EXHIBIT
99.1
Financial
statements of DigitizeIQ, LLC
As
of December 31, 2014 and for the period from inception (July 23, 2014) through December 31, 2014.
DIGITIZEIQ,
LLC
FINANCIAL
STATEMENTS
WITH
INDEPENDENT
AUDITORS’ REPORT
DECEMBER
31, 2014
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Member
DigitizeIQ,
LLC
We
have audited the accompanying balance sheet of DigitizeIQ, LLC (the “Company”) as of December 31, 2014 and the related
statements of operations, member’s deficiency, and cash flows for the period from inception (July 23, 2014) to December
31, 2014. The financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2014, and the results of its operations and its cash flows for the period from inception (July 23,
2014) to December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
| /s/
Paritz & Company, P.A. |
|
| Paritz & Company, P.A. |
|
| |
|
| Hackensack,
New Jersey |
|
| |
|
| March
10, 2016 |
|
DIGITIZEIQ,
LLC
Balance
Sheet
December
31, 2014
| ASSETS | |
| | |
| Current assets: | |
| | |
| Cash | |
$ | 73,205 | |
| Accounts receivable | |
| 57,800 | |
| Prepaid Expenses | |
| 1,896 | |
| Total current assets and total assets | |
$ | 132,901 | |
| | |
| | |
| LIABILITIES AND MEMBER’S DEFICIENCY | |
| | |
| Current liabilities: | |
| | |
| Accounts payable | |
$ | 33,433 | |
| Credit card payable | |
| 37,403 | |
| Deferred revenue | |
| 105,100 | |
| Total current liabilities and total liabilities | |
| 175,936 | |
| Commitments and contingencies | |
| | |
| | |
| | |
| Member’s Deficiency | |
| (43,035 | ) |
| Total liabilities and member’s deficiency | |
$ | 132,901 | |
See
accompanying notes to financial statements
DIGITIZEIQ,
LLC
Statement
of Operations
From
Inception (July 23, 2014) through December 31, 2014
| Revenue | |
$ | 876,699 | |
| Cost of revenue | |
| 706,153 | |
| Gross profit | |
| 170,546 | |
| Costs and expenses | |
| | |
| Selling, general and administrative | |
| 288,581 | |
| Total costs and expenses | |
| 288,581 | |
| Net loss | |
$ | (118,035 | ) |
See
accompanying notes to financial statements.
DIGITIZEIQ,
LLC
Statement
of Member’s Deficiency
From
Inception (July 23, 2014) through December 31, 2014
| Balance - July 23, 2014, inception | |
$ | - | |
| Member’s contribution | |
| 75,000 | |
| Net loss | |
| (118,035 | ) |
| Balance - December 31, 2014 | |
$ | (43,035 | ) |
See
accompanying notes to financial statements.
DIGITIZEIQ,
LLC
Statement
of Cash Flows
From
Inception (July 23, 2014) through December 31, 2014
| Operating activities | |
| | |
| Net loss | |
$ | (118,035 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | |
| Changes in operating assets and liabilities: | |
| | |
| Accounts receivable | |
| (57,800 | ) |
| Prepaid Expenses | |
| (1,896 | ) |
| Accounts payable and accrued expenses | |
| 33,433 | |
| Credit card payable | |
| 37,403 | |
| Deferred revenue | |
| 105,100 | |
| Net cash used in operating activities | |
| (1,795 | ) |
| Financing activities | |
| | |
| Member contribution | |
| 75,000 | |
| Net cash provided by financing activities | |
| 75,000 | |
| Net increase in cash and cash equivalents | |
| 73,205 | |
| Cash, beginning of period | |
| - | |
| Cash, end of period | |
$ | 73,205 | |
See
accompanying notes to financial statements
DIGITIZEIQ,
LLC
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
Business
description
DIGITIZEIQ,
LLC, is an Illinois limited liability company that was formed on July 23, 2014, and whose primary business operation is a full
service digital advertising agency specializing in lead generation and landing page optimization specifically designed for mass
tort class action lawsuits.
| 2 |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES |
Basis
of presentation
The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (“US GAP”).
Uses
of estimates in the presentation of financial statements
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period. Actual
results could differ from those estimates.
Cash
The
Company maintains cash balances at various financial institutions, certain of which are insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company’s accounts at the insured institutions may, at times, exceed the federally insured
limits. The Company has not experienced any losses in either the insured or uninsured accounts.
Accounts
receivable and allowance for doubtful accounts
Accounts
receivable are generally due upon receipt. The Company has a policy of reserving for uncollectible accounts based on their best
estimate of the amount of profitable credit losses in its existing accounts receivable. The Company extends credit to its customers
based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other
security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance
for potential bad debts if required.
The
Company determines whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates
the customers may have an inability to meet financial obligations. In these cases, the Company uses assumptions and judgment,
based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to
reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional
information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also
record a general allowance as necessary.
Direct
write-offs are taken in the period when the Company has exhausted their efforts to collect overdue and unpaid receivables or otherwise
evaluate other circumstances that indicate that the Company should abandon such efforts. The Company has determined that an allowance
for doubtful accounts is not required at December 31, 2014.
Deferred
revenue
The
Company generally requires prepayment of the initial contract amount in advance of services being performed. As such, the advance
payment is deferred as a current liability until the Company delivers the leads contracted. At that time revenue is recognized
and the deferred revenue liability is reduced.
Concentrations
of credit risk
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and
cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with high credit quality financial
institutions which at times may be in excess of the FDIC limit. The Company performs ongoing credit evaluations of its customers’
financial condition and, as a consequence, believes that its trade accounts receivable credit risk is limited.
Income
taxes
The
Company is a limited liability company and any income or loss is passed through to the tax returns of the member. As such, no
provision for income taxes is required.
Revenue
recognition
The
Company recognizes revenue in accordance with Accounting Standard Codification (ASC) 605-10 (previously Securities and Exchange
Commission Staff Accounting Bulletin No. 104, Revenue Recognition).
DIQ
generally requires prepayment of the initial contract amount, which will result in deferred revenue until DIQ delivers the leads
contracted for. Receivables will arise when DIQ, through agreement with its customer will deliver more leads than originally contracted
for.
The
Company generally requires prepayment of the initial contract amount in advance of services being performed. As such, the advance
payment is deferred as a current liability until the Company delivers the leads contracted. At that time revenue is recognized
and the deferred revenue liability is reduced.
Revenue
is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed
and collectability of the resulting receivable is reasonably assured. The Company’s revenues are derived from lead generation
on a cost per lead (CPL) and flat-fee basis.
| |
● |
Before
commencement of services, DIQ executes a service agreement with the client and generally commences lead generation when payment
is received. Revenue from customers on a CPL basis is recognized in the period the leads are delivered and accepted by the
client. |
| |
|
|
| |
● |
Revenue
from flat-fee services is based on a service provided for a specific length of time rather than a delivery of leads and is
recognized over the period of time the service is provided. |
Fair
value measurements
The
Company adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used
in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The
estimated fair value of certain financial instruments, including cash and cash equivalents, prepaid expenses, and accounts payable
and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature
of these instruments.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of observable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 - quoted prices in active markets for identical assets and liabilities
Level
2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 - inputs that re unobservable (for example cash flow modeling inputs based on assumptions)
Recent
accounting pronouncements
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies
that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting
pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on
its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash
flows when implemented.
Deferred
revenue at December 31, 2014 amounted to $105,100. Contracts with customers generally are for a thirty day period and the related
deferred revenue will be recognized as the leads are generated.
The
Company maintains an arrangement with its bank whereby it utilizes credit cards to pay the majority of its obligations. The bank
charges no interest on the outstanding credit card balance, which is required to be repaid at the end of each billing cycle. In
the event the payment is not made timely, the bank charges a fee equal to 2% of the outstanding balance. The Company’s credit
limit is approximately $500,000.
The
Company had a limited number of customers at December 31, 2014. The following summarizes our activity with our three principal
customers.
| | |
A | | |
B | | |
C | | |
Other | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 382,220 | | |
$ | 228,410 | | |
$ | 200,800 | | |
$ | 65,269 | | |
$ | 876,699 | |
| | |
| 43.6 | % | |
| 26.1 | % | |
| 22.9 | % | |
| 7.4 | % | |
| 100.0 | % |
| Accounts receivable | |
$ | - | | |
$ | - | | |
$ | 57,800 | | |
$ | - | | |
$ | 57,800 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deferred revenue | |
$ | - | | |
$ | 105,100 | | |
$ | - | | |
$ | - | | |
$ | 105,100 | |
The
Company has evaluated events occurring subsequent to December 31, 2014 through March 8, 2016, the date that these financial statements
were available to be issued.
Effective
October 12, 2015, KSIX Media Holdings, Inc., a Nevada corporation (“KSIX”), executed and entered into an Agreement
for the Exchange of Common Stock (the “Agreement”) with DIQ and its sole owner. Upon the execution of this Agreement,
DIQ became a wholly-owned subsidiary of KSIX.
