company received aggregate proceeds of $41,550 from a related party and significant shareholder for which notes were issued bearing 8% interest annually. On April 1, 2017, the Company issued a note for $42,374 consisting of $41,550 in principal and $824 in accrued interest for the previous notes. The note is non-interest bearing, matures on October 1, 2017 and is unsecured.

 

On April 1, 2017, the company renegotiated a $65,000 note with interest tied to the performance of its joint venture agreement into a new $71,067 non-interest bearing note with a maturity date of October 1, 2017. At the time of the refinance, the joint venture had not produced positive income, so no interest was due at maturity on August 1, 2017. The $6,097 consideration given on the new note was recorded as a loss on extinguishment of debt.


10



Between May 1, 2016 and June 29, 2017, the Company received aggregate proceeds of $140,000 from a related party and significant shareholder for which notes were issued bearing 8% interest annually. On April 1, 2017, the Company issued a note for $140,000 to restructure the previous notes. The new note is non-interest bearing, matures on October 1, 2017 and is secured by certain domain names owned by the Company.

 

NOTE 10 – NOTES PAYABLE

 

Notes

 

On July 1, 2015, the Company entered into a seven (7) day loan agreement with two parties for aggregate proceeds of $34,900.  The note bears interest at the rate of six percent (6%) annually.  In addition to the loans, the Company issued an aggregate 349,000 shares of common stock valued at $26,016 and warrants to purchase an aggregate 100,000 shares of the Company’s common stock at an exercise price of $0.25 per share valued at $6,898.  The relative fair value of the shares and warrants associated with these notes have been recorded as debt discount to be amortized over the life of the loans.  As of June 30, 2017, these notes have not yet been repaid and principal and interest totaling $39,071 is in default.

 

On August 10, 2015, the Company entered into a one hundred twenty (120) day loan agreement with an existing investor for aggregate proceeds of $45,000 (two installments of $22,500 each).  The note bears interest at the rate of six percent (6%) annually.  As additional consideration for these loans, the Company issued an aggregate 1,200,000 shares of common stock valued at $38,918.  The relative fair value of the shares associated with these notes have been recorded as debt discount to be amortized over the life of the loans). As of June 30, 2017, these notes have not yet been repaid and principal and interest totaling $49,664 is in default.

 

Convertible Notes

 

On February 29, 2016, in conjunction with its joint venture agreement (see Note 4 – Investment in Joint Venture), the Company entered an agreement to issue three $50,000, one year convertible notes. These notes are convertible into shares of the Company’s stock at a price of $0.20 per share or a total of 250,000 shares each. Interest on the note is payable quarterly in an amount equal to a percentage of the Company’s joint venture company’s net revenues, up to fifty percent of the original face value This interest will be payable only in the event that the joint venture company generates net revenues. Concurrent with this agreement, the Company issued the first of these convertible notes. On April 8, 2016, the Company issued the second of these convertible notes. As of June 30, 2017, the proceeds from the third note investment of $50,000 had not been received.

 

Dilutive shares associated with convertible notes outstanding at June 30, 2017 is as follows:

 

 

Principal

 

Shares

Note dated February 29, 2016, convertible at $0.20 per share

$

50,000

 

 

250,000

Note dated April 8, 2016, convertible at $0.20 per share

 

50,000

 

 

250,000

Total Dilutive shares –June 30, 2017

$

100,000

 

 

500,000

 

The following table summarizes the Company’s notes and convertible notes payable for the six months ended June 30, 2017:

 

 

Notes

 

Convertible Notes

Balance – December 31, 2016

$

196,433

 

$

100,000

Note proceeds received

 

-

 

 

-

Settlement of note

 

(116,553)

 

 

-

Repayments on notes

 

-

 

 

-

Balance –June 30, 2017

$

79,900

 

$

100,000

 

NOTE 11 – EQUITY

 

On January 10, 2017, the Company issued 400,000 shares of the Company’s common stock previously recorded as a subscription payable valued at $62,000 as settlement of its previously settled lawsuit with Lee Ori.

 

On April 10, 2017, we sold 1,000,000 shares of common stock in a private transaction at a per share price of $.025, for gross proceeds of $25,000, to an “accredited investor” within the meaning of Rule 502 of Regulation D under the Securities Act of 1933, as amended.

 

Between June 5 and June 29, 2017, the Company issued a total of 1,631,660 shares of the Company’s common stock as settlement for an aggregate $163,166 in payables.  The Company recognized an aggregate gain of $76,617 on these settlements.


11



NOTE 12 – STOCK WARRANTS

 

The Company has applied fair value accounting for all warrants issued. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.

 

A summary of the Company’s warrant activity for the six months ended June 30, 2017 is as follows:

 

 

 

Number of 

Warrants

 

Weighted 

Average

Exercise 

Price

Outstanding – December 31, 2016

 

 

17,755,603

 

$

0.08

Granted

 

 

-

 

 

-

Expired

 

 

(2,000,000)

 

 

0.05

Exercised/settled

 

 

-

 

 

-

Balance as June 30, 2017

 

 

15,755,603

 

$

0.08

 

The Company’s outstanding warrants at June 30, 2017 are as follows:

 

Warrants Outstanding

 

Warrants Exercisable

Exercise 

Price

Range

 

Number

Outstanding

 

Weighted 

Average

Remaining

Contractual 

Life

(in years)

 

Weighted 

Average

Exercise 

Price

 

Number

Exercisable

 

Weighted

Average

Exercise 

Price

 

Intrinsic 

Value

$0.05 - $0.25

 

15,755,603

 

0.81

 

$0.08

 

15,755,603

 

$0.08

 

-

 

NOTE 13 – EARNINGS (LOSS) PER SHARE

 

Net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

 

Since the Company reflected a net loss for the three and six months ended June 30, 2017 and 2016, respectively, the effect of considering any common stock equivalents, if exercisable, would have been anti-dilutive. Therefore, a separate computation of diluted earnings (loss) per share is not presented.

 

The Company has the following common stock equivalents as of June 30, 2017:

 

 

As of

June 30,

2017

Warrants (exercise price $0.05 - $0.25/share)

 

 

15,755,603

Convertible debt (exercise price $0.20/share)

 

 

500,000

 

 

 

16,255,603

 

NOTE 14 – RELATED PARTY TRANSACTIONS

 

We are headquartered in Scottsdale, Arizona where we rent space from Howard R. Baer, the spouse of a significant shareholder. We previously rented space form Kuboo, Inc., our former parent company.  We began renting approximately 2,100 square feet of space from Howard. Baer on a month-to-month basis on July 1, 2017. The monthly rent for our space is about $2,700 (all inclusive). During the six months ended June 30, 2017 we incurred rent expense payable to Kuboo, Inc. of $69,000.

 

During the six months ended June 30, 2017, the Company received proceeds of $220,299 from a related party and significant shareholder for which notes were issued bearing 8% interest annually. The notes, as extended, mature on October 1, 2017 and are unsecured. At June 30, 2017, the Company had accrued interest of $5,291 related to the notes.


12



During the six months ended June 30, 2017, Kae Yong Park, a significant shareholder, and her spouse, Howard Baer (collectively, “Park”), advanced an aggregate of $52,650 on an unsecured basis to the Company for short-term capital needs.  During this period, the Company also repaid $24,550 of its secured debt to Park and recaptured $65,938 worth of payroll expenses for Park’s use of Company personnel.  At June 30, 2017, the Company had a note payable to Park for these advances of $1,376,829 which is secured by the assets of the Company.  

 

During the six months ended June 30, 2017, the Company incurred expenses of $90,000 related to its consulting contract with Howard Baer, the spouse of Kae Yong Park, our significant shareholder.

 

On April 1, 2017, the company renegotiated a $65,000 note with interest tied to the performance of its joint venture agreement into a new $71,067 non-interest bearing note with a maturity date of October 1, 2017. At the time of the refinance, the joint venture had not produced positive income, so no interest was due at maturity on August 1, 2017. The $6,097 consideration given on the new note was recorded as a loss on extinguishment of debt.

 

On April 13, 2016, the Company agreed to amend the promissory note with Kae Yong Park and Howard R. Baer so as to make $564,000 in principal amount due under said Note interest bearing at the rate of 10% per annum, effective January 1, 2016. The remaining principal is non-interest bearing. During the six months ended June 30, 2017, the company incurred interest expense of $27,968 related to this note.  At June 30, 2017, the Company has accrued interest owed under this agreement of $84,523.

 

NOTE 15 – COMMITMENTS AND CONTINGENCIES

 

In May 2014, The Company entered into an asset purchase agreement that requires the Company to pay a monthly royalty equal to six percent of gross monthly revenues over $150,000. The royalty payment is payable for a period of thirty-six months from and after the first month in which the Company’s gross revenues are in excess of $150,000.

 

On June 23, 2014, the Company issued a $500,000 promissory note in conjunction with the purchase of approximately 7,500 cannabis-related internet domain names. The original note bore interest at the rate of 3.25% per annum and was payable as follows: upon the Company’s receipt of an aggregate of $1,000,000 in funding (whether debt or equity), $100,000 was required to be paid. The remaining $400,000 is payable in thirty-six equal monthly installments, commencing on the fifteenth day following the first month the Company realizes at least $150,000 in gross revenue.

 

On July 25, 2014, the Company amended and restated its promissory note in the principal amount of $500,000 owing to Kae Yong Park (the Company’s then majority shareholder) to provide that it would make the first $100,000 installment payment due under the Note on July 25, 2014 (earlier than required), in exchange for which Kae Yong Park agreed to waive all interest due over the term of the note. Thereafter, Kae Yong Park waived the requirement that the Company pay the $100,000 due under the Amended and Restated Note until August 25, 2014, at which time it was paid.  

 

On August 15, 2016, the Company instituted a legal action in Arizona against, Tumbleweed Holdings Inc., (“TW”). The complaint alleged that (i) TW breached the joint venture agreement by failing to fund the remaining $15,000 due to the joint venture company by April 29, 2016, (ii) TW breached the joint venture agreement by failing to fund the last $50,000 convertible note due to the Company by April 29, 2016, and (iii) TW breached the joint venture agreement by failing to fund their respective 40% of development expense in excess of the initial $100,000. The Company seeks damages in the amount of $128,000 plus interest.

 

On September 22, 2016, Tumbleweed Holdings Inc., instituted a counterclaim in Arizona in response to the above legal action. The complaint alleged that (i) The Company breached the joint venture agreement by failing to leverage relationships and failing to provide budgeting and accounting records, (ii) the Company breached implied covenant of good faith and fair dealing by enticing TW into making significant contributions and then failing to perform under the agreement, (iii) the Company was unjustly enriched by having use of funds contributed by TW, (iv) the Company converted funds contributed by TW into its own assets, and (v) the Company has not provided accounting for all funds received by TW. TW seeks damages in the amount to be determined at trial. The Company believes these claims are without merit and intends to vigorously defend itself against them. See Note 17 - Subsequent Events.

 

NOTE 16 – REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

 

The Company identified an error relating to the recognition of warrants not yet received during the year ended December 31, 2016. The effect of error is to increase the net loss for the periods ended June 30, 2016.

 


13



In accordance with the guidance provided by the SEC’s Staff Accounting Bulletin 99, Materiality, and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Measurements in Current Year Financial Statements, the Company determined that the impact of the adjustments relating to the correction of this accounting error are not material to previously issued unaudited financial statements. Accordingly, these changes are disclosed herein and will be disclosed prospectively.

 

As a result of the aforementioned correction of accounting errors, the revised prior unaudited financial statements have been revised as follows:

 

 

 

June 30, 2016

 

 

 

As Previously

 

 

 

 

 

As

 

Balance Sheet

 

Reported

 

 

Adjustments

 

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale securities

 

$

286,901

 

 

$

(286,901)

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income

 

 

111,857

 

 

 

(111,857)

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' deficit

 

 

(2,265,004)

 

 

 

(286,901)

 

 

 

(2,551,905)

 

 

 

 

For the Three Months Ended June 30, 2016

 

 

 

As Previously

 

 

 

 

 

As

 

Statement of Operations

 

Reported

 

 

Adjustments

 

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on securities

 

$

(300,707)

 

 

$

(175,044)

 

 

$

(475,751)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(568,555)

 

 

 

(175,044)

 

 

 

(568,555)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on marketable securities

 

 

121,347

 

 

 

(121,347)

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

(446,938)

 

 

 

(121,617)

 

 

 

(568,555)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss-basic and diluted

 

 

(0.01)

 

 

 

 

 

 

(0.01)

 

 

 

 

For the Six Months Ended June 30, 2016

 

 

 

As Previously

 

 

 

 

 

As

 

Statement of Operations

 

Reported

 

 

Adjustments

 

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on securities

 

$

(300,707)

 

 

$

(175,044)

 

 

$

(475,751)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,338,289)

 

 

 

(175,044)

 

 

 

(1,513,333)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on marketable securities

 

 

111,857

 

 

 

(111,857)

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

(1,226,432)

 

 

 

(286,901)

 

 

 

(1,513,333)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss-basic and diluted

 

 

(0.01)

 

 

 

 

 

 

(0.01)

 

 

 

 

For the Six Months ended June 30, 2016

 

 

 

As Previously

 

 

 

 

 

As

 

Statement of Cash Flows

 

Reported

 

 

Adjustments

 

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,338,289)

 

 

$

(175,044)

 

 

$

(1,513,333)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on investments

 

 

300,707

 

 

 

175,044

 

 

 

475,751

 


14



NOTE 17 – SUBSEQUENT EVENTS

 

We have evaluated all events that occurred after the balance sheet date through the date when our financial statements were issued to determine if they must be reported. Management has determined that other than as disclosed below, there were no additional reportable subsequent events to be disclosed.

 

Loan Advances

 

Since June 30, 2017, the Company made repayments of $1,000 to Kae Yong Park, a significant shareholder, and her spouse, Howard R. Baer leaving a balance due of $1,375,829 at August 18, 2017. These advances are secured by all of the Company’s assets, including all of its internet domain names, websites and related assets, and are payable on demand. Of the aggregate $1,375,829 owed at August 18, 2017, $853,829 is non-interest bearing.

 

Between July 14 and August 14, 2017, a related party and significant shareholder advanced the Company an aggregate $115,000 to fund business operations.

 

Office Rent

 

We are headquartered in Scottsdale, Arizona where we rent space from Howard R. Baer, the spouse of a significant shareholder. We previously rented space form Kuboo, Inc., our former parent company.  We began renting approximately 2,100 square feet of space from Howard. Baer on a month-to-month basis on July 1, 2017. The monthly rent for our space is about $2,700 (all inclusive). During the six months ended June 30, 2017 we incurred rent expense payable to Kuboo, Inc. of $69,000.

 

Settlement of Tumbleweed Litigation

 

On July 17, 2017, the Company and Tumbleweed settled the litigation relating to the joint venture.  As part of the settlement, Tumbleweed converted its $100,000 convertible note and its $85,000 joint venture investment into shares of company common stock at a rate of $.10 per share. The warrants issuable to Tumbleweed and the company were cancelled. The parties released each other from all claims related to the joint venture.

 

Entry into Definitive Purchase Agreement with Crush Mobile

 

On August 8, 2017, the company entered into a definitive agreement to acquire all the outstanding membership interests of Crush Mobile, LLC. Under the terms of the Agreement, the company will acquire all the outstanding membership interests of Crush Mobile, in exchange for an aggregate of approximately 8 million shares of common stock, plus $85,000 in cash. The Company also agreed to piggy-back registration rights with respect to the shares of common stock issuable to the sellers in connection with the acquisition. The agreement provides that the current management of Crush will take over management of the Company following the closing. Consummation of the Crush Mobile acquisition is subject to completion of the company’s financial due diligence and the Company completing a funding of at least $500,000.


15



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-looking Statements

 

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.

 

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

 

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

 

Overview

 

On June 23, 2014, the Company acquired approximately 7,500 cannabis related Internet domain names from Kae Yong Park (who then became our majority shareholder in connection with such acquisition). The list of domain names we acquired is filed as Exhibit 99.3 to the Form 8-K Current Report filed with the Commission on June 25, 2014. Currently, we own approximately 2,700 cannabis related internet domain names. Based upon our limited capital resources, we determined to allow certain domain names to expire that we concluded were of little utility to us given our business strategy.

 

In consideration of the acquisition of these assets from Kae Yong Park, we issued her 78.5 million shares of our common stock. In addition, we issued a promissory note in the aggregate principal amount of $500,000, $100,000 of which has been paid and the payment of $400,000 of which is contingent upon our achieving $150,000 in monthly revenues (see Note 14 - Related Party Transactions and Note 15 - Commitments and Contingencies). The remaining balance of $400,000 is payable in thirty-six equal monthly installments, commencing on the fifteenth day following the first month the Company realizes at least $150,000 in gross revenue.

 

The Company has already launched several websites and portals and, subject to availability of sufficient funding (which the Company does not currently have), intends to build additional websites/portals around its owned internet domain names. These websites/portals will serve as directories for businesses engaged in the lawful sale and distribution of cannabis and hemp related products.

 

On February 29, 2016, the Company entered into a joint venture agreement with Tumbleweed Holdings, Inc. (“TW”), pursuant to which a newly formed joint venture company is developing an online dating service around the URL, www.jointlovers.com. The Company and TW own 60% and 40%, respectively, of equity of the joint venture company.  On August 15, 2016, the Company instituted a legal action in Arizona against TW.   On September 22, 2016, Tumbleweed Holdings Inc., instituted a counterclaim in Arizona in response to the above legal action.

 

On July 17, 2017, the Company and Tumbleweed settled the litigation relating to the joint venture.  As part of the settlement, Tumbleweed converted its $100,000 convertible note and its $85,000 joint venture investment into shares of company common stock at a rate of $.10 per share. The warrants issuable to Tumbleweed and the company were cancelled. The parties released each other from all claims related to the joint venture.

 

In May, 2017, we determined not to proceed with our previously announced planned acquisition of Stargreen Enterprises, LLC, a Los Angeles, California, company (“Stargreen”).

 

Stargreen informed us that it has not raised the minimum $2.5 million called for by the LOI. In addition, Stargreen suggested substantial changes to the proposed transaction terms, which our management believed were not in the best interests of our shareholders. Based on the foregoing, we determined to terminate the planned acquisition transaction with Stargreen.


16



In May, 2017, we signed a non-binding memorandum of terms to acquire Crush Mobile. On August 8, 2017, the company entered into a definitive agreement to acquire all the outstanding membership interests of Crush Mobile, LLC. Under the terms of the Agreement, the company will acquire all the outstanding membership interests of Crush Mobile, in exchange for an aggregate of approximately 8 million shares of common stock, plus $85,000 in cash. The Company also agreed to piggy-back registration rights with respect to the shares of common stock issuable to the sellers in connection with the acquisition.  The agreement provides that the current management of Crush will take over management of the Company following the closing.  Consummation of the Crush Mobile acquisition is subject to completion of the company’s financial due diligence and the Company completing a funding of at least $500,000.

 

Crush Mobile, with approximately nine hundred thousand members, has developed a group of dating sites with a presence in the Latino, Israeli and African American communities.  Crush will also be incorporating Northsight’s "Joint Lovers" dating app, which concentrates on the Cannabis space, into its dating applications suite.

 

Upon the closing, the Crush Mobile management team will take over our day to day operations, with the Crush Mobile current CEO, Sonya Kreizman, taking over as our interim CEO. 

 

Consummation of the acquisition transaction is subject to a variety of conditions, including our raising $500,000 prior to closing and our financial due diligence. Accordingly, there can be no assurance that this transaction will be consummated.

 

Subject to the foregoing conditions, the closing is expected to occur around September 30, 2017.

 

Recent Funding History

 

Between February 29 and April 8, 2016, the Company received aggregate proceeds of $100,000 from the issuance of convertible notes to Tumbleweed. These notes have been converted into shares of the Company’s stock at a price of $0.10 per share or a total of 1,000,000 shares. Between February 29 and May 6, 2016, the joint venture company received aggregate proceeds of $85,000 from Tumbleweed Holdings, its former the joint venture partner. In connection with the settlement of the Tumbleweed litigation, this $85,000 investment was converted into shares of the Company’s stock at a price of $0.10 per share or a total of 850,000 shares. See Note 17 subsequent Events

 

Between January 3, and July 13, 2017  Kae Yong Park,  a significant shareholder, and her spouse, Howard R, Baer (collectively, Park), made $52,650 of cash advances to us to fund our basic operations, $25,550 of which has been repaid and $65,938 of which has been recaptured for Park’s use of Company personnel, leaving a balance due of $1,375,829, as of August 18, 2017.

 

Neither Ms. Park nor Mr. Baer are not under any obligation to provide any further funding to the Company. Ms. Park and her spouse are no longer able to provide ongoing advances to fund the company’s operations. The funding received during 2016 and 2017 is insufficient to fund the Company’s basic business operations.  The Company has an immediate and urgent need for additional capital. Since early 2015, the Company has experienced great difficulty in raising capital from third parties. See “Liquidity and Capital Resources.”

 

Between January 13, and August 14, 2017, the Company received proceeds of $335,299 from a related party and significant shareholder for which non-interest bearing notes were issued. The notes, as extended, mature on October 1, 2017 with certain notes secured by certain of the Company’s URLs and websites (www.weedepot.com, www.ratemystrain.com, www.marijuanamd.com and www.420careers.com.  The Company had total notes payable to the related party of $470,936 at August 18, 2017.

 

The Company has used these limited funds to fund its basic operations on a severely scaled back basis.

 

Results of Operations

 

Three Months Ended June 30, 2017 Compared to the Three Months Ended June 30, 2016

 

The Company incurred net losses of approximately $177,000 for the three months ended June 30, 2017 as compared to a net loss of $569,000 for the three months ended June 30, 2016.  The approximate $391,000 decrease in net loss is due primarily to the following: (all numbers approximate) a decrease in general and administrative expense of $37,000, due to mainly to decreases in consulting and contract labor expenses, a $175,000 decrease in executive compensation, due to a decrease in salaries and stock based compensation; a $130,000 decrease in loss on deposit, a $77,000 increase in gain on settlement of liabilities and a $10,000 decrease in interest expense, partially offset by a $33,000 increase in professional fees and a 6,000 increase in loss on extinguishment of debt. We consider the gain on settlement liabilities to be of a non-recurring nature. If we are able to raise substantial additional capital and/or close the Crush Mobile acquisition, we expect to ramp up our operations which will cause our operating expenses to increase substantially.  


17



Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

 

The Company incurred net losses of approximately $379,000 for the six months ended June 30, 2017 as compared to a net loss of $1,513,000 for the six months ended June 30, 2016.  The approximate $1,134,000 decrease in net loss is due primarily to the following: (all numbers approximate) a decrease in general and administrative expense of $134,000, due to mainly to decreases in consulting and contract labor expenses, a $353,000 decrease in executive compensation, due to a decrease in salaries and stock based compensation, a $476,000 decrease in non-cash losses on investments, a $77,000 increase in gain on settlement of liabilities and a $131,000 decrease in loss on deposit, partially offset by a $27,000 increase in professional fees, a 6,000 increase in loss on extinguishment of debt and a $6,000 increase in interest expense. If we are able to raise substantial additional capital and/or close the Crush Mobile acquisition, we expect to ramp up our operations which will cause our operating expenses to increase substantially.  

 

Liquidity and Capital Resources

 

As of June 30, and August 18 2017, we had virtually no cash on hand. Between January 13, and June 29, 2017, the Company received gross proceeds from debt agreements of $220,299. Additionally, in order to fund our basic operations, between January 3 and June 30, 2017, Kae Yong Park, a significant shareholder, and her spouse, Howard Baer (together, “Park”), have collectively made cash advances of $52,650 to fund our basic operations, $24,550 of which has been repaid.  In addition, $65,938 of the amount owed Park has been recaptured for Park’s use of Company personnel, leaving a balance due of $1,376,829, as of August 18, 2017.  

 

We continue to have an immediate and urgent need for additional capital. The lack of operating capital continues to materially and adversely affect our business operations. Due to the lack of operating capital, we are unable to implement our business plan. If the Company does not receive a significant infusion of capital in the near term, it is unlikely that the Company will be able to continue as a going concern, in which case, investors would suffer a total loss of their investment in the Company.  

 

We have not yet realized significant operating revenues. Although our operations have been scaled back due to our lack of operating capital, we continue to incur significant costs and expenses in connection with our basic operations and ongoing compliance costs associated with being a public company. Consequently, we are currently experiencing ongoing negative cash flows from operations.

 

Cash used in operating activities during the six months ended June 30, 2017 (all numbers approximate) was $219,000 (about $36,000 per month), a decrease of approximately $104,000 from the $323,000 used during the comparable prior period. The $104,000 decrease in cash used by operations was due primarily to a $1,134,000 decrease in net loss and a $6,000 increase in loss on extinguishment of debt, partially offset by a $131,000 decrease in loss on deposits (non-cash), a $63,000 decrease in warrants issued for executive compensation (non-cash), a $476,000 decrease in loss on securities (non-cash), a $261,000 decrease in the change (increase) in accounts payable and accrued expenses, a $40,000 decrease in related party payables, and a $77,000 increase in gain on settlement of obligations (non-cash).

 

Cash provided by financing activities for the six months ended June 30, 2017 was approximately $207,000 as compared to approximately $301,000 in the prior comparable period. The (all numbers are approximate) $94,000 decrease is due primarily to a decrease of $100,000 in proceeds from the issuance of debt (including convertible notes), a $1,000 decrease in proceeds from notes payable – related party and an increase of $17,000 in repayments of notes payable – related party, partially offset by an increase of $25,000 from proceeds from the sale of common stock. The Company is experiencing ever increasing difficulty raising capital from third parties. Cash provided by financing activities is insufficient to fund the Company’s basic operating activities.  

 

If we are able to obtain additional funding and ramp up our operations, our operations will use increasing amounts of cash in coming quarters, unless and until we are able to generate revenue from our operating activities.

 

Based on our current business plan, we anticipate that our operating and website development activities will use approximately $100,000 in cash per month over the next twelve months, or $1.2 million. Currently we have virtually no cash on hand, and consequently, we are unable to implement our current business plan. We believe that our operations will not begin to generate positive cash flows until at least the second quarter of 2018 (assuming we secure sufficient funding in the near term to implement our business plan, which we currently do not have).  Accordingly, we have an immediate and extremely urgent need for capital to fund our operating activities.


18



In order to remedy this liquidity deficiency, we are actively seeking to raise additional funds through the sale of equity and debt securities, and ultimately we will need to generate substantial positive operating cash flows. Our internal sources of funds will consist of cash flows from operations, but not until we begin to realize substantial revenues from the sale of services. As previously stated, we currently have only nominal revenue, and our operations are generating negative cash flows, and thus adversely affecting our liquidity. Although we are attempting to raise additional funds through equity and/or debt financing, we are having great difficulty in securing any significant funding from unrelated third parties. If we are able to secure sufficient funding in the near term to implement our business plan, we expect that our operations could begin to generate significant revenues during the second quarter 2018, which should ameliorate our liquidity deficiency.  If we are unable to raise additional funds in the near term, we will not be able to implement our business plan, and it is unlikely that we will be able to continue as a going concern.

 

Since early 2015, we have encountered great difficulty raising capital from unrelated third parties. There is a significant risk that we will be unable to raise additional capital form unrelated third parties.  Although Kae Yong Park and Howard Baer have in the past provided us with significant funds, they are under no obligation to do so and at this time are unable to provide additional funding.  Nor is the significant shareholder who has recently provided us with loans under any obligation to continue funding our scaled back operations. In the event we do not generate sufficient funds from revenues or financing through the issuance of common stock or from debt financing, we will be unable to implement our business plan and pay our obligations as they become due, any of which circumstances would have a material adverse effect on our business prospects, financial condition, and results of operations. If the Company does not receive a significant infusion of capital in the near term, it is unlikely that the Company will be able to continue as a going concern, in which case, investors would suffer a total loss of their investment in the Company.  The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities. See Note 2 to the Financial Statements - Liquidity/Going Concern.

 

Subject to the availability of funds, which we currently do not have, we expect to incur approximately $175,000 in website development expenditures over the next 12 months (included in the $1.2 million estimate of cash required over the next twelve months). The purpose of these expenditures will be for the development of various Websites/portals we intend to create, modifications and improvements on existing sites and acquisition of additional domain names.

 

We expect to fund these website development expenditures through a combination of cash flows from operations and proceeds from equity financing. If we are unable to generate positive cash flows from operations, and/or raise additional funds (either through debt or equity), we will be unable to fund our website development expenditures, in which case, there could be an adverse effect on our business and results of operations.

 

We intend to raise additional funds in the near term from the further sales of shares of common stock. Additional sales of common stock will reduce the percentage interest of existing shareholders in our company. Although it is possible, we do not believe it is likely that we will raise additional funds through the sale of debt securities in the near term.

 

As described above, In June, 2014, we issued Kae Yong Park a promissory note in the principal amount of $500,000, as partial consideration for the acquisition of approximately 7,500 cannabis related internet domain names. We have since paid $100,000 in principal to Ms. Park. The remaining balance of $400,000 is payable in thirty-six equal monthly installments, commencing on the fifteenth day following the first month we realize at least $150,000 in gross revenue. This remaining $400,000 balance is currently classified as a noncurrent liability. We believe that we will be able to make the approximate $11,000 monthly payment when (and if) we achieve the monthly $150,000 revenue threshold which triggers our repayment obligation.

 

In addition, as described above, we are currently indebted to Kae Park, a significant shareholder, and Howard Baer, her spouse, in the aggregate amount of $1,376,829, which is secured by the Company’s assets.  As of April 13, 2016 (with an effective date of January 1, 2016), $564,000 of the principal due under the note evidencing this indebtedness is interest bearing at the rate of 10% annually with any remainder being non-interest bearing.  All amounts due under this note are payable on demand.  If demand for payment is made, and we are unable to pay the amount due, we would be in default and Ms. Park and Mr. Baer would have the right to sell our assets to satisfy the amounts due them under the promissory note. In such event, shareholders of the company would lose their entire investment in the Company.

 

Further, as described above, between January 13, and August 14, 2017, we received proceeds of $335,299 from a related party and significant shareholder for which non-interest bearing notes were issued. The notes, as extended, mature on October 1, 2017 with certain notes secured by certain of the Company’s URLs and websites (www.weedepot.com, www.ratemystrain.com, www.marijuanamd.com and www.420careers.com.  The Company had total notes payable to the related party of $470,936 at August 18, 2017.


19



Off-balance Sheet Arrangements

 

None.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not required.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls over Procedures

 

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including the CEO and Financial Controller, to allow timely decisions regarding required disclosures.

 

Under the supervision and with the participation of our management, including our EVP Operations and financial controller, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our CEO and financial controller concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls were not effective.

 

Changes in Internal Control over Financial Reporting

 

None


20



PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

On August 15, 2016, the Company ("Plaintiff") instituted a legal action in Arizona against, Tumbleweed Holdings Inc., ("TW").

 

On September 22, 2016, Tumbleweed Holdings Inc., instituted a counterclaim in Arizona in response to the above legal action. On July 17, 2017, the Company and Tumbleweed settled the litigation relating to the joint venture.  As part of the settlement, Tumbleweed converted its $100,000 convertible note and its $85,000 joint venture investment into shares of company common stock at a rate of $.10 per share. The warrants issuable to Tumbleweed and the company were cancelled. The parties released each other from all claims related to the joint venture.

 

Item 1A. Risk Factors

 

Not required.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On January 10, 2017, the Company issued 400,000 previously accrued shares of the Company’s commons stock as settlement of its lawsuit with Lee Ori.

 

On April 10, 2017, we sold 1,000,000 shares of common stock in a private transaction at a per share price of $.025, for gross proceeds of $25,000, to an “accredited investor” within the meaning of Rule 502 of Regulation D under the Securities Act of 1933, as amended.

 

Between June 5 and June 29, 2017, the Company issued a total of 1,631,660 shares of the Company’s common stock as settlement for an aggregate $163,166 in payables (a conversion rate of $.10 per share) to an “accredited investor” within the meaning of Rule 502 of Regulation D under the Securities Act of 1933, as amended.  The Company recognized an aggregate gain of $76,617 on these settlements.

 

Item 3. Defaults upon Senior Securities

 

As of May 15, 2016, the Company is in default under the following promissory notes:

 

Notes in the aggregate principal amount of $34,900 were due July 8, 2015.  The aggregate amount in default as of the date of this report was approximately $38,800, consisting of $34,900 in unpaid principal and approximately $4,400 in unpaid interest.

 

Notes in the aggregate principal amount of $45,000 were due on or around December 10, 2015. The aggregate amount in default as of the date of this report was approximately $49,800, consisting of $45,000 in unpaid principal and approximately $5,400 in unpaid interest.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

On August 14, 2017, John Lemak, a related party and significant shareholder, advanced the Company $55,000 to fund business operations. This advance is evidenced by a non-interest bearing secured promissory note that matures on October 1, 2017. The repayment of this promissory note is secured by the following Internet domain names and related websites: www.weeddepot.com, www.ratemystrain.com, www.marijuanamd.com and www.420careers.com. The existing lienholders, Kae Yong Park and Howard R. Baer, have subordinated their liens in these assets.


21



Entry into Definitive Purchase Agreement with Crush Mobile

 

On August 8, 2017, the company entered into a definitive agreement to acquire all the outstanding membership interests of Crush Mobile, LLC. Under the terms of the Agreement, the company will acquire all the outstanding membership interests of Crush Mobile, in exchange for an aggregate of approximately 8 million shares of common stock, plus $85,000 in cash. The Company also agreed to piggy-back registration rights with respect to the shares of common stock issuable to the sellers in connection with the acquisition.  The agreement provides that the current management of Crush will take over management of the Company following the closing.  Consummation of the Crush Mobile acquisition is subject to completion of the company’s financial due diligence and the Company completing a funding of at least $500,000.

 

Item 6. Exhibits

 

(a) Exhibits 

 

Identification of Exhibit

 

3.1

Articles of Incorporation, as amended (1)

3.2

Bylaws (1)

10.1

Asset Purchase Agreement between the Company and Kae Park, dated May 2, 2014 (2)

10.2

Amended and Restated Promissory Note issued to Kae Yong Park July 25, 2014 (3)

10.3

Agreement with Howard R. Baer dated December 2, 2014 (5)

10.4

Agreement with Kae Yong Park and Howard R.  Baer regarding Funding (4)

10.5

Amended and Restated Promissory Note Issued to Kae Yong Park and Howard R. Baer Dated September 30, 2015 (6)

10.6

Agreement with Sandor Capital Master Fund (4)

10.8

Security Agreement with Kae Yong Park and Howard R. Baer Dated September 30, 2015 (6)

10.9

Joint Venture Agreement with Tumbleweed Holdings, Inc., dated February 29, 2016 (7)

10.10

Form of Convertible Note issued to Tumbleweed Holdings, Inc., dated February 29, 2016 (7)

10.11

Form of Note issued to Sandor Capital Master Fund dated May 11, 2016 (8)

10.12

Form of Note issued to John Lemak dated May 15, 2017 (9)

10.13

Settlement Agreement with Tumbleweed Holdings, Inc., dated July 17, 2017 *

10.14

Purchase and Sale Agreement with Crush Mobile, LLC, dated August 8, 2017 *

10.15

Form of Note issued to Sandor Capital Master Fund dated April 1, 2017 *

10.16

Form of Note issued to Sandor Capital Master Fund dated April 1, 2017 *

10.17

Form of Note extension issued to Sandor Capital Master Fund dated August 17, 2017 *

10.18

Form of Note issued to John Lemak dated April 1, 2017 *

10.19

Form of Note issued to John Lemak dated August 17, 2017 *

10.20

Form of Note issued to John Lemak dated August 17, 2017 *

31.1

Certification of Principal Executive and Principal Financial Officer as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 *

32.1

Certification of Principal Executive and Principal Financial Officer pursuant to 18 U.S.C section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

(1) Filed as Exhibits to our Form S-1 Registration Statement on July 11, 2008 and incorporated herein by reference. 

(2) Filed as Exhibit 4.01 to our Current Report on Form 8-K filed on May 7, 2014 and incorporated herein by reference. 

(3)   Filed as Exhibit to our Form 10-Q filed on May 20, 2015 and incorporated herein by reference. 

(4) Filed as Exhibits to our Form 10K filed on May 20, 2015 and incorporated herein by reference. 

(5) Filed as Exhibit to our Form S-1 Registration Statement on December 12, 2014 and incorporated herein by reference. 

(6) Filed as Exhibits to our Form 10Q filed on November 20, 2015 and incorporated herein by reference. 

(7) Filed as Exhibits to our Form 10K filed on April 14, 2016 and incorporated herein by reference. 

(8) Filed as Exhibits to our Form 10Q filed on May 16, 2016 and incorporated herein by reference. 

(9) Filed as Exhibits to our Form 10Q filed on May 15, 2017 and incorporated herein by reference. 

 

* Filed herewith 

** Furnished, not filed 


22



 

SIGNATURES

 

Pursuant to the requirements 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.

 

NORTHSIGHT CAPITAL, INC.

(Issuer)

 

Date:

August 21, 2017

               

By:

/s/John Venners

 

 

 

 

John Venners,

EVP Operations and Director

 

 


23

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (" Agreement ") is entered into and effective this 17 th day of July, 2017, by and between NORTHSIGHT CAPITAL, INC., a Nevada Corporation (referred to herein as “ Plaintiff ” and/or “ NCAP ”) with offices located at 7580 E. Gray Road, #103, Scottsdale, AZ 85260 and TUMBLEWEED HOLDINGS, INC., a Utah Corporation (“ Defendant ”) with offices located at 720 Fifth Avenue, 10 th Floor, New York, NY 10019. Plaintiff and Defendant are collectively referred to herein as the “ Parties ” and each individually as a “ Party .”

 

RECITALS

 

WHEREAS, Plaintiffs filed a complaint in the Maricopa County Superior Court of the State of Arizona on July 29, 2016, Case No. CV2016-010084 (the “ Complaint ”), making several claims and allegations relating to a joint venture agreement (“ JV Agreement ”) between the Parties; 

 

WHEREAS, Defendant answered the Complaint (“ Answer ”) and made several counterclaims and allegations (“ Counterclaim ”); 

 

WHEREAS, the Complaint, the Answer, the Counterclaim, and all issues related thereto shall be referred to herein as the “ Dispute ”; 

 

WHEREAS, the Parties wish to avoid the continued expense and risk associated with the litigation associated with the Dispute and now therefore desire to resolve all matters relating to the Dispute on the terms stated herein.  

 

AGREEMENT

 

NOW THEREFORE, in full consideration of the terms set forth below, the Parties agree as follows:

 

1. INCORPORATION OF RECITALS  

 

The recitals stated above are incorporated into and made a part of this Agreement by this reference.

 

2. CONVERSION OF PROMISSORY NOTE  

 

A. Defendant had provided Plaintiff funds in the amount of one hundred thousand dollars ($100,000.00) and Plaintiff had agreed to repay such funds under the terms of certain promissory notes described in the JV Agreement (the “ Promissory Notes ”). The Parties agree that the $100,000.00 owed under the Promissory Notes shall be converted into common shares of stock in Northsight Capital, Inc. (OTCBB: NCAP) (“ NCAP Shares ”) at ten cents ($.10) per NCAP Share. 

 

B. Defendant had made an investment of eighty five thousand dollars ($85,000.00) in the joint venture company (“ Joint Lovers ”), pursuant to the JV Agreement. The Parties agree that the $85,000.00 investment in Joint Lovers shall be converted into common NCAP Shares at ten cents ($.10) per NCAP Share. 

 

C. Pursuant to the above referenced conversions, Defendant shall receive 1 million (1,000,000) NCAP Shares from the Promissory Note conversion and eight hundred fifty thousand (850,000) NCAP Shares from the Joint Lovers’ investment conversion, for a total conversion equal to one million eight hundred fifty thousand (1,850,000) NCAP Shares (“ Converted Shares ”) 

 

3. CRUSH MOBILE TRANSACTION  

 

A. Defendant and Plaintiff are involved in raising capital for NCAP in relation to a deal the Parties identify as “ Crush Mobile .”  

 

B. Defendant shall receive five hundred thousand (500,000) NCAP Shares at the closing of the Crush Mobile deal.  

 

C. If prior to the closing of the Crush Mobile deal, Defendant, or its principals, have raised two hundred fifty thousand dollars ($250,000.00) for the Crush Mobile deal, Defendant shall receive an additional five hundred thousand (500,000) NCAP Shares at the closing of the Crush Mobile deal.  


1


D. All NCAP Shares received by Defendant pursuant to Sections 3.B. and 3.C. of this Agreement shall be referred to as the “ Crush Shares ”.  

 

E. The Crush Shares shall be included in NCAP's next Form S-1 Registration Statement pursuant to Section 4 of this Agreement.  

 

4. REGISTRATION OF SHARES  

 

A. The Converted Shares shall be included in NCAP's next Form S-1 Registration Statement (“ Registration Statement ”).  

 

B. If such Registration Statement is not filed within Sixty (60) days of Closing of the Crush Mobile deal, then NCAP shall register the Converted Shares under Section 3(a)(10) of the Securities Act of 1933, as amended. 

 

C. NCAP agrees to include the Crush Shares in the next Registration Statement if there is room (the Parties understood that with the proposed financing for the Crush Mobile deal, NCAP may be at the maximum limit of its authorized shares; if this is the case, the Parties agree that investors in the $500,000 financing for the Crush Mobile deal shall have priority to be included in the Registration Statement). In the event there is no room to include the Crush Shares issued to Defendant, then the Crush Shares shall be registered by NCAP under Section 3(a)(10), at no cost to NCAP. 

 

D. If it is necessary to register the Crush Shares under Section 3(a)(10), Defendant shall pay the costs of such registration.  

 

5. CANCELATION OF WARRANTS  

 

All warrants authorized from the Joint Lovers deal shall be canceled.

 

6. JOINT PRESS RELEASE  

 

The Parties agree to a joint press release, at which the Parties will announce the settlement as an agreement to work together on future transactions for NCAP and Tumbleweed.

 

7. RELEASES  

 

Except for the obligations noted herein, the Parties fully and forever release, acquit and discharge each other and their respective agents, assigns, companies, trusts, attorneys, trustees, representatives and any other related parties from any and all liability, claims, demands, causes of action (contingent, accrued, inchoate, or otherwise of any kind whatsoever, known or unknown), which they may now have, or may ever have, against each other arising from, or relating to, the Dispute, which is the subject of this Agreement.

 

8. COMPROMISE OF DISPUTED CLAIMS  

 

This Agreement constitutes a compromise of disputed claims and is not an admission of liability by any Party and should not be construed as such.

 

9. WARRANTIES  

 

Each Party represents and warrants to the other that they have the ability to carry out the obligations assumed and promised hereunder, and is not presently aware of any pending event which would, or could, hamper, hinder, delay, or prevent its timely performance of said obligations.

 

10. BINDING EFFECT  

 

This Agreement, and all covenants and releases set forth herein, shall be binding upon and shall inure to the benefit of the respective Parties, their spouses, legal successors, heirs, assigns, partners, representatives, executors, administrators, agents, attorneys, officers, trusts, trustees, and affiliated companies.


2


11. ATTORNEY'S FEES  

 

Each Party shall bear its/their respective attorneys’ fees incurred in connection with all matters related to the Dispute and the preparation of this Agreement. In the event any Party to this Agreement commences any legal proceeding concerning any aspect of this Agreement, including, but not limited to, the interpretation or enforcement of any of its provisions, the prevailing party shall be entitled to recover reasonable attorneys' fees and all other costs and expenses incurred in connection with the action or proceeding.

 

12. SEVERABILITY  

 

If any term, provision, clause or other portion of this Agreement is found to be invalid, illegal, void, or unenforceable for any reason whatsoever, this Agreement shall be read as if it did not contain that portion or clause found to be severable from the remainder. Any such clause or portion and its severance shall not affect the validity or effect of the remaining provisions of this Agreement.

 

13. COUNTERPARTS  

 

This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall constitute one and the same Agreement.

 

14. SECTION HEADINGS  

 

The captions, subject, section and paragraph headings in this Agreement are included for convenience and reference only. They do not form a part hereof, and do not in any way codify, interpret, or reflect the intent of the Parties. Said headings shall not be used to construe or interpret any provision of this Agreement.

 

15. RIGHT TO CONSULT WITH ATTORNEY, TERMS UNDERSTOOD  

 

The Parties acknowledge that each has read this Agreement; that each fully understands its rights, privileges and duties under this Agreement; and that each enters into this Agreement freely and voluntarily. Each Party further acknowledges that each has had the opportunity to consult with an attorney of its choice to explain the terms of this Agreement and the consequences of signing it.

 

16. CHOICE OF LAW AND FORUM  

 

The Parties agree that this Agreement shall be interpreted under and governed by the laws of the State of Arizona without regard for its choice of law provisions and that any action to enforce or interpret this Settlement and Release Agreement will be brought in Maricopa County, Arizona. The Parties agree that venue is proper in Maricopa County in any action brought concerning this Agreement and hereby consent to the personal jurisdiction to the courts of said State and County.

 

17. NO PRESUMPTION AGAINST DRAFTING PARTY  

 

This Agreement and the provisions contained herein shall not be construed or interpreted for or against any Party hereto because said Party drafted or caused the Party's legal representative to draft any of its provisions.

 

18. WAIVER  

 

The failure of any Party to enforce any provision of this Agreement shall not be construed as a waiver of any such provision, nor prevent such Party thereafter from enforcing such provision or any other provision of this Agreement. The rights and remedies granted all Parties herein are cumulative and the election of one right or remedy shall not constitute a waiver of such Party's right to assert all other legal remedies available under this Agreement or otherwise provided by law.

 

19. NOTICE TO THE COURT AND DISMISSAL UPON COMPLETION OF SETTLEMENT AGREEMENT  

 

Upon execution of this agreement, the parties will notify the court that a settlement has been reached and that the matter be continued on the inactive calendar pending execution of the terms of the settlement agreement. Upon completion of the settlement requirements set forth in paragraphs 2, 3, and 4 the parties shall execute a stipulation to dismiss the underlying lawsuit with prejudice, each side to bear its costs and attorney fees.


3


20. INDEMNITY AND HOLD HARMLESS  

 

Each Party (an “ Indemnifying Party ”) to this Agreement agrees to indemnify and hold harmless the other Parties, and their respective agents, spouses, heirs, companies, trusts, attorneys, trustees, representatives and any other related parties from and against all third-party claims, damages, losses and expenses, arising out of or resulting from a breach by the Indemnifying Party of any covenant, term, or representation of this Agreement.

 

21. ENTIRE AGREEMENT  

 

This Agreement, constitutes the entire understanding between the Parties and supersedes any prior or contemporaneous written or oral agreements and representations. There are no agreements between the Parties not contained within this Agreement. Each Party will, without further consideration, cooperate by executing any further documents that may be required to carry out the terms of this Agreement.

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day and year indicated below.

 

 

Plaintiff:

 

/s/ John P. Venners

 

By: John P. Venners

 

Its: President

 

 

 

Defendant:

 

/s/ Gary Herman

 

By: Gary Herman

 

Its: Chief Executive Officer


4

Execution Version


 

PURCHASE AND SALE AGREEMENT

 

by and between

 

The Persons listed on Each of the Seller Signature Pages Attached hereto (the “Sellers”);

 

Crush Mobile, LLC, a Delaware Limited Liability Company (the “Company”)

 

And

 

Northsight Capital, Inc., a Nevada Corporation (“Purchaser”)

 

 

 

 

Dated as of August 8, 2017

 

 


PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “ Agreement ”), dated as of August 8, 2017, is by and between the persons listed on the Seller Signature Pages attached hereto (individually, a “ Seller ” and, collectively, the “ Seller’s ”), including Itay Koren, the majority member of Crush Mobile, LLC, a Delaware Limited Liability Company (the “ Company ”), having its principal place of business at 286 Madison Avenue, Suite 800, New York, New York 10017, and Northsight Capital, Inc., a Nevada corporation, with an address of 7740 East Evans Rd., Scottsdale, AZ 85260 (the “ Purchaser ”) (collectively, sometimes referred to as the “ Parties ”).

 

RECITALS

 

WHEREAS, the Sellers collectively own all of the outstanding equity interests of the Company (the “Membership Interests”), and are willing to sell the Membership Interests to Purchaser; and

 

WHEREAS, Purchaser wishes to acquire all of the outstanding Membership Interests;

 

WHEREAS, the parties hereto wish to adopt an agreement pursuant to which Purchaser will acquire all of the Membership Interests solely in exchange for shares of Purchaser’s Common Stock (“Purchaser’s Common Stock”) and the other consideration set forth herein;

 

NOW, THEREFORE, in consideration for the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. DEFINITIONS  

 

Agreement has the meaning set forth in the preamble.

 

Base Balance Sheet has the meaning specified in Section 5.

 

Company has the meaning set forth in the preamble.

 

Governmental Authority ” means any government or political subdivision or regulatory body, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision or regulatory authority, or any federal, state, local or foreign court or arbitrator.

 

Indemnified Person means any person entitled to be indemnified under Section 9.

 

Indemnifying Person means any person obligated to indemnify another person under Section 9 .

 

Intellectual Property Rights means (i) patents, patent applications, trademarks or service marks (whether registered or unregistered), trade mark or service mark applications, trade names, copyrights, computer software, maskworks and (ii) all customer lists, and manufacturing and other secret processes and technologies and other trade secrets (collectively “Trade Secrets”).

 

Knowledge an individual will be deemed to have “Knowledge” of a particular fact or other matter if (i) such individual is actually aware of such fact or other matter; or (ii) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter. A person (other than an individual) will be deemed to have “Knowledge” of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter.

 

Law ” means any law, statute, code, ordinance, regulation or other requirement of any Governmental Authority.

 

Lien ” means any mortgage, lien, pledge, encumbrance, security interest, claim, charge, and/or defect in title or other restriction.

 

Material Adverse Change ” or “ Material Adverse Effect means, when used in connection with a person, any change, effect, event, occurrence or state of facts that, by itself or in conjunction with all other such changes, effects, events, occurrences or states of facts, whether or not arising in the Ordinary Course of Business, is, or reasonably would be expected to be, material and adverse to the financial condition (including working capital, earnings, and reserves), properties, assets, liabilities, business or operations of the person’s business.


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Membership Interests has the meaning set forth in the recitals.

 

Order ” means any order, judgment, injunction, award, decree, ruling, charge or writ of any Governmental Authority.

 

Parties ” has the meaning set forth in the preamble.

 

Permit ” means any permit, license, approval, consent, or authorization issued by a Governmental Authority.

 

Person ” means any individual, sole proprietorship, partnership, corporation, limited liability company, unincorporated society or association, trust, or other entity.

 

Principal Shareholders means Itay Koren, Edward J. Murphy and Sonya Kreizman.

 

Proceeding ” means any complaint, action, lawsuit, hearing, investigation, charge, audit, claim or demand.

 

Purchase Price ” has the meaning set forth in Section 3 .

 

Purchaser ” has the meaning set forth in the preamble.

 

Purchaser’s Common Stock has the meaning set forth in the preamble.

 

Seller(s) ” has the meaning set forth in the preamble.

 

Third Party Action means any written assertion of a claim, or the commencement of any action, suit, or proceeding, by a third party as to which any person believes it may be an Indemnified Person hereunder.

 

2. PURCHASE AND SALE OF STOCK .  

 

2.1 Purchase of Membership Interests.  

 

Subject to the provisions of this Agreement, each of the Sellers agrees to sell, and Purchaser agrees to purchase, at the Closing (as defined in Section 2.2 hereof), the Membership Interests, which Membership Interests constitute, and will constitute at the Closing, 100% of the issued and outstanding Membership Interests of the Company.

 

2.2 Time and Place of Closing.  

 

The closing of the purchase and sale provided for in this Agreement (herein called the “Closing”) shall be held on August__, 2017 or at such other date or time as may be fixed by mutual agreement of the parties (the “Closing Date”).

 

2.3 Instruments of Conveyance.  

 

In addition to any other documents to be delivered under other provisions of this Agreement, in order to convey the Membership Interests, at the Closing: Seller shall deliver to Purchaser (a) certificates, if any, for all the Membership Interests owned by each Seller, duly endorsed in blank for transfer, or with stock powers attached duly executed in blank, with all signatures notarized, if requested by Purchaser and (b) such other documents as may be required to effect a valid transfer of the Membership Interests by each Seller, free and clear of any and all Encumbrances under Article 8 of the Uniform Commercial Code or otherwise. Such instruments of transfer (i) shall be in the form and substance reasonably satisfactory to Purchaser, and (ii) shall effectively vest in Purchaser good and marketable title to all the Membership Interests, free and clear of all Encumbrances.

 

3. PURCHASE PRICE /PAYMENTS AT CLOSING  

 

3.1 Purchase Consideration . In consideration of Sellers’ transfer of the Membership Interests to the Purchaser, the Purchaser shall issue an aggregate of 4,904,000 shares of Purchaser Common Stock (the “Purchase Price”), with each Seller to receive a pro-rata number of said shares based on his/her/its proportionate interest in the Membership Interests of the Company, except that Yossi Shemesh shall be paid $1,876 in cash for his Membership Interest, Adam Gottlieb shall be paid $625 in cash for his Membership Interest and Robert Feinstein shall be paid $2,778 in cash for his Membership Interest. For the avoidance of doubt, if a Seller owns 10% of the Membership Interests, said Seller shall receive 490,400 shares of the Purchaser’s common stock (10% of the 4,904,000 shares comprising the Purchase Price). 


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3.2 Additional Shares. In addition to the foregoing Purchase Price, the Purchaser shall issue 3 million shares of Purchaser Common Stock to Company creditors specified on schedule 3.2 hereof, which shall be in full and complete satisfaction of $300,000 of indebtedness owing by the Company to said creditors. 

 

3.3 Payment to 17 Media Group, LLC. The Purchaser shall pay $80,000 in cash to 17 Media Group, LLC, an affiliate of Itay Koren, in full and complete satisfaction of all indebtedness owing by the Company to such entity. 

 

3.4 Title . Upon receipt of the Purchase Price, all of Sellers’ right, title and interest in and to the Membership Interests, shall, without further action on the part of Seller, be vested in the Purchaser free and clear of any and all Liens. 

 

4. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS AND COMPANY  

 

The Company and, solely with respect sections 4.1 through 4.3 inclusive and 4.18 (relating to investor status) hereof, each Seller (for himself/herself/itself on a several and not joint basis) hereby represent and warrant to Purchaser as follows:

 

4.1 Execution, Delivery and Performance of Agreement . The Company and, with respect to each Seller, such Seller has the power and authority to execute, deliver and perform fully his and its obligations under this Agreement. 

 

4.2 Title to Membership Interests . Each Seller is the record and beneficial owner of the Membership Interests set forth opposite his/her/its name on the respective Seller’s Signature page attached hereto. The Membership Interests to be delivered by Seller to Purchaser pursuant to this Agreement will be, when delivered by appropriate instruments of assignment and assumption, duly authorized, validly issued, fully paid and nonassessable, and will be free and clear of all Encumbrances, under Article 8 of the Uniform Commercial Code or otherwise. 

 

4.3 Enforceability . The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of each Seller and the Company and constitute the valid and legally binding obligations of each Seller and the Company enforceable against them in accordance with its terms. 

 

The Company and each Principal Shareholder (for himself/herself/itself) hereby represent and warrant to Purchaser as follows:

 

4.4 No Conflict . Neither the execution of this Agreement, nor the performance by the Principal Shareholders or the Company of their respective obligations hereunder will violate or conflict with any agreement by which any Principal Shareholder or the Company, respectively, is bound, or any applicable Law or Order. 

 

4.5 Consents . No consent of any third party or Governmental Authority is required in connection with the execution and delivery by the Principal Shareholder or the Company of this Agreement and/or the consummation of the transactions contemplated hereby. 

 

4.6 Existence, Good Standing and Authority . The Company is a Delaware limited liability company, duly formed, validly existing and in good standing under the laws of the State of Delaware. The Company has full power and authority to own, operate, or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. 

 

4.7 Base Balance Sheet. The Company shall deliver a balance sheet of the Company, prepared by its duly authorized financial officer, at least five days before the Closing and dated as of June 30, 2017 (the “Base Balance Sheet”). The Base Balance Sheet has been prepared by the Company in good faith and in a manner that fairly presents the financial condition of the Company, but has not been prepared in accordance with GAAP. In preparing the financial statements, the following provisions shall apply:

 

(a) Consistency. The same accounting principles, practices, procedures and policies that have been used by the Company historically in preparing the Company’s financial statements shall be used in preparing the Base Balance Sheet, and the computational methods and assumptions used in preparing the Company’s financial statements shall be used in the preparation of the Base Balance Sheet.

 

4.8 Financial Statements . The Base Balance Sheet is complete and correct and fairly presents the financial position of the Company as of the date thereof. Such Base Balance Sheet has been prepared in accordance with accounting principles, practices, procedures and policies consistently applied throughout the periods involved and prior periods, except for the omission of footnotes otherwise required by GAAP in the case of interim financial statements. The books and records of the Company are adequate to enable a PCAOB registered auditor to render an audit opinion on the Company’s historical financial statements.  


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4.9 Absence of Undisclosed Liabilities.  

 

As of the Closing Date, the Company has no liabilities of any nature, whether accrued, absolute, contingent or otherwise (including without limitation liabilities as guarantor or otherwise with respect to obligations of others, or liabilities for taxes due or then accrued or to become due), except as may be disclosed in the Base Balance Sheet.

 

4.10 Payment of Taxes.  

 

(a) The Company has duly and timely filed, after taking into account valid extensions therefore, all Tax Returns required to be filed by it with any Governmental Authority with respect to Taxes. All of the Tax Returns are complete and correct in all material respects.

 

(b) With respect to all other Taxes for which no return is required or which have not yet accrued or otherwise become due, adequate provision has been made in the Base Balance Sheet. The provisions for Taxes reflected in the Base Balance Sheet are adequate to cover in all material respects any liabilities of the Company for Taxes in respect of its business, properties and operations during the periods covered by said financial statement and all prior periods. Any Taxes which the Company is required to withhold or collect have been withheld or collected and paid over or will be paid over to proper Governmental Authorities as required by Law.

 

4.11 Disclosure of Material Information.  

 

Neither this Agreement, nor the financial statements (including the footnotes thereto), any Schedule, any exhibit, document or certificate delivered by or on behalf of any Principal Shareholder or the Company pursuant hereto contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements herein or therein not misleading. There is no fact which has a Material Adverse Effect on the Company or its business which has not been specifically disclosed herein or on a Schedule hereto.

 

4.12 Capitalization of Company.  

 

(a) Schedule 4.12 hereto is a true, correct and complete list of all the Members of the Company, including the number of Membership Interests and percentage interest of the Company owned by each Member of the Company. The issuance of all of the issued and outstanding Membership Interests was duly authorized and all such interests are fully paid and nonassessable, were issued in compliance with applicable Federal and state securities laws, and were not issued in violation of any person’s preemptive rights. There are no Membership Interests of the Company reserved for any purpose.

 

(b) There are no (i) outstanding or authorized subscriptions, warrants, options or other rights granted by the Company or any Principal Shareholder to purchase or acquire, or preemptive rights with respect to the issuance or sale of, the Membership Interests of the Company, or which obligate or may obligate the Company to issue any additional Membership Interests or any securities convertible into or evidencing the right to subscribe for any Membership Interests, (ii) other securities of the Company directly or indirectly convertible into or exchangeable for Membership Interests of the Company, (iii) “phantom” interests, appreciation rights or agreements or similar rights or agreements which are intended to confer on any person rights similar to any rights accruing to owners of Membership Interests, (iv) agreements relating to the voting of the Company’s Membership Interests, (v) restrictions on the transferability of the Company’s Membership Interests (by agreement, Organizational Documents, statute or otherwise), or (vi) other agreements among the Principal Shareholders or any other person relating to the Membership Interests.

 

4.13 Conduct of business; Absence of Certain Changes.  

 

Since the Base Balance Sheet Date, the Company has conducted its business only in the Ordinary Course of Business and, whether or not in the Ordinary Course of Business, there has not been any Material Adverse Change with respect to the Company. In addition to the foregoing since the Base Balance Sheet Date there has not been:

 

(a) any contingent liability incurred by the Company, as guarantor or otherwise, with respect to the obligations of others;

 

(b) any Encumbrance placed on any of the properties of the Company which remains in existence on the date hereof;

 

(c) any obligation or liability incurred by the Company other than obligations and liabilities incurred in the Ordinary Course of Business consistent with past practice (none of which is a claim for breach of contract, breach of duty, breach of warranty, tort or infringement of an Intellectual Property Right);

 

(d) any sale or other disposition, or any agreement or other arrangement for the sale or other disposition, of any of the properties or assets of the Company other than in the Ordinary Course of Business;


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(e) any capital expenditure or commitment in excess of $5,000 with respect to any individual item, or in excess of $10,000 with respect to all such items;

 

(f) any lease or agreement to lease any assets with an annual rental in excess of $5,000 with respect to any individual item or in excess of $10,000 with respect to all such items;

 

(g) any damage, destruction or loss, whether or not covered by insurance, of any of the assets or business of the Company;

 

(h) any (i) declaration, setting aside or payment of any dividend on, or (ii) the making of any other distribution in respect of, or (iii) any direct or indirect redemption, purchase or other acquisition by the Company of, the capital stock of the Company;

 

(i) any issuance of any securities of the Company;

 

(j) any labor trouble or claim of unfair labor practices involving the Company;

 

(k) any obligation or liability incurred by the Company to, or any loans or advances made by the Company to, any of its officers, directors or stockholders, except normal compensation and expense allowances payable to officers;

 

(l) any change in (i) the compensation or other amounts payable or to become payable by the Company to any of its officers, employees or agents; (ii) any bonus arrangements with any of such officers, employees or agents; (iii) any severance or termination arrangements; (iv) the terms of any employment agreement; or (v) the benefits payable under any Benefit Plan;

 

(m) any change with respect to the management or supervisory personnel of the Company;

 

(n) any payment or discharge of a material Encumbrance or liability of the Company which was not shown on the Base Balance Sheet or incurred in the Ordinary Course of Business thereafter;

 

(o) any write-downs of the value of any assets (including impairment of intangible assets ) or write-offs as uncollectible of any notes or accounts receivable, except for write-downs or write-offs that are in the aggregate less than $5,000 incurred in the Ordinary Course of Business;

 

(p) any disposal, sale, assignment, license or lapse of any rights to the use of any Intellectual Property Right, or disclosure to any person other than Purchaser of any trade secret or other information not theretofore a matter of public knowledge other than pursuant to confidentiality agreements;

 

(q) any change in any method of accounting or accounting practice, whether or not such change was permitted by GAAP; or

 

(r) any agreement, whether in writing or otherwise, to take any action described in this Section.

 

4.14 Warranty or other Claims.  

 

(a) Neither the Company nor any Principal Shareholder has Knowledge of any existing or threatened claims, or any facts upon which a claim is likely to be asserted, against the Company for services which are defective or fail to meet any service warranties. No claim has been asserted against the Company for material renegotiation or price redetermination of any business transaction, and neither the Company nor any Principal Shareholder has Knowledge of any facts upon which any such claim is likely to be asserted.

 

(b) All service offerings sold by the Company complied with applicable Laws, contracts, agreed product specifications, and generally recognized standards (whether promulgated by the Company, industry or Governmental Authority) and there are no defects in such offerings.

 

4.15 Compliance with Legal Requirements.  

 

The Company is, and at all times since its formation will has been, in compliance, in all material respects, with each Law that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets.


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4.16 Legal Proceedings.  

 

There is no pending Proceeding:

 

(i) That, to the Knowledge of the Company or the Principal Shareholders, has been commenced by or against the Company or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Company; or

 

(ii) That, to the Knowledge of the Company or the Principal Shareholders, challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated hereby.

 

4.17 Borrowings and Guarantees.  

 

There are no agreements or undertakings pursuant to which the Company (a) is borrowing or is entitled to borrow any money, (b) is lending or has committed itself to lend any money, or (c) is a guarantor or surety with respect to the obligations of any person. Complete and accurate copies of any such written agreements have been delivered to Purchaser.

 

4.18 Status of Each Seller.  

 

(a) Except as set forth on Schedule 4.18 hereto, each Seller is an “accredited investor,” within the meaning of Regulation D, promulgated under the Securities Act of 1933, as amended.

 

(b) Each Seller is acquiring the Purchaser’s Common Stock for investment for his/her/its own account and without the intention of participating, directly or indirectly, in a distribution of the Purchaser’s Common Stock, and not with a view to resale or any distribution of the Purchaser’s Common Stock, or any portion thereof.

 

(c) Each Seller has knowledge and experience in financial and business matters and has consulted with his/her/its own professional representatives as he/she/it has considered appropriate to assist in evaluating the merits and risks of this investment. Each Seller has had access to and an opportunity to question the officers of the Company, or persons acting on their behalf, with respect to material information about the Purchaser, and, in connection with the evaluation of this investment, has, to the best of his/her/its knowledge, received all information and data with respect to the Purchaser that Seller has requested and which is necessary to enable Seller to make an informed decision regarding the purchase of the Purchaser’s Common Stock. Each Seller is acquiring the Purchaser’s Common Stock based solely upon his/her/its independent examination and judgment as to the prospects of the Purchaser. Each Seller is not relying on any representation in connection with the purchase of shares contemplated hereby, except for those representations set forth herein.

 

(d) Each Seller, severally and not jointly, represents and warrants that he/she/it has reviewed all publicly available information about the Purchaser through the date hereof, including without limitation all of the Purchaser’s SEC filings. Each Seller has not in connection with making its investment decision with respect to the Purchaser’s Common Stock, relied on any representation or warranty about the Purchaser, except as set forth herein.

 

(e) The Purchaser’s Common Stock was not offered to Seller by means of publicly disseminated advertisements or sales literature.

 

(f) Each Seller acknowledges that an investment in the Purchaser’s Common Stock is speculative and involves a high degree of risk and that Seller may have to continue to bear the economic risk of the investment in such Common Stock for an indefinite period.

 

(g) Each Seller acknowledges that the Purchaser Common Stock to be received pursuant to this Agreement shall constitute “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended, and, consequently, shall be subject to restriction on transfer.

 

4.19 Intellectual Property Rights . All rights of ownership of, or material licenses to use, Intellectual Property Rights held by the Company are listed on Schedule 4.19 hereto. There are no material Intellectual Property Rights, other than those set forth on Schedule 4.19 , necessary to, or regularly used in, the conduct of the business of the Company as presently conducted or as presently proposed to be conducted. 

 

(a) Except as set forth on Schedule 4.19 , all statutory Intellectual Property Rights (other than copyright matters) required to be listed in Schedule 4.19 :

 

(i) have been duly registered, filed in, or issued by, the United States Patent and Trademark Office, or the corresponding offices of other countries identified on said schedule;


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(ii) have been properly maintained and renewed in accordance with all applicable laws and regulations in the United States and such foreign countries;

 

(iii) in the case of copyrightable works of authorship, were developed and authored as original works of authorship either by full-time employees of the Company within the normal scope of their duties as works for hire, or by third persons as works for hire under an express written agreement so stating or under a written agreement expressly transferring and assigning all rights to the Company;

 

(iv) in the case of patents or patent applications, have been duly assigned to the Company and such assignment(s) have been recorded with the appropriate Governmental Authorities; and

 

(v) are freely transferable (except as otherwise required by Law).

 

(b) All Intellectual Property Rights required to be listed on Schedule 4.19 , whether or not statutorily created:

 

(i) are owned exclusively by the Company, free and clear of any licenses, sub-licenses or Encumbrances, such that no other person has any right or interest in or license to use or right to license others to use any of the Intellectual Property Rights, other than as disclosed on Schedule 4.19 and non-exclusive licenses to customers in the Ordinary Course of Business or have been validly licensed to the Company under license agreements permitting their current use; and

 

(ii) are not subject to any outstanding Court Order.

 

(c) All licenses and other agreements pursuant to which any Intellectual Property Rights, including any computer software, are licensed to or used by the Company are valid, binding and enforceable, and there does not exist under any such license or agreement a default or event or condition which, after notice or lapse of time or both, would constitute a default by any party thereto.

 

(d) No Proceeding to which the Company is a party has been commenced which (i) challenges the rights of the Company in respect of the Intellectual Property Rights listed on Schedule 4.19 , or (ii) charges the Company with infringement of any other person’s Intellectual Property Rights. To the Knowledge of the Company and the Principal Shareholders, no such Proceeding has been threatened, nor has any such Proceeding to which the Company is not a party been filed or threatened to be filed.

 

(e) To the Knowledge of the Company or the Principal Shareholders (based on the Company’s review of competitive products of the last two years), the Company is not infringing upon any Intellectual Property Rights of any other person. To the Knowledge of the Company and the Principal Shareholders, none of the Intellectual Property Rights listed on Schedule 4.19 is being infringed by any other person.

 

(f) No director, officer, employee or Member of the Company owns, directly or indirectly, in whole or in part, any Intellectual Property right which the Company has used, is presently using, or the use of which is reasonably necessary to its business as now conducted or presently contemplated to be conducted.

 

(g) In addition to the Intellectual Property Rights described above, the Company has the right to use, free and clear of any claims or rights of others, all Trade Secrets required for or used in the manufacture or marketing of all products formerly or presently produced by the Company, including products licensed from others. The Company has disclosed to Buyer all written documentation relating to its Trade Secrets and has adopted measures adequate to protect its Trade Secrets.

 

(h) Copies of all forms of confidentiality, nondisclosure and similar agreements related to Intellectual Property Rights to which the Company is a party or which benefit the Company have been or will be on or before the Closing Date, delivered to the Purchaser, and all such agreements are valid, binding and enforceable against the parties thereto and there are no defaults or conditions which, after notice or lapse of time or both, would constitute a default by the Company, or to the Knowledge of Company or Seller, by any party thereto.

 

4.20 Company Assets. Schedule 4.20 sets forth a true, correct and complete list of all the Company’s material contracts and tangible and intangible material assets, including, but not limited to, Internet domain names, websites, and filed and issued patents. 


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5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.  

 

The Purchaser hereby represents and warrant to each Seller as follows:

 

5.1 Existence and Good Standing . The Purchaser is a Nevada Corporation, duly formed, validly existing and in good standing under the laws of the state of Nevada. 

 

5.2 Execution, Delivery and Performance of Agreement . The Purchaser has the power and authority to execute, deliver and perform fully its obligations under this Agreement.  

 

5.3 Enforceability . The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Purchaser and constitute the valid and legally binding obligations of the Purchaser, enforceable against it in accordance with its terms. 

 

5.4 No Conflict . Neither the execution of this Agreement, nor the performance by the Purchaser of its obligations hereunder will violate or conflict with the Purchaser’s organizational documents, or any applicable Law or Order. 

 

5.5 Consents . No consent of any third party or Governmental Authority is required in connection with the execution and delivery by the Purchaser of this Agreement and/or the consummation of the transactions contemplated hereby. 

 

5.6 SEC Reporting . The Purchaser is in compliance in all material respects with all informational reporting requirements to which it is subject under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder (the “ Exchange Act Rules ”). All periodic and other reports required by the Purchaser to be filed with the Securities and Exchange Commission (the “SEC”) under the Exchange Act and the Exchange Act Rules (the “ Purchaser’s SEC Reports ”) have been filed with the SEC comply as to form with the Exchange Act and the Exchange Act Rules. None of the Purchaser’s SEC Reports contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements herein or therein not misleading. 

 

5.7 Bad Actor Representation . The Purchaser represents and warrants that the statements set forth in Schedule 5.7 are true and accurate in all respects with respect to the Purchaser and each of its directors and officers, and, to the knowledge of the Purchaser, with respect to owners of 20% or more in voting power of its capital stock (collectively, “ Purchaser Persons ”). 

 

5.8 Compliance with Securities Law . The Purchaser’s issuance of Purchaser’s Common Stock to the Sellers is exempt from registration under Section 5 of the Securities Act of 1933, as amended (the “ Act ”). Such issuance will occur in compliance with the Act and all other applicable federal and state securities laws. 

 

5.9 Disclosure of Material Information. Neither this Agreement, any Schedule, any exhibit, document or certificate delivered by or on behalf of the Purchaser pursuant hereto contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements herein or therein not misleading.  

 

6 . COVENANTS  

 

6.1 Access to Information.  

 

From and after the date hereof, at reasonable times and upon reasonable notice to the Company, the Purchaser shall be entitled, through its employees, advisors and representatives, to make such investigation of the assets, properties, facilities, personnel, business and operations of the Company, and to make such examination of the books, records and financial condition of the Company and the business of the Company, as Purchaser reasonably requests. No investigation by Purchaser shall diminish, obviate or constitute a waiver of, the enforcement of any of the representations, warranties, covenants or agreements of the Company or the Sellers under this Agreement. The Company shall furnish the representatives of Purchaser with all information and copies of documents concerning the affairs of the business of the Company as such representatives may reasonably request and shall cause the appropriate officers, employees, consultants, agents, accountants and attorneys of the Company to cooperate fully with such representatives in connection with such review and examination and shall make full disclosure to Purchaser of all material facts affecting the financial condition and business operations of the Company.

 

6.2 Company Corporate Records . The Company shall deliver at the Closing all the corporate records and documents of the Company, including without limitation, contracts, agreements, and corporate and financial records of every nature and kind.  


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6.3 Affirmative Covenants with Respect to Ordinary Course of Business.  

 

Between the date of this Agreement and the Closing, except as otherwise required in the Ordinary Course of Business, the Company will do each of the following with respect to the Company:

 

(a) conduct the Company’s business only in the ordinary course of business;

 

(b) prevent any change with respect to its banking arrangements;

 

(c) keep intact its current business organization, to keep available its present officers, agents and employees and to preserve the goodwill of those persons having business relations with it;

 

(d) withhold or remit with respect to any employees all employment taxes;

 

(e) maintain true, correct and complete books of accounts and records relating to the business of the Company;

 

(f) comply in all respects with all Laws applicable to the conduct of the Company’s business or its properties or assets;

 

(g) pay any and all Taxes imposed upon the Company or its income, profits or assets, or otherwise required to be paid by it;

 

(h) pay when due any liability or charge that if, unpaid, might become an Encumbrance upon any of the Company’s assets;

 

6.6 Negative Covenants with Respect to Ordinary Course of Business.  

 

Between the date of this Agreement and the Closing, the Company will:

 

(a) refrain from making any purchase, sale or disposition of any asset or property of the Company and from mortgaging, pledging or, subjecting to any encumbrance any of its properties or assets;

 

(b) refrain from entering into any contract or commitment;

 

(c) refrain from incurring any contingent liability as a guarantor or otherwise with respect to the obligations of others, and from incurring any other contingent or fixed obligations or;

 

(d) refrain from entering into any material agreement or amending or terminating any material contract, agreement or license to which it is a party or waiving or releasing any material right or claim;

 

(e) refrain in from making any change or incurring any obligation to make a change in its organizational documents or any other of its securities, including warrants and options;

 

(f) refrain from declaring, setting aside or paying any dividend or making any other distribution in respect of Membership Interests, or making any direct or indirect redemption, purchase or other acquisition of Membership Interests, of any Seller;

 

(g) refrain from entering into any employment contract or making any change in the compensation payable or to become payable to any of its officers, employees or agents;

 

(h) refrain from instituting, terminating, changing or making any representations, either oral or written, to increase or change any benefit plan or adopting any new benefit plan;

 

(i) refrain from making any change in accounting methods or practices;

 

(j) refrain from prepaying any loans from its members, officers or directors (if any) or making any change in its borrowing arrangements;

 

(k) refrain from merging, consolidating or reorganizing with, or acquiring, any entity;

 

(l) refrain from agreeing to any audit assessment by any Governmental Authority or filing any Tax Return, or amendment thereto, unless copies of such Tax Returns have been delivered to the Company’s CFO for review and approval prior to filing, or from revoking any tax election or making any agreement or settlement related to Taxes with any Governmental Authority;


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(m) refrain from taking any action which would cause any Governmental Authority to institute Proceedings regarding the Company or take any other action which would result in the Company being in noncompliance in any material respect with the requirements of any Governmental Authority having jurisdiction thereof; and

 

(n) refrain from issuing any securities of the Company

 

6.7 Notification of Breach of Representations and Warranties.  

 

Promptly upon the Company having knowledge thereof, it shall advise the Purchaser in writing of (i) any material adverse change with respect to Company; (ii) any event, condition or circumstance occurring from the date hereof until the Closing Date that would constitute a violation or breach of any representation, warranty, covenant, agreement or provision contained in this Agreement (provided, however, that such disclosure shall not be deemed to cure any violation or breach of any such representation, warranty, covenant, agreement or provision), or (iii) any event, occurrence, transaction or other item that would have been required to be disclosed herein or delivered hereunder, had such event, occurrence, transaction or item existed on the date hereof, and the Company shall use its best efforts to prevent or promptly remedy the same.

 

6.8 Consummation of Agreement.  

 

The Company, the Purchaser and the Sellers shall use their best efforts to perform and fulfill all conditions and obligations on their respective part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out. To this end, the Company and the Purchaser will obtain all necessary authorizations or approvals, including those of the Members, Managers and Board of Directors of the Company and the Purchaser, as applicable.

 

6.10 Exclusive Dealing.  

 

(a) Until such time as this Agreement is terminated in accordance with its terms, none of the Company, the Sellers, nor any of the Company’s directors, officers, employees or Representatives will, directly or indirectly: (i) encourage, solicit, initiate, engage (including by way of furnishing or disclosing information) or participate in any negotiations with any third person or entity (other than the Purchaser) concerning any merger, consolidation or other business combination involving the Company or acquisition of any portion of its assets or business (other than in the ordinary course of business), or encourage, solicit, initiate or entertain inquiries or proposals concerning, or which could reasonably be expected to lead to, any of the foregoing (an “Acquisition Transaction”); or (ii) negotiate or take any other action intended or designed to facilitate the efforts of any third person or entity (other than Purchaser) relating to a possible Acquisition Transaction, or (ii) enter into any arrangements, agreements or understanding requiring the Company or any Seller to abandon, terminate or fail to consummate the transactions contemplated by this Agreement.

 

(b) The Company will immediately notify the Purchaser regarding any contact between the Company or any of its Members, officers, directors or Representatives and any other person regarding any such offer or proposal or any related inquiry.

 

6.11 Further Assurances . After the date hereof, at the reasonable request of the other party, each Seller, Company and Purchaser shall execute and deliver or cause to be executed and delivered to the other party such documents or other instruments as required by this Agreement, in order to implement the transactions contemplated by this Agreement. 

 

6.12 SEC Reporting . For so long as the Purchaser remains subject to the informational reporting requirements of the Exchange Act and the Exchange Act Rules or, if earlier, until all Sellers have disposed of their shares of Common Stock of the Purchaser, the Purchaser shall remain fully compliant with all such reporting requirements of the Exchange Act and the Exchange Act Rules and shall promptly file all SEC Reports with the SEC in compliance therewith. 

 

7. CONDITIONS TO COMPANY AND SELLERS’ OBLIGATIONS.  

 

The obligation of each Seller and the Company to consummate this Agreement and the transactions contemplated hereby are subject to the condition that, on or before the Closing, the actions required by this section 7 will have been completed.

 

7.1 Representations; Warrantees; Covenants. Each of the representations and warranties of the Purchaser contained in Section 5 shall be true and correct as though made on and as of the Closing Date, and the Purchaser shall, on or before the Closing have performed all of its obligations hereunder which by the terms hereof are to be performed by them on or before the Closing.  


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7.2 No Bankruptcy. The Purchaser shall not (i) have commenced a voluntary Proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or substantially all of its property, or (ii) have an involuntary Proceeding commenced against it seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereinafter in effect or seeking the appointing of a trustee, receiver, liquidator, custodian or similar official of it or substantially all of its property, or (iii) have consented to any such relief or to the appointment of or taking possession by any such official against it, or (iv) have made a general assignment for the benefit of its creditors, or (iii) have an attachment placed after the date hereof on all or a significant portion of its assets  

 

7.3 Absence of Certain Litigation. There shall not be any (a) injunction, restraining order or other Court Order issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided, (b) Proceeding by any Government Authority pending before any court or Governmental Authority, wherein such complainant seeks the restraint or prohibition of the consummation of the transactions contemplated by this Agreement, or (c) Proceeding by a private party pending before any Governmental Authority, which in the reasonable opinion of Company is likely to result in the restraint or prohibition of the consummation of any material transaction contemplated hereby or the obtaining of an amount in payment (or indemnification) of material damages from or other material relief against any of the parties or against any directors or officers of the Company, in connection with the consummation of the transactions contemplated by this Agreement. .  

 

7.4 Resignations and Appointment of Officers; Releases. The Purchaser shall have delivered to the Company prior to Closing, a complete and correct list of all of the officers and directors of the Purchaser and the written resignations of the EVP, Operations of the Purchaser, which resignation will be effective no later than the Closing Date. In addition, the Purchaser’s Board of Directors shall have appointed (i) Itay Koren to the Board of Directors, (ii) Sonya Kreizman as Interim CEO of the Purchaser at a salary of $7,000 per month, and (iii) Yossi Shemesh CTO of the Purchaser at a salary not to exceed $10,000 per month.  

 

7.5 Closing Certificate of Purchaser. The Purchaser shall have delivered one or more certificates of the Purchaser, dated as of the Closing Date, as to such matters as the Company may reasonably request. 

 

7.6 Registration Rights Agreement . Purchaser shall have executed and delivered a Registration Rights Agreement to the Sellers in form and substance substantially as set forth on Exhibit A hereto. 

 

7.7 Purchaser’s Receipt of Minimum Financing. Purchaser shall have received after the date hereof and on or before the Closing Date, financing in the amount of at least $500,000. 

 

8. CONDITIONS TO OBLIGATIONS OF THE PURCHASER.  

 

The obligation of the Purchaser to consummate this Agreement and the transactions contemplated hereby are subject to the condition that, on or before the Closing, the actions required by this Section 8 will have been completed.

 

8.1 Representations; Warrantees; Covenants. Each of the representations and warranties of the Company and each Seller contained in Section 4 shall be true and correct as though made on and as of the Closing Date and the Company and each Seller shall, on or before the Closing, have performed all of their respective obligations hereunder which by the terms hereof are to be performed by them on or before the Closing. Company shall have delivered to Purchaser a certificate dated as of the Closing to the foregoing effect

 

8.2 Absence of Certain Litigation. There shall not be any (a) injunction, restraining order or other Court Order issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided, (b) Proceeding by any Government Authority pending before any court or Governmental Authority, wherein such complainant seeks the restraint or prohibition of the consummation of the transactions contemplated by this Agreement, or (c) Proceeding by a private party pending before any Governmental Authority, which in the reasonable opinion of Purchaser is likely to result in the restraint or prohibition of the consummation of any material transaction contemplated hereby or the obtaining of an amount in payment (or indemnification) of material damages from or other material relief against any of the parties or against any directors or officers of the Purchaser, in connection with the consummation of any material transaction contemplated hereby.  

 

8.3 Ancillary Agreements.  

 

Itay Koren, majority member of the Company, Sonya Kreizman, a Principal Shareholder of the Company, and Yossi Shemesh, CTO of the Company, shall have executed and delivered a Noncompetition Agreement, Nondisclosure Agreement and Intellectual Property Rights Agreement, all in form and substance reasonably satisfactory to the Purchaser. Itay Koren shall agree to provide strategic consulting services to the Purchaser for a period of two months for no additional consideration (after this initial period, Mr. Koren and the Purchaser shall determine whether and on what terms to enter into a further agreement with regard to advisory services to the Purchaser). Ed Murphy and the Purchaser shall enter into a business consulting agreement on terms acceptable to the Purchaser.


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8.3 Closing Certificate of Company and Sellers. The Company and the Principal Shareholders shall have delivered one or more certificates, dated as of the Closing Date, as to such matters as the Purchaser shall reasonably request.  

 

8.4 Purchaser’s Receipt of Minimum Financing. Purchaser shall have received after the date hereof and on or before the Closing Date, financing in the amount of at least $500,000 on terms and conditions reasonably satisfactory to Purchaser. 

 

8.5 Liabilities at Closing. After giving effect, on a pro-forma basis, to the issuance of Purchaser common stock and payments under Sections 3.2 and 3.3 hereof, respectively, the Company shall have no liabilities of any kind or nature. 

 

8.6 Base Balance Sheet. The Base Balance Sheet shall be acceptable in form and substance to NCAP in its sole and absolute discretion. 

 

9. INDEMNIFICATION  

 

9.1 Survival; Right to Indemnification Not Affected By Knowledge or Materiality.  

 

(a) All representations, warranties, covenants, and obligations in this Agreement, will survive the execution of this Agreement and the Closing of the transactions contemplated hereby.

 

(b) The right of the Indemnified Party to indemnification for losses or other remedy based on breach of the representations, warranties, and/or covenants set forth in this Agreement will not be affected by the closing of the transaction contemplated by this Agreement, or any information of which the Indemnified Party may have Knowledge prior to the Closing Date, provided that the rights and remedies of the Indemnified Party in respect of any of the foregoing shall not extend to any event or matter which otherwise might have affected such rights and remedies as provided in any specific written waiver or release by the Indemnified Party.

 

(c) For the purpose of determining whether there is a claim for losses under this Section and calculation of the amount of such losses, any qualification of any representation or warranty by reference to the materiality of matters stated therein, and any limitations of such representations as being to the knowledge of any person, or words to similar effect, shall be disregarded.

 

9.2 Indemnification by the Principal Shareholders and the Company.  

 

Subject to the limitations in Section 9.3 below, and in consideration of the transfer of the Membership Interests, the Principal Shareholders and the Company (but the Company only until the moment immediately before it is owned by Purchaser), jointly and severally, shall defend, indemnify and hold the Purchaser harmless from and against any losses, liabilities or expenses, including reasonable attorney’s fees, directly incurred by Purchaser resulting from any Third Party Action that is instituted against it, resulting from or arising out of any breach of any of the representations, warranties, covenants or agreements made by the Company or any Seller in or pursuant to this Agreement.

 

9.3 Limitations on Indemnification by the Company and Principal Shareholders.  

 

The right to indemnification under Section 9.2 is subject to the following limitations:

 

(a) The Company and the Principal Shareholders shall have no liability under Section 9.2 unless Purchaser gives reasonably prompt written notice to the Company and Principal Shareholders asserting a claim for losses, including reasonably detailed facts and circumstances pertaining thereto, before the expiration of a period of two years after the date hereof for all claims of any type or nature whatsoever.

 

(b) Each Principal Shareholder’s liability under this Section 9 shall be limited to return of the shares issued to them representing the Purchase Price paid to them or, in case they no longer own said shares, an amount of cash equal to the product of the number of shares issued to said Shareholder and the price per share as quoted on OTC Markets at the close of business on the Closing Date. For purposes hereof, the $80,000 paid to 17 Media Group, LLC shall be deemed part of the Purchase Price paid to Itay Koren, one of the Principal Shareholders. Without limiting the foregoing and for avoidance of doubt, the Purchaser shall have no post-closing recourse against any Seller for any matter set forth herein or pursuant to any of the transactions contemplated hereby, except to the extent that the Purchaser can obtain indemnification from a Principal Shareholder solely to the extent limited by this Section 9.3(b).

 

9.4 Defense of Third Party Actions.  

 

(a) Promptly after receipt of notice of any Third Party Action, any person who believes he, she or it may be an Indemnified Person will give prompt written notice to the potential Indemnifying Person of such action.


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(b) The Indemnified Person shall control the defense and settlement of any Third Party Action asserted against it. The Indemnifying Person shall render all assistance as shall be reasonable and shall have the right to participate in and appoint its own counsel (at its own cost) and be present at the defense of such Third Party Action, but not to control the defense, negotiation or settlement thereof, which control shall remain with the Indemnified Person.

 

(c) Each Indemnifying Person hereby consents to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Person for purposes of any claim that an Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on them with respect to such a claim anywhere in the world.

 

9.5 Payment of Indemnification.  

 

Subject to Section 9 above, claims for indemnification under this Section shall be paid or otherwise satisfied by Indemnifying Persons within thirty (30) days after receipt of written notice thereof given by the Indemnified Person in writing.

 

10. SURVIVAL AND REMEDIES  

 

10.1 Survival . The provisions contained in Sections 4,5,6,7,8,9,10,11and 12 shall survive any termination of this Agreement.  

 

10.2 Remedies.  

 

The parties hereto acknowledge that the remedy at law for any breach of the obligations undertaken by the parties hereto is and will be insufficient and inadequate and that the parties hereto shall be entitled to equitable relief, in addition to remedies at law. In the event of any action to enforce the provisions of this Agreement, Purchaser, Sellers and Company shall waive the defense that there is an adequate remedy at law. Purchaser, Sellers and Company acknowledge that the Membership Interests are unique and cannot be obtained on the open market. Without limiting any remedies Purchaser may otherwise have hereunder or under applicable law, in the event any Seller or Company refuse to perform their respective obligations under this Agreement, Purchaser shall have, in addition to any other rights at law or equity, the right to specific performance.

 

11. TERMINATION.  

 

At any time prior to the Closing, this Agreement may be terminated (a) by mutual consent of the parties, (b) by either side if there has been a material misrepresentation, breach of warranty or breach of covenant by the other side in its representations, warranties and covenants set forth herein, (c) by Company or the Sellers if the conditions stated in Article 7 have not been satisfied at or prior to the Closing, (d) by the Purchaser if the conditions stated in Article 8 have not been satisfied at or prior to the Closing, or (f) if the Closing shall not have occurred and the transactions contemplated hereby consummated by August 31, 2017; provided that the right to terminate under this Section shall not be available to any parties whose breach has been the cause of such failure to close. .

 

11.1 Effect of Termination.  

 

If this Agreement shall be terminated as above provided, all obligations of the parties hereunder shall terminate but any breaching party shall remain liable to a nonbreaching party for its damages. In the event that this Agreement is so terminated, each party will return all papers, documents, financial statements and other data furnished to it by or with respect to each other party to such other party (including any copies thereof made by the first party). Notwithstanding such termination, the provisions of Section 9 and 10 shall survive the termination of this Agreement .

 

11.2 Right to Proceed.  

 

Notwithstanding anything in this Agreement to the contrary, (a) if any of the conditions specified in Article 7 hereof have not been satisfied, Company and the Sellers shall have the right to proceed with the transactions contemplated hereby without waiving its rights hereunder and (b) if any of the conditions specified in Article 8 hereof have not been satisfied, Purchaser shall have the right to proceed with the transactions contemplated hereby without waiving its rights hereunder. In each such case, the party electing to proceed shall have the right to require all obligations, undertakings, agreements and other provisions of this Agreement specifically performed by the other parties and shall have the right to obtain and order such specific performance in any of the Courts in the United States or any state or political subdivision thereof.


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12. MISCELLANEOUS  

 

12.1 Confidentiality . In the event that the transactions contemplated hereby are not consummated, each party will keep confidential, not disclose and not use for its own benefit (and will cause its subsidiaries, employees, officers and directors to keep confidential, not disclose, and not use for their own benefit) any information, whether written, oral or in electronic format and whether or not identified as “confidential” at the time of its disclosure, obtained with respect to the other party or its subsidiaries, employees, officers and directors as a result of the transaction contemplated hereby or Purchaser’s due diligence process in connection herewith (“Confidential Information”). The obligation set forth in the preceding sentence will not apply to Confidential Information which (i) is in the public domain on the date hereof, (ii) enters the public domain after the date hereof (other than by reason of the breach of any confidentiality obligation), (iii) was known to the receiving party prior to receipt from the disclosing party, (iv) is independently developed by the receiving party after the date hereof, (v) is disclosed to the receiving party by a third party not in violation of the proprietary or other rights of the other party or (vi) is disclosed pursuant to a requirement of law or judicial process.  

 

12.2 Expenses . Except as otherwise provided herein, each of the parties hereto shall bear its respective expenses incurred or to be incurred in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.  

 

12.3 No Assignment . The rights and obligations of the parties hereunder may not be assigned without the prior written consent of the other party hereto, except that Purchaser may assign its rights and obligations hereunder to any wholly-owned subsidiary formed for the purpose of making the acquisition contemplated hereby. 

 

12.4 Headings . The headings contained in this Agreement are included for purposes of convenience only, and will not affect the meaning or interpretation of this Agreement. 

 

12.5 Integration, Modification and Waiver . This Agreement, together with the Schedules or other instruments as may be delivered hereunder, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, representations, understandings, communications, whether written or verbal between the parties in relation thereto. No supplement, modification or amendment of this Agreement will be binding unless executed in writing by each of the parties’ duly authorized representatives hereto. No waiver of any of the provisions of this Agreement will be deemed to be or will constitute a continuing waiver. No waiver will be binding unless executed in writing by the party making the waiver. The recitals shall form part of this Agreement. 

 

12.6 Construction . The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” means including without limitation. Any reference to the singular in this Agreement also includes the plural and vice versa. 

 

12.7 Severability . If any provision of this Agreement or the application of any provision hereof to any party or circumstance is, to any extent, adjudged invalid or unenforceable by a court of competent jurisdiction, the application of the remainder of such provision to such party or circumstance, the application of such provision to other parties or circumstances, and the application of the remainder of this Agreement will not be affected thereby. 

 

12.8 Notices . All notices and other communications required or permitted hereunder must be in writing and will be deemed to have been duly given when delivered in person, or when dispatched by electronic mail or facsimile transmission (provided there is confirmation of such facsimile transmission), or the next business day after having been dispatched by an internationally recognized courier service to the appropriate party at the address specified below: 

 

If to the Purchaser:

 

Northsight Capital, Inc.

7740 East Evans Rd.

Scottsdale, AZ 85260

Email: johnvenners@gmail.com


15


If to the Company or Sellers:

 

Crush Mobile. LLC

286 Madison Avenue, Suite 800

New York, New York 10017

Email: itay.koren @gmail.com

 

With a copy to:

 

David H. Feinberg, Esq.

Feinberg Hanson LLP

855 Boylston Street

Boston, Massachusetts 02116

dfeinberg@feinberghanson.com

 

Any party hereto may change its address or facsimile number for the purposes of this Section 12.8 by giving notice as provided herein.

 

12.9 Governing Law . This Agreement is to be governed by and construed and enforced in accordance with the laws of the State of Nevada without regard to principles of conflicts of law.  

 

12.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by fax or electronic transmission is sufficient to bind the parties to the terms and conditions of this Agreement.  

 

12.11 Disputes . In case of any dispute hereunder, the prevailing party shall be entitled to be reimbursed by the other party for its reasonable legal fees and expenses. 

 

12.12 Further Assurances . The Company and Seller from time to time after the Closing at the request of Purchaser and without further consideration shall execute and deliver further instruments of transfer and assignment (in addition to those delivered hereunder and take such other action as Purchaser may reasonably require to more effectively transfer and assign to, and vest in, Purchaser all of the Membership Interests. 

 

12.13 Assistance in Proceedings . The Company and Principal Shareholders will cooperate with Purchaser and its counsel in the contest or defense of, and make available its personnel and provide any testimony and access to its books and records in connection with, any Proceeding involving or relating to (a) any transaction contemplated hereby or (b) any action, activity, circumstance, condition, conduct, event, fact, failure to act, incident, occurrence, plan, practice, situation, status or transaction on or before the Closing Date involving the Company or its business. 

 

 

[Balance of page intentionally left blank] .


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IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

                                                                                          

 

Company:

 

Crush Mobile, LLC, a Delaware limited liability company

 

By: /s/ Itay Koren

Name: Itay Koren

Title: President

 

 

Purchaser:

 

Northsight Capital, Inc., a Nevada corporation

 

 

By: /s/ John P. Venners

John P. Venners, EVP, Operations and Director

 


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Itay Koren                                                                 

Itay Koren

767,744 shares (55.62% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Edward J. Murphy                                                       

Edward J. Murphy

114,065 shares (8.30% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Sonya Kreizman                                                    

Sonya Kreizman

93,750 shares (6.82% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Natasha Nov                                                                         

Natasha Nov

23,440 shares (1.70% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

Bloo Circle, LLC

 

By: /s/ Daniel Karsh , duly authorized

Name: Daniel Karsh

Title: Founder

 

(23,440 shares (1.70% of total Membership Interests))


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Isaac Bernato                                                             

Isaac Bernato

18,750 shares (1.36% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Gary Rodich                                                                 

Gary Rodich

18,750 shares (1.36% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Yosi Shemesh                                                               

Yosi Shemesh

18,750 shares (1.36% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

Direct Focus Online Limited

 

By: /s/ Jordan Rolband , duly authorized

Name: Jordan Rolband

Title: President

 

250,000 shares (18.18% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Adam Gottlieb                                                                 

Adam Gottlieb

3,125 shares (0.23% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

Proventus Partners Capital

 

By: /s/ Edward Murphy , duly authorized

Name: Edward Murphy

Title: Chairman

 

41,667 shares (3.03% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written.

 

 

/s/ Robert Feinstein                                                         

Robert Feinstein

13,889 shares (1.01% of total Membership Interests)


SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT BY AND AMONG NORTHSIGHT CAPITAL, INC., CRUSH MOBILE, LLC, AND THE MEMBERS LISTED THEREIN


OMNIBUS PROMISSORY NOTE

 

  Scottsdale, Arizona

  April 1, 2017

 

FOR VALUE RECEIVED, the undersigned, Northsight Capital, Inc., a corporation with an address of 7740 East Evans rd., Scottsdale, AZ 85264 (hereinafter referred to as the “Maker”), hereby promises to pay to the order of Sandor Capital Master Fund, a company with a mailing address of 2828 Routh St., Dallas Texas (“Holder”), the sum of FORTY-TWO THOUSAND THREE HUNDRED SEVENTY-FOUR DOLLARS ($42,374).  

 

Important Explanatory Note: Holder acknowledges and agrees that: (i) this omnibus promissory note consolidates and supersedes certain promissory notes issued by the Maker in favor of the Holder prior to the date hereof in the aggregate principal amount of $41,550 (plus accrued interest of $824) and (ii) that the principal amount of this promissory note ($42,374), together with that certain promissory note of even date, in the principal amount of $71,097, issued by Maker in favor of Holder, represents the entire amount of all indebtedness owing by the Maker to the Holder as of the date hereof.

 

All outstanding principal sums shall be paid by Maker, as set forth below. The entire balance of outstanding principal and other fees and charges shall be due and payable on the earlier of (i) an Event of Default (as defined below) or (ii) August 1, 2017 (the “Maturity Date). There shall be no prepayment penalty.  

 

The unpaid principal balance from time to time outstanding under this note shall be non-interest bearing.  

 

Each of the following shall constitute an “ Event of Default ” hereunder: (i) Maker’s failure to make any payment when due hereunder; (ii) with respect to Maker, the commencement of an action seeking relief under federal or state bankruptcy or insolvency statutes or similar laws, or seeking the appointment of a receiver, trustee or custodian for Maker or all or part of its assets, or the commencement of an involuntary proceeding against Maker under federal or state bankruptcy or insolvency statues or similar laws, which involuntary proceeding is not dismissed or stayed within thirty (30) days; or (iii) if Maker makes an assignment for the benefit of creditors. If an Events of Default occurs, the obligations under this note shall become immediately due and payable without notice or demand.  

 

Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses incurred, or which may be incurred, by Holder in connection with the enforcement and collection of this note. Such costs and expenses shall be payable upon demand for the same and until so paid shall be added to the principal amount of the note.  

 

Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.  

 

This instrument contains the entire agreement among Maker and Holder with respect to the transactions contemplated hereby, and supersedes all negotiations, presentations, warranties, commitments, offers, contracts and writings prior to the date hereof relating to the subject matter hereof. This instrument may be amended, modified, waived, discharged or terminated only by a writing signed by Maker and accepted in writing by Holder.

 

This instrument shall be governed by Arizona law, without regard to the conflict of laws provisions thereof. For purposes of any action or proceeding involving this note, Maker and Holder hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and consent to any order, process, notice of motion or other application to or by any of said courts or a judge thereof being served within or without such court’s jurisdiction by registered mail or by personal service, provided a reasonable time for appearance is allowed (but not less than the time otherwise afforded by any law or rule), and waives any right to contest the appropriateness of any action brought in any such court based upon lack of personal jurisdiction, improper venue or forum non conveniens.

 

This Note shall inure to the benefit of Holder’s successors and assigns.  


Executed as an instrument under seal, as of the date first above written. This Note shall not become an obligation of the Maker until countersigned by Holder and returned to Maker.

 

MAKER:  

 

 

WITNESS: Northsight Capital, Inc.  

 

______________________________________ /s/ John P. Venners                                   

Witness John P. Venners, EVP Operations  

Print Name: ____________________________

 

ACCEPTED AND AGREED BY HOLDER

 

Sandor Capital Master Fund

 

/s/ John Lemak                             

By: John Lemak, duly authorized


2


EXHIBIT 1 – NOTES REFINANCED

 

 

 

Original Notes

Balance

12/15/2016

 

Principal

8,550

12/30/2016

 

Principal

23,000

1/13/2017

 

Principal

10,000

 

 

 

41,550

 

 

New Note

Balance

 

 

Original Principal

41,550

 

 

Accrued Interest

824

4/1/2017

 

New Note Principal

42,374

 

 

 

 


3


PROMISSORY NOTE

 

  Scottsdale, Arizona

  April 1, 2017

 

FOR VALUE RECEIVED, the undersigned, Northsight Capital, Inc., a corporation with an address of 7740 East Evans rd., Scottsdale, AZ 85264 (hereinafter referred to as the “Maker”), hereby promises to pay to the order of Sandor Capital Master Fund, a company with a mailing address of 2828 Routh St., Dallas Texas (“Holder”), the sum of SEVENTY-ONE THOUSAND NINETY-SEVEN DOLLARS ($71,097).  

 

Important Explanatory Note: Holder acknowledges and agrees that: (i) this promissory note supersedes that certain promissory note issued by the Maker in favor of the Holder prior to the date hereof in the principal amount of $65,000 (including accrued interest thereon of $6,097) and (ii) that the principal amount of this promissory note ($71,097), together with that certain promissory note of even date, in the principal amount of $42,374, issued by Maker in favor of Holder, represents the entire amount of all indebtedness owing by the Maker to the Holder as of the date hereof.

 

All outstanding principal sums shall be paid by Maker, as set forth below. The entire balance of outstanding principal and other fees and charges shall be due and payable on the earlier of (i) an Event of Default (as defined below) or (ii) August 1, 2017 (the “Maturity Date). There shall be no prepayment penalty.  

 

The unpaid principal balance from time to time outstanding under this note shall be non-interest bearing.  

 

Each of the following shall constitute an “ Event of Default ” hereunder: (i) Maker’s failure to make any payment when due hereunder; (ii) with respect to Maker, the commencement of an action seeking relief under federal or state bankruptcy or insolvency statutes or similar laws, or seeking the appointment of a receiver, trustee or custodian for Maker or all or part of its assets, or the commencement of an involuntary proceeding against Maker under federal or state bankruptcy or insolvency statues or similar laws, which involuntary proceeding is not dismissed or stayed within thirty (30) days; or (iii) if Maker makes an assignment for the benefit of creditors. If an Events of Default occurs, the obligations under this note shall become immediately due and payable without notice or demand.  

 

Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses incurred, or which may be incurred, by Holder in connection with the enforcement and collection of this note. Such costs and expenses shall be payable upon demand for the same and until so paid shall be added to the principal amount of the note.  

 

Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.  

 

This instrument contains the entire agreement among Maker and Holder with respect to the transactions contemplated hereby, and supersedes all negotiations, presentations, warranties, commitments, offers, contracts and writings prior to the date hereof relating to the subject matter hereof. This instrument may be amended, modified, waived, discharged or terminated only by a writing signed by Maker and accepted in writing by Holder.

 

This instrument shall be governed by Arizona law, without regard to the conflict of laws provisions thereof. For purposes of any action or proceeding involving this note, Maker and Holder hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and consent to any order, process, notice of motion or other application to or by any of said courts or a judge thereof being served within or without such court’s jurisdiction by registered mail or by personal service, provided a reasonable time for appearance is allowed (but not less than the time otherwise afforded by any law or rule), and waives any right to contest the appropriateness of any action brought in any such court based upon lack of personal jurisdiction, improper venue or forum non conveniens.

 

This Note shall inure to the benefit of Holder’s successors and assigns.  


Executed as an instrument under seal, as of the date first above written. This Note shall not become an obligation of the Maker until countersigned by Holder and returned to Maker.

 

MAKER:  

 

 

WITNESS: Northsight Capital, Inc.  

 

_____________________________________ /s/ John P Venners                                         

Witness John P. Venners, EVP Operations  

Print Name: ___________________________

 

ACCEPTED AND AGREED BY HOLDER

 

Sandor Capital Master Fund

 

/s/ John Lemak                             

By: John Lemak, duly authorized


2


EXHIBIT 1 – NOTES REFINANCED

 

Date

 

Original Note

Balance

5/11/2016

 

Principal

65,000

 

 

New Note

Balance

 

 

Original Principal

65,000

 

 

Accrued Interest

6,097

4/1/2017

 

New Note Principal

71,097

 

 

 

 


3

 

EXTENSION AGREEMENT

 

(Promissory Notes dated April 1, 2017)

 

THIS AGREEMENT is made effective as of June 30, 2017, by and between, Sandor Capital Master Fund., a company with a principal place of business at 2828 Routh St., Suite 500, Dallas, TX 75201 (“Sandor”) and Northsight Capital, Inc., with an address of 7580 East Gray Rd., Suite 103, Scottsdale, AZ 85264 (the “Borrower”).

 

RECITALS

 

WHEREAS, Sandor is the holder of certain promissory notes of Borrower (“Notes”) dated as of April 1, 2017 (See Schedule A for Note details);

 

WHEREAS, Borrower and Sandor have agreed to extend the Maturity date of the Notes until October 1, 2017; and

 

AGREEMENT

 

Now, therefore , the parties hereto, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree as follows:

 

1. Extension of Maturity date of Notes.   The maturity date of the Notes is hereby extended until October 1, 2017 (“Maturity Date”). The Notes, except as modified hereby, remains in full force and effect. 

 

The Parties hereto have executed this Agreement as an instrument under seal as of the date written above.

 

Sandor Capital Master Fund

 

/s/ John Lemak                                         

John Lemak, duly authorized

 

Borrower:

 

Northsight Capital, Inc.

 

/s/ John Venners                                       

By: John Venners, EVP Operations


OMNIBUS PROMISSORY NOTE

 

  Scottsdale, Arizona

  April 1, 2017

 

FOR VALUE RECEIVED, the undersigned, Northsight Capital, Inc., a corporation with an address of 7580 East Gray Rd., Suite 103, Scottsdale, AZ 85260 (hereinafter referred to as the “Maker”), hereby promises to pay to the order of John Lemak, with a mailing address of 2828 Routh St., Dallas Texas (“Holder”), the sum of ONE HUNDRED TWO THOUSAND FOUR HUNDRED SIXTY-FIVE DOLLARS ($102,465).  

 

Important Explanatory Note: Holder acknowledges and agrees that: (i) this omnibus promissory note consolidates and supersedes certain promissory notes issued by the Maker in favor of the Holder prior to the date hereof in the aggregate principal amount of $101,000 (see schedule A hereto) and (ii) that the principal amount of this promissory note represents the entire amount of all indebtedness owing by the Maker to the Holder as of the date hereof.

 

All outstanding principal sums shall be paid by Maker, as set forth below. The entire balance of outstanding principal and other fees and charges shall be due and payable on the earlier of (i) an Event of Default (as defined below) or (ii) October 1, 2017 (the “Maturity Date). There shall be no prepayment penalty.  

 

The unpaid principal balance from time to time outstanding under this note shall be non-interest bearing.  

 

Each of the following shall constitute an “ Event of Default ” hereunder: (i) Maker’s failure to make any payment when due hereunder; (ii) with respect to Maker, the commencement of an action seeking relief under federal or state bankruptcy or insolvency statutes or similar laws, or seeking the appointment of a receiver, trustee or custodian for Maker or all or part of its assets, or the commencement of an involuntary proceeding against Maker under federal or state bankruptcy or insolvency statues or similar laws, which involuntary proceeding is not dismissed or stayed within thirty (30) days; or (iii) if Maker makes an assignment for the benefit of creditors. If an Events of Default occurs, the obligations under this note shall become immediately due and payable without notice or demand.  

 

Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses incurred, or which may be incurred, by Holder in connection with the enforcement and collection of this note. Such costs and expenses shall be payable upon demand for the same and until so paid shall be added to the principal amount of the note.  

 

Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.  

 

This instrument contains the entire agreement among Maker and Holder with respect to the transactions contemplated hereby, and supersedes all negotiations, presentations, warranties, commitments, offers, contracts and writings prior to the date hereof relating to the subject matter hereof. This instrument may be amended, modified, waived, discharged or terminated only by a writing signed by Maker and accepted in writing by Holder.

 

This instrument shall be governed by Arizona law, without regard to the conflict of laws provisions thereof. For purposes of any action or proceeding involving this note, Maker and Holder hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and consent to any order, process, notice of motion or other application to or by any of said courts or a judge thereof being served within or without such court’s jurisdiction by registered mail or by personal service, provided a reasonable time for appearance is allowed (but not less than the time otherwise afforded by any law or rule), and waives any right to contest the appropriateness of any action brought in any such court based upon lack of personal jurisdiction, improper venue or forum non conveniens.

 

This Note shall inure to the benefit of Holder’s successors and assigns.  


Executed as an instrument under seal, as of the date first above written. This Note shall not become an obligation of the Maker until countersigned by Holder and returned to Maker.

 

MAKER:  

 

 

WITNESS: Northsight Capital, Inc.  

 

_____________________________________ /s/ John P Venners                                  

Witness John P. Venners, EVP Operations  

Print Name: ___________________________

 

 

ACCEPTED AND AGREED BY HOLDER

 

 

/s/ John Lemak                             

By: John Lemak, duly authorized


2


EXHIBIT 1 – NOTES REFINANCED

 

 

 

Original Notes

Balance

12/01/2016

 

Principal

20,000

12/31/2016

 

Principal

11,000

01/26/2017

 

Principal

10,000

01/30/2017

 

Principal

14,000

2/6/2017

 

Principal

11,000

03/10/2017

 

Principal

25,000

03/16/2017

 

Principal

10,000

 

 

 

101,000

 

 

New Note

Balance

 

 

Original Principal

101,000

 

 

Accrued Interest

1,465

4/1/2017

 

New Note Principal

102,465


3


OMNIBUS PROMISSORY NOTE

 

  Scottsdale, Arizona

  August 1, 2017

 

FOR VALUE RECEIVED, the undersigned, Northsight Capital, Inc., a corporation with an address of 7580 East Gray Rd., Suite 103, Scottsdale, AZ 85260 (hereinafter referred to as the “Maker”), hereby promises to pay to the order of John Lemak IRA Rollover (Texas Capital Bank Custodian), with a mailing address of 2828 Routh St., Dallas Texas (“Holder”), the sum of SIXTY THOUSAND DOLLARS ($60,000).  

 

Important Explanatory Note: Holder acknowledges and agrees that: (i) this omnibus promissory note consolidates and supersedes certain promissory notes issued by the Maker in favor of the Holder prior to the date hereof in the aggregate principal amount of $60,000 (see schedule A hereto) and (ii) that the principal amount of this promissory note ($60,000), along with a note in the principal amount of $140,000, dated June 29, 2017 (an aggregate principal amount of $200,000).

 

All outstanding principal sums shall be paid by Maker, as set forth below. The entire balance of outstanding principal and other fees and charges shall be due and payable on the earlier of (i) an Event of Default (as defined below) or (ii) October 1, 2017 (the “Maturity Date). There shall be no prepayment penalty.  

 

The unpaid principal balance from time to time outstanding under this note shall be non-interest bearing.  

 

Each of the following shall constitute an “ Event of Default ” hereunder: (i) Maker’s failure to make any payment when due hereunder; (ii) with respect to Maker, the commencement of an action seeking relief under federal or state bankruptcy or insolvency statutes or similar laws, or seeking the appointment of a receiver, trustee or custodian for Maker or all or part of its assets, or the commencement of an involuntary proceeding against Maker under federal or state bankruptcy or insolvency statues or similar laws, which involuntary proceeding is not dismissed or stayed within thirty (30) days; or (iii) if Maker makes an assignment for the benefit of creditors. If an Events of Default occurs, the obligations under this note shall become immediately due and payable without notice or demand.  

 

Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses incurred, or which may be incurred, by Holder in connection with the enforcement and collection of this note. Such costs and expenses shall be payable upon demand for the same and until so paid shall be added to the principal amount of the note.  

 

Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.  

 

This instrument contains the entire agreement among Maker and Holder with respect to the transactions contemplated hereby, and supersedes all negotiations, presentations, warranties, commitments, offers, contracts and writings prior to the date hereof relating to the subject matter hereof. This instrument may be amended, modified, waived, discharged or terminated only by a writing signed by Maker and accepted in writing by Holder.

 

This instrument shall be governed by Arizona law, without regard to the conflict of laws provisions thereof. For purposes of any action or proceeding involving this note, Maker and Holder hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and consent to any order, process, notice of motion or other application to or by any of said courts or a judge thereof being served within or without such court’s jurisdiction by registered mail or by personal service, provided a reasonable time for appearance is allowed (but not less than the time otherwise afforded by any law or rule), and waives any right to contest the appropriateness of any action brought in any such court based upon lack of personal jurisdiction, improper venue or forum non conveniens.

 

This Note shall inure to the benefit of Holder’s successors and assigns. In order to secure the fulfillment of Maker’s obligations hereunder to Holder, the Maker hereby grants to the Holder a security interest in the following internet domain names and related websites: www.weeddepot.com, www.420careers.com, www.ratemystrain.com and www.marijuanamd.com (the “Collateral”). Other than the liens granted hereby, after giving effect to the lien subordination set forth herein, Maker represents and warrants to Holder that the Collateral is not subject to any liens or encumbrance which is superior to Holder’s lien. The Maker covenants and agrees that it shall not grant any further liens in or otherwise further encumber the Collateral.  


By countersigning this Note, Kae Yong Park and Howard R. Baer agree to subordinate their security interest in the Collateral to the security interest of Holder granted hereby, so that, after giving effect to the liens granted hereby to Holder and said subordination, Kae Yong Park and Howard R. Baer shall have a subordinated lien in the Collateral.

 

Executed as an instrument under seal, as of the date first above written. This Note shall not become an obligation of the Maker until countersigned by Holder and returned to Maker.

 

MAKER:  

 

 

WITNESS: Northsight Capital, Inc.  

 

______________________________________ /s/ John P Venners                                     

Witness John P. Venners, EVP Operations  

Print Name: ___________________________

 

 

Howard R. Baer and Kae Yong Park are executing this Note for the sole purpose of subordinating their liens in the Collateral and shall have no liability under this Note.

 

[Signatures follow]

 

 

Howard R. Baer Kae Yong Park  

 

/s/ Howard Baer                                                    /s/ Kae Yong Park                                     

Howard R. Baer Kae Yong Park  

 

 

ACCEPTED AND AGREED BY HOLDER

 

/s/ John Lemak                                                    

By: John Lemak, duly authorized


2


OMNIBUS PROMISSORY NOTE

 

  Scottsdale, Arizona

  June 29, 2017

 

FOR VALUE RECEIVED, the undersigned, Northsight Capital, Inc., a corporation with an address of 7580 East Gray Rd., Suite 103, Scottsdale, AZ 85260 (hereinafter referred to as the “Maker”), hereby promises to pay to the order of John Lemak IRA Rollover (Texas Capital Bank Custodian), with a mailing address of 2828 Routh St., Dallas Texas (“Holder”), the sum of ONE HUNDRED FORTY THOUSAND DOLLARS ($140,000).  

 

Important Explanatory Note: Holder acknowledges and agrees that: (i) this omnibus promissory note consolidates and supersedes certain promissory notes issued by the Maker in favor of the Holder prior to the date hereof in the aggregate principal amount of $140,000 (see schedule A hereto) and (ii) that the principal amount of this promissory note ($140,000), represents the entire amount of all indebtedness owing by the Maker to the Holder as of the date hereof.

 

All outstanding principal sums shall be paid by Maker, as set forth below. The entire balance of outstanding principal and other fees and charges shall be due and payable on the earlier of (i) an Event of Default (as defined below) or (ii) October 1, 2017 (the “Maturity Date). There shall be no prepayment penalty.  

 

The unpaid principal balance from time to time outstanding under this note shall be non-interest bearing.  

 

Each of the following shall constitute an “ Event of Default ” hereunder: (i) Maker’s failure to make any payment when due hereunder; (ii) with respect to Maker, the commencement of an action seeking relief under federal or state bankruptcy or insolvency statutes or similar laws, or seeking the appointment of a receiver, trustee or custodian for Maker or all or part of its assets, or the commencement of an involuntary proceeding against Maker under federal or state bankruptcy or insolvency statues or similar laws, which involuntary proceeding is not dismissed or stayed within thirty (30) days; or (iii) if Maker makes an assignment for the benefit of creditors. If an Events of Default occurs, the obligations under this note shall become immediately due and payable without notice or demand.  

 

Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses incurred, or which may be incurred, by Holder in connection with the enforcement and collection of this note. Such costs and expenses shall be payable upon demand for the same and until so paid shall be added to the principal amount of the note.  

 

Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.  

 

This instrument contains the entire agreement among Maker and Holder with respect to the transactions contemplated hereby, and supersedes all negotiations, presentations, warranties, commitments, offers, contracts and writings prior to the date hereof relating to the subject matter hereof. This instrument may be amended, modified, waived, discharged or terminated only by a writing signed by Maker and accepted in writing by Holder.

 

This instrument shall be governed by Arizona law, without regard to the conflict of laws provisions thereof. For purposes of any action or proceeding involving this note, Maker and Holder hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and consent to any order, process, notice of motion or other application to or by any of said courts or a judge thereof being served within or without such court’s jurisdiction by registered mail or by personal service, provided a reasonable time for appearance is allowed (but not less than the time otherwise afforded by any law or rule), and waives any right to contest the appropriateness of any action brought in any such court based upon lack of personal jurisdiction, improper venue or forum non conveniens.

 

This Note shall inure to the benefit of Holder’s successors and assigns. In order to secure the fulfillment of Maker’s obligations hereunder to Holder, the Maker hereby grants to the Holder a security interest in the following internet domain names and related websites: www.weeddepot.com, www.420careers.com, www.ratemystrain.com and www.marijuanamd.com (the “Collateral”). Other than the liens granted hereby, after giving effect to the lien subordination set forth herein, Maker represents and warrants to Holder that the Collateral is not subject to any liens or encumbrance which is superior to Holder’s lien. The Maker covenants and agrees that it shall not grant any further liens in or otherwise further encumber the Collateral.  


By countersigning this Note, Kae Yong Park and Howard R. Baer agree to subordinate their security interest in the Collateral to the security interest of Holder granted hereby, so that, after giving effect to the liens granted hereby to Holder and said subordination, Kae Yong Park and Howard R. Baer shall have a subordinated lien in the Collateral.

 

Executed as an instrument under seal, as of the date first above written. This Note shall not become an obligation of the Maker until countersigned by Holder and returned to Maker.

 

MAKER:  

 

 

WITNESS: Northsight Capital, Inc.  

 

______________________________________ /s/ John P Venners                                     

Witness John P. Venners, EVP Operations  

Print Name: ___________________________

 

 

Howard R. Baer and Kae Yong Park are executing this Note for the sole purpose of subordinating their liens in the Collateral and shall have no liability under this Note.

 

[Signatures follow]

 

 

Howard R. Baer Kae Yong Park  

 

/s/ Howard Baer                                                    /s/ Kae Yong Park                                     

Howard R. Baer Kae Yong Park  

 

 

ACCEPTED AND AGREED BY HOLDER

 

/s/ John Lemak                                                    

By: John Lemak, duly authorized


2


EXHIBIT 1 – NOTES REFINANCED

 

 

 

Original Notes

Balance

05/01/2017

 

Principal

40,000

05/15/2017

 

Principal

50,000

06/01/2017

 

Principal

20,000

06/15/2017

 

Principal

10,000

06/29/2017

 

Principal

20,000

 

 

 

140,000

 

 

New Note

Balance

 

 

Original Principal

140,000

 

 

Accrued Interest

-

6/30/2017

 

New Note Principal

140,000

 

 

 

 


3

 

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, John Venners, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Northsight Capital, Inc. (the “Registrant”); 

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 

 

4. The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have: 

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

 

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; 

 

(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

 

(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions); 

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and 

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. 

 

 

 

 

 

 

Date:

August 21, 2017

                                                             

By:

/s/ John Venners

 

 

 

 

John Venners, EVP Operations and Director

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Northsight Capital, Inc. (the “Registrant”) on Form 10-Q for the quarter ending June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, John Venners, EVP Operations and Director of the registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(a) The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

 

(b) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. 

 

 

 

 

 

 

Date:

August 21, 2017

                                                             

By:

/s/ John Venners

 

 

 

 

John Venners, EVP Operations and Director