0001607062-16-000854.txt : 20160519 0001607062-16-000854.hdr.sgml : 20160519 20160519135701 ACCESSION NUMBER: 0001607062-16-000854 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 73 CONFORMED PERIOD OF REPORT: 20160331 FILED AS OF DATE: 20160519 DATE AS OF CHANGE: 20160519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Kiwibox.Com, Inc. CENTRAL INDEX KEY: 0000838796 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 752228828 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-32485 FILM NUMBER: 161662678 BUSINESS ADDRESS: STREET 1: 401 ROUTE 24 CITY: CHESTER STATE: NJ ZIP: 07930 BUSINESS PHONE: 9088792722 MAIL ADDRESS: STREET 1: 401 ROUTE 24 CITY: CHESTER STATE: NJ ZIP: 07930 FORMER COMPANY: FORMER CONFORMED NAME: MAGNITUDE INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19990210 FORMER COMPANY: FORMER CONFORMED NAME: PROFORMIX SYSTEMS INC DATE OF NAME CHANGE: 19970801 FORMER COMPANY: FORMER CONFORMED NAME: WHITESTONE INDUSTRIES INC DATE OF NAME CHANGE: 19930429 10-Q 1 kiwb033116form10q.htm FORM 10-Q

 

FORM 10-Q

 

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, DC 20549

 

 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 31, 2016

 

OR

 

☐  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 33-20432

 

KIWIBOX.COM, INC.

Formerly known as Magnitude Information Systems, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware 75-2228828
(State or other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)  

 

330 West 42ND St. Suite 3210 New York, NY 10036 (212) 239-8210
(Address of Principal Executive Office)  (Zip Code) (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  ☒ 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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  ☐   Accelerated filer  ☐   Non-accelerated filer  ☐   Smaller reporting company  ☒

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):  Yes  ☐  No  ☒

 

 The number of shares of Registrant’s Common Stock, $0.0001 par value, outstanding as of May 15, 2016, was 688,493,060 shares.

   

1 
 

KIWIBOX.COM, INC.

 

INDEX 

 

  Page No.
PART 1 - FINANCIAL INFORMATION
   
Item 1. Financial Statements 3
   
Balance Sheets - March 31, 2016 (unaudited) and December 31, 2015 3
   
Statements of Operations and Comprehensive Income (Loss) - Three months ended March 31, 2016 and 2015 (unaudited) 4
   
Statements of Cash Flows - Three months ended March 31, 2016 and 2015 (unaudited) 5
   
Notes to Financial Statements 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
   
Item 4. Control and Procedures 25
   
PART II - OTHER INFORMATION 26
   
Item 1. Legal Proceedings 26
   
Item 1A. Risk Factors 26
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
   
Item 3. Defaults Upon Senior Securities 26
   
Item 4T. Submission of Matters to a Vote of Security Holders 26
   
Item 5. Other Information 26
   
Item 6. Exhibits 27
   
SIGNATURES 28

 

2 
 

PART I - Item 1 Financial Statements

Kiwibox.Com, Inc.

Balance Sheets

 

   

March 31,

2016

 

December 31,

2015

    (unaudited)    
Assets                
Current Assets                
Cash and cash equivalents   $ 795       -  
Accounts receivables - affiliate, net of allowance for doubtful accounts of $0     54,236       51,898  
Prepaid exoenses and other current assets     173,878       229,038  
Total Current Assets     228,909       280,936  
Property and equipment, net of accumulated depreciation of $114,675 and $114,225, respectively     2,596       3,046  
Website development costs, net of accumulated amortization of $254,264 and $254,264, respectively     -       -  
Other assets     12,007       12,007  
Total Assets   $ 243,512     $ 295,989  
                 
Liabilities and Stockholders’ Equity (Impairment)                
Current Liabilities                
Accounts payable     283,337       284,912  
Accrued expenses     4,953,240       4,634,763  
Due to related parties     146,115       116,474  
Obligations to be settled in stock     286,318       284,368  
Dividends payable     799,734       786,919  
Loans and notes payable - other     100,000       100,000  
Loans and notes payable - related parties     340,000       340,000  
Convertible notes payable - related parties     12,583,700       12,353,700  
Current maturities of long-term debt     33,529       33,529  
Liability for derivative conversion feature - related parties     17,220,588       16,596,381  
Total Current Liabilities     36,742,561       35,531,046  
                 
Stockholders’ Equity (Impairment)                
Preferred Stock, $0.001 par value, non-voting, 3,000,000 shares authorized; 85,890 shares issued and outstanding     86       86  
Common Stock, $0.0001 par value, 1,400,000,000 shares authoirzed; issued and outstanding 688,493,060 and 686,093,060 shares respectively     68,847       68,607  
Additional paid-in capital     52,733,065        52,728,745  
Accumulated deficit     (89,301,047 )      (88,032,495
Total Stockholders’ Equity (Impairment)     (36,499,049 )      (35,235,057 )
Total Liabilities and Stockholders’ Equity (Impairment)   $ 243,512     $  295,989  

 

The accompanying notes are an integral part of the financial statements.

 

3 
 

 Kiwibox.Com, Inc.

Statements of Operations and Comprehensive Income (Loss) (Unaudited)

 

   Three Months Ended
March 31,
   2016  2015
Net Sales          
Advertising - affiliate  $2,337   $8,955 
Other   —      —   
Total Net Sales   2,337    8,955 
Cost of Goods Sold          
Website hosting expenses   1,650    2,833 
Total Cost of Goods Sold   1,650    2,833 
 Gross Profit (Loss)   687    6,122 
Selling expenses   135,663    150,741 
Stock-based compensation   2,280    —   
General and administrative expenses   173,644    179,592 
 Loss From Operations   (310,900)   (324,211)
 Other Income (Expense)          
Miscellaneous income/(expense)   (960)   —   
Interest expense   (319,668)   (286,709)
Interest expense-derivative conversion features   (563,489)   (562,130)
Change in fair value – derivative liabilities   (60,719)   136,738 
 Total Other Income (Expense)   (944,836)   (712,101)
Loss Before Benefit (Provision) for Income Taxes   (1,255,736)   (1,036,312)
Benefit (Provision) for Income Taxes   —      —   
 Net Loss  $(1,255,736)  $(1,036,312)
 Dividends on Preferred Shares   (12,816)   (12,816)
 Net Loss Applicable to Common Shareholders, basic and diluted  $(1,268,552)  $(1,049,128)
 Net Loss Per Common Share, basic and diluted  $(0.002)  $(0.002)
 Weighted Average of Common Shares Outstanding   685,275,478    683,693,060 

 

 

The accompanying notes are an integral part of the financial statements.

4 
 

 

Kiwibox.Com, Inc.

Statements of Cash Flows (Unaudited)

 

      Three Months Ended
March 31,
      2016     2015
 Cash Flows From Operating Activities                   
 Net Loss       $(1,255,736)      $(1,036,312)
Adjustments to Reconcile Net Loss to Net Cash Used by Operations                   
Depreciation and amortization
        450        1,249 
Securities issued for services        2,280        —   
Loss on debt extinguishment        960        —   
Change in fair value – derivative liabilities        60,719              (136,738) 
Intrinsic value of  beneficial conversion feature        563,489        562,130 
 Decreases (Increases) in Assets                   
Accounts receivable - affiliates
        

(2,338)

        (8,955)
Due from related party       —                        (74) 
Prepaid expenses        55,160        60,654 
                    
Increases (Decreases) in Liabilities                   
Bank overdraft
        —          —   
Liabilities to be settled in stock
        3,270        4,290 
Accounts payable
        (2,576)       (13,031)
Accrued expenses        318,476        284,650 
 Net Cash Used by Operating Activities        (255,846)       (282,137)
                    
 Cash Flows From Investing Activities                   
Cash proceeds (outlay) – other assets        —          4,972 
 Purchases of property and equipment        —          

 

(999)

 
 Net Cash Provided by Investing Activities        —          3,973 
                    
Cash Flows From Financing Activities                   
Proceeds from loans/notes payable        230,000        275,000 
Net  proceeds (repayments) to related parties        26,641        4,060 
 Net Cash Provided by Financing Activities        256,641        279,060 
                    
 Net Increase (Decrease) in Cash        795        896 
                    
Cash at beginning of period        —          299 
Cash at end of period       $795       $           1,195 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                   
 Interest Paid       $—         $—   
 Income Taxes Paid       $31       $300 

 

The accompanying notes are an integral part of the financial statements.

5 
 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:   
    
Three Months Ended March 31, 2016   
Settlement of obligations with common stock  $2,280 
Quarter to date dividend accruals  $12,816 
      
Three Months Ended March 31, 2015     
Quarter to date dividend accruals  $12,816 

 

The accompanying notes are an integral part of the financial statements.

 

6 
 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The condensed balance sheet at December 31, 2015 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed financial statements should be read in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2015.  

 

Nature of Organization

 

Kiwibox.Com, Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc. On November 18, 1998, the Company changed its name to Magnitude Information Systems, Inc. On December 31, 2009, the Company changed its name to Kiwibox.com, Inc.

 

On August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc.

 

The Company, Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox Media, Inc. being a wholly owned subsidiary. On December 31, 2009, the two subsidiaries, Magnitude, Inc. and Kiwibox Media, Inc. merged into the Company.

 

On September 30, 2011, Kiwibox.com acquired the German based social network Kwick! Community GmbH & Co. KG (“Kwick”), a wholly-owned subsidiary.

 

On September 24, 2013, Kwick Community GmbH & Co. KG signed an equity purchase agreement to acquire Interscholz Internet Services GmbH and Co KG, a German limited liability company, and all the equity of its general partner, Interscholz Beteiligungs GmbH. As of the balance sheet date, and pursuant to the terms of the contract, since full payment was not made for the purchase price of Interscholz Internet Services GmbH & Co KG, ownership does not transfer to Kwick Community GmbH & Co KG. Full payment must be made for ownership to transfer to Kwick. As of December 31, 2013 only $515,037 of the total purchase price of $1,352,000 was made. On December 9, 2013 the acquisition of Interscholz Internet Services GmbH and Co KG by Kwick was rescinded due to non compliance with the terms of the addendum to the contract, calling for the full purchase price to have been paid. However, Kwick did acquire all the equity of the general partner, Interscholz Beteiligungs GmbH, as full payment was not a requirement for transfer of ownership of that entity.

 

On December 10, 2013, the Company signed an Equity Purchase Agreement with Marcus Winkler to sell to him eighty (80%) percent of the equity of its German subsidiary, KWICK! Community GmbH & Co. KG, a German limited liability company, and Kwick! Beteiligungs GmbH, its general partner (collectively, “Kwick”). The sale was approved on December 18, 2013. Due to the fact that the parent company ceased to have a controlling financial interest in Kwick, the subsidiary was deconsolidated from that date forward. On December 30, 2013 a total of 15% of the remaining 20% of the equity of Kwick was transferred to the Chief Executive Officer of Kwick (the “Kwick CEO”), in consideration for the Kwick CEO pledging to the bank 5,000 Euros as collateral, on behalf of Kiwibox, for bank overdrafts incurred by “Kwick’s” wholly-owned subsidiary Interscholz Beteiligungs GmbH, as general partner (managing partner) for Interscholz Internet Services GmbH & Co KG; as it is the duty of the general/managing partner to secure liquidity for the partnership. Since Kiwibox owned 20% of Kwick they were required, under German law, as managing partner of Interscholz Beteiligungs GmbH to secure liquidity for

7 
 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

 

Interscholz Internet Services GmbH & Co KG. Therefore, 15% of Kiwibox’s 20% of Kwick was given to the Kwick CEO in exchange for the CEO pledging the necessary collateral. In addition to the collateral given by the Kwick CEO, as new 15% shareholder of Kwick, the Kwick CEO also agreed to keep the Interscholz Beteiligungs GmbH business going. This transfer was unanimously approved with written consent of the Board of Directors. Since the fair value of Kiwibox’s interest in Kwick is zero, this transaction had no material impact on the financial statements.

 

Cash and Cash Equivalents

 

The Company accounts for cash and other highly liquid investments with original maturities of three months or less as cash and cash equivalents.

 

Depreciation and Amortization

 

Property and equipment are recorded at cost. Depreciation on equipment, furniture and fixtures and leasehold improvements is computed on the straight-line method over the estimated useful lives of such assets between 3-10 years, or lease term for leasehold improvements, if for a shorter period. Maintenance and repairs are charged to operations as incurred. Software costs are amortized using the straight line method and amortized over their estimated useful lives. Amortization begins when the related software is ready for its intended use in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, Subsequent Measurement.

 

Advertising Costs

 

Advertising costs are charged to operations when incurred. Advertising expense was $1,500 and $1,000 for the three months ended March 31, 2016 and 2015, respectively.

 

Evaluation of Long Lived Assets

 

Long-lived assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated undiscounted future net cash flows of the related long-lived asset.

 

Any impairment of the Company’s internally-developed software is recognized and measured in accordance with the provisions of ASC 360-10-35, Intangibles-Goodwill and Other, Internal-Use Software, Subsequent Measurement, which requires that assets be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs related to computer software being developed or currently in use indicating that the carrying amount may not be recoverable:

 

a.Internal-use computer software is not expected to provide substantive service potential.
b.A significant change occurs in the extent or manner in which the software is used or is expected to be used.
c.A significant change is made or will be made to the software program.
d.Costs of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify the software.

8 
 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

 

Fair Value Measurements

 

The Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Under ASC 820, a framework was established for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Company accounted for certain convertible debentures issued in the year ended December 31, 2014 and the three months ended March 31, 2015 as derivative liabilities required to be bifurcated from the host contract in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares (see Note 13).

 

Securities Issued for Services

 

The Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair value method. For non-employees, the fair market value of the Company’s stock on the date of stock issuance or option/grant is used. The Company has determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model. The Company has adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant).

 

Reclassification of Certain Securities Under ASC 815-15

 

Pursuant to ASC 815-15, “Contracts in Entity’s own Equity”, if a company has more than one contract subject to this Issue, and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions of contracts, should be reclassified. The Company's method for reclassification of such contracts is reclassification of contracts with the latest maturity date first.

 

Capitalization of Software /Website development costs

 

The Company capitalizes outside-contracted development work in accordance with the guidelines published under ASC 350-50, “Website Development Costs”. Under ASC 350-50, costs incurred during the planning stage are expensed, while costs relating to software used to operate a web site or for developing initial graphics should be accounted for under ASC 350-50, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, unless a plan exists or is being developed to market the software externally. Under ASC 350-50, internal and external costs incurred to develop internal-use computer software during the application development stage should be capitalized. Costs to develop or obtain software that allows for access or conversion of old data by new systems should also be capitalized, excluding training costs.

 

Fees incurred for web site hosting, which involve the payment of a specified, periodic fee to an Internet service provider in return for hosting the web site on its server(s) connected to the Internet, are expensed over the period of benefit, and included in cost of sales in the accompanying financial statements.

 

A total of $0 and $0 was capitalized for web-site development work during the three months ended March 31, 2016 and 2015, respectively.

9 
 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

 

Income Taxes

 

The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in the Company’s income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset.

 

Net Loss Per Share

 

Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. Such common stock equivalents totaled 86,441,799 common shares at March 31, 2016, comprised of 7,000,000 shares issuable upon exercise of stock purchase warrants, 4,500,000 shares issuable upon exercise of stock options, 729,537 shares exercisable upon conversion of convertible preferred shares, and 74,212,262 shares potentially issuable upon conversion of convertible debt. Such debt and the related accrued interest, is presently convertible at the option of four holders at a conversion price of 50% of the ten day trailing market price. The total principal due under these notes of $12,583,700 would yield in excess of 24.5 billion shares if fully converted, however, the respective notes, all of which were issued to these four investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion, may in the aggregate not exceed a number that would increase the total share holdings beneficially owned by such investor to a level above 9.99%. At the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the aforementioned conversions or exercises, as the case may be, are at the option of the holders.

 

Revenue Recognition

 

The Company’s revenue is derived from advertising on the Kiwibox.Com or, formerly, Kwick websites. Most contracts require the Company to deliver the customer impressions, click-throughs or new customers, or some combination thereof. Accordingly, advertising revenue is estimated and recognized for the period in which customer impressions, click through or new customers are delivered. Licensing or hosting revenue consists of an annual contract with clients to provide web-site hosting and assistance.

 

Use of Estimates

 

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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

10 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

2. GOING CONCERN

 

The ability of the Company to continue its operations is dependent on increasing sales and obtaining additional capital and financing. Our revenues during the foreseeable future are insufficient to finance our business and we are entirely dependent on the willingness of existing investors to continue supporting the Company with working capital loans and equity investments, and our ability to find new investors should the financial support from existing investors prove to be insufficient. If we were unable to obtain a steady flow of new debt or equity-based working capital we would be forced to cease operations. In their report for the fiscal year ended December 31, 2015, our auditors had expressed an opinion that, as a result of the above, there was substantial doubt regarding our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern. Management’s plans are to continue seeking equity and debt capital until cash flow from operations cover funding needs.

 

3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK

 

The Company maintains cash balances in a financial institution which is insured by the Federal Deposit Insurance Corporation up to $250,000. Balances in these accounts may, at times, exceed the federally insured limits. At March 31, 2016, cash balances in bank accounts did not exceed this limit. The Company provides credit in the normal course of business to customers located throughout the U.S. and overseas. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

 

 

4. PREPAID EXPENSES

Prepaid expenses consist of the following at:

 

    March 31, 2016    December 31, 2015 
          Consulting fees  $165,000   $220,000 
          Business insurance   8,878    9,038 
   $173,878   $229,038 

 

5. PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following at:

 

   March 31, 2016  December 31, 2015
          Furniture  $15,040   $15,040 
          Leasehold Improvements   24,130    24,130 
          Equipment   78,101    78,101 
    117,271    117,271 
          Less accumulated depreciation   114,675    114,225 
          Total  $2,596   $3,046 

 

Depreciation expense charged to operations was $450 and $1,249 in the first three months of 2016 and 2015, respectively.

 

6. INTANGIBLE ASSETS

 

Intangible assets consisted of software for website development costs as follows:

 

   March 31, 2016  December 31, 2015
        Website development costs  $254,264   $254,264 
        Less accumulated amortization   254,264    254,264 
        Total  $0   $0 

 

Amortization expense for the three months ended March 31, 2016 and 2015 was $0 and $0, respectively.

 

11 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

 

7. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

 

On December 10, 2013, the company signed an equity purchase agreement with Marcus Winkler to sell to him eighty (80%) percent of the equity of its German subsidiary, Kwick. Pursuant to the terms of the agreement, the purchaser paid 36,000 Euros as the purchase price and the company was required to obtain shareholder approval of the sale as required under applicable Delaware Law. The majority shareholder approval was obtained on December 18, 2013. In addition, the Company and Mr. Winkler signed a Lock-Up and Standstill Agreement pursuant to the general terms of which the Company agreed not to participate in the management, operations or finances of Kwick, which shall be exclusively managed and under control of the purchaser. Accordingly, the Company’s minority ownership position shall be subject, in all respects, to the exclusive control of the purchaser. Mr. Winkler also has investment and voting control over Kreuzfeld Ltd., a major creditor of the company, which holds a Class AA convertible promissory note with an outstanding balance (including accrued interest) of $5,825,613 as of March 31, 2016. On June 22, 2015, a Class A Senior Revolving Promissory Note with a principal amount of $340,000 was assigned from Ulrich Schuerch to Mr. Winkler.

 

On December 30, 2013 a total of 15% of the remaining 20% of the equity of Kwick was transferred to the Chief Executive Officer of Kwick (the “Kwick CEO”), in consideration for the Kwick CEO pledging to the bank 5,000 Euros as collateral, on behalf of Kiwibox, for bank overdrafts incurred by “Kwick’s” wholly-owned subsidiary Interscholz Beteiligungs GmbH, as general partner (managing partner) for Interscholz Internet Services GmbH & Co KG: as it is the duty of the general partner/managing partner to secure liquidity for the partnership. Since Kiwibox owned 20% of Kwick they were required, under German law, as managing partner of Interscholz Beteiligungs GmbH to secure liquidity for Interscholz Internet Services GmbH & Co KG. Therefore, 15% of Kiwibox’s 20% was given to the Kwick CEO in exchange for the CEO pledging the necessary collateral. In addition to the collateral given by the Kwick CEO, as new 15% shareholder of Kwick, the Kwick CEO also agreed to keep the Interscholz Beteiligungs GmbH business going. This transfer was unanimously approved with written consent of the Board of Directors. Since the fair value of Kiwibox’s interest in Kwick is zero, this transaction had no material impact on the financial statements.

 

Due to the significant reductions in fair value of this reporting unit that were considered other than temporary, and impairment of the related goodwill, the carrying value of this cost method investment was zero at December 31, 2015 and March 31, 2016.

 

8. ACCRUED EXPENSES

 

Accrued expenses consisted of the following at:

 

   March 31, 2106  December 31, 2015
       Accrued interest  $4,762,846   $4,443,178 
       Accrued payroll, payroll taxes and commissions   45,733    41,541 
       Accrued professional fees   110,000    114,900 
       Accrued rent/deferred rent obligation   10,726    11,209 
       Miscellaneous accruals   23,935    23,935 
       Total  $4,953,240   $4,634,763 

 

12 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

 

9. OBLIGATIONS TO BE SETTLED IN STOCK

 

Obligations to be settled in stock consisted of the following at:

 

   March 31, 2016  December 31, 2015
Obligation for warrants granted for compensation  $100,000   $100,000 
600,000 common shares issuable to a consultant who was a director of the company, for services
rendered.
   36,000    36,000 
300,000 (2016) and 1,200,000 (2015) common shares, and 2,900,000 (2016) and 2,900,000 (2015) stock options issuable to two officers of the Company pursuant to their respective employment Agreements   57,158    58,178 
8,400,000 (2016) and 8,100,000 (2015) stock options issuable to one director who also serves as the Company’s general counsel
   83,160    80,190 
1,000,000 warrants granted on the Picunity.de assest Purchase   10,000    10,000 
   $286,318   $284,368 

 

 

10. LOANS PAYABLE

 

The Company (formerly Magnitude, Inc.) had borrowings under short term loan agreements with the following terms and conditions at March 31, 2016 and December 31, 2015:

 

 

On December 4, 1996, the company (formerly Magnitude, Inc.) repurchased 500,000 shares of its common stock and retired same against issuance of a promissory note maturing twelve months thereafter accruing interest at 5% per annum and due December 4, 1998. This note is overdue as of September 30, 2005 and no demand for payment has been made.

  $75,000 
Total  $75,000 

 

13 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

 

11. NOTES PAYABLE

 

   March 31,  December 31,
   2016  2015
Balance of non-converted notes outstanding. Attempts to locate the holder of this note, to settle this liability, have been unsuccessful.  $25,000   $25,000 
From September 2008 through March 2016 five creditors loaned the Company funds under the terms of the convertible notes issued, as modified in March 2009 and July 2010 and April 2011 and August 2012(see Note 13).   12,583,700    12,353,700 
In January 2011 and again in February 2011, a shareholder loaned the Company $50,000 under a demand note at 10%. In 2010, this shareholder loaned the Company $240,000 under a demand note at 10%. On June 22, 2015 this shareholder assigned all of his right, title and interest in this note to Mr. Marcus Winkler. Mr. Winkler has an investment and voting control over two of the company’s lenders.
   

340,000

    

340,000

 
Total  $12,948,700   $12,718,700 

 

 

 

12. LONG-TERM DEBT

 

Long-term debt as of March 31, 2016 and December 31, 2015 is comprised of the following:

 

 Discounted present value of a non-interest bearing $70,000 settlement with a former investor of Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997. The imputed interest rate used to discount the note is 8% per annum. This obligation is in default.  $33,529 
Total   33,529 
Less current maturities   33,529 
Long-term debt, net of current maturities  $—   

 

14 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

 

13. DERIVATIVE CONVERSION FEATURES  

 

 

On July 27, 2010, the Company issued two Class A Senior Convertible Revolving Promissory Notes (“Class A Notes”), one to Cambridge Services, Inc., in the principal amount of $683,996, consolidating the series of loans (and related accrued interest) made to the Company since June 26, 2009, and one to Discover Advisory Company, in the principal amount of $1,160,984, consolidating the series of loans (and related accrued interest) made to the Company since September 19, 2008 and including advances through September 30, 2010. Each of these promissory notes are due on demand, accrue interest at the rate of 10%, per annum, are convertible (including accrued interest) at the option of each lender into Common Stock of the Company at 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event less than $0.001 (the "Conversion Price"). Both promissory notes contain conversion caps, limiting conversions under these notes to a maximum beneficial ownership position of Company common stock to 9.99% for each lender. Each of these notes contains Company covenants, requiring the lenders’ prior written consent in order for the Company to merge, issue any common or preferred stock or any convertible debt instruments, declare a stock split or dividends, increase any compensation to its officers or directors by more than five (5%) during any calendar year. During the three months ended March 31, 2016, no debt was converted. During the three months ended March 31, 2016, no debt was converted.

 

The Company renegotiated certain outstanding promissory notes with its four major creditors, Discover Advisory Company of the Bahamas (“DAC”), Kreuzfeld Ltd. of Switzerland (“Kreuzfeld”), Cambridge Services, Inc. of Panama (“CSI”) and Vermoegensverwaltungs-Gesellschaft Zurich LTD of Switzerland (“VGZ”). As of August 1, 2012, the Company authorized the issue of a new series of corporate notes, the Class AA Senior Secured Convertible Revolving Promissory Notes, dated as of August 1, 2012 (the New Note(s)”) and issued New Notes: (1) to DAC, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated July 27, 2010, in the original principal amount of $1,080,984, now cancelled, which had an outstanding balance due (including accrued interest) of $5,915,726 as of December 31, 2015 and $6,027,284 at March 31, 2016; (2) to Kreuzfeld, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 16, 2011, in the original principal amount of $2,000,000, now cancelled, which had an outstanding balance due (including accrued interest) of $5,490,657 at December 31, 2015 and $5,825,613 at March 31, 2016; (3) to CSI, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated August 1, 2011, in the original principal amount of $1,303,996, now cancelled, with an outstanding balance due (including accrued interest) of $4,040,407 as of December 31, 2015, and $4,115,914 at March 31, 2016 and; (4) to VGZ, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 30, 2010, in the original principal amount of $2,000,000, now cancelled, with an outstanding balance due (including accrued interest) of $1,109,550 as of December 31, 2015 and $1,128,744 at March 31, 2016. All of the New Notes accrue interest at the rate of 10%, are convertible into common shares at the conversion rate equal to 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event less than $0.001, and are due on demand.. Pursuant to an Equity and Stock Pledge Agreement, also negotiated and executed as of August 1, 2012, the repayment of the outstanding indebtedness of the New Notes is secured by all of the limited partnership interests of the Company’s partly-owned (now deconsolidated) German subsidiary, KWICK! Community GmbH & Co. KG, a private German limited partnership (“KG”), and all of its shares of the sole general partner of KG, KWICK! Community Beteiligungs GmbH.

 

15 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

13. DERIVATIVE CONVERSION FEATURES  (continued)

 

The Company accounted for the conversion features underlying these convertible debentures in accordance with ASC 815-40, Contract in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares. The Company determined the value of the derivate conversion features of new debentures issued to these holders plus accrued interest during the three months ended March 31, 2016 under these terms at the relevant commitment dates to be $563,489 utilizing a Black-Scholes valuation model. The change in fair value of the liability for the conversion feature resulted in expense of $60,719 for the three months ended March 31, 2016, which is included in Other Income (Expense) in the accompanying financial statements. The fair value of these derivative conversion features was determined to be $17,220,588 at March 31, 2016.

 

 

14. COMMITMENTS AND CONTINGENCIES

 

We maintain offices for our operations at 330 W. 42th Street, New York, New York 10036, for approximately 990 square feet. This lease requires initial minimum monthly rentals of $3,833 plus tenants’ share of utility/cam/property tax charges which average approximately $291 per month. During 2013 the Company successfully negotiated a 5 year lease, with future minimum rentals as follows:

 

 2016    37,089 
 2017    50,768 
 2018    47,847 

 

In May 2010 the Company negotiated a lease of an apartment in New York City for the CEO in order to reduce travel costs. The lease was for 12 months at $2,775 per month through May 31, 2011. In May 2011 the lease was extended through August 31, 2011 at the rate of $2,837. In August 2011 the lease was extended through December 31, 2011 at the rate of $2,837 per month. In December 2011 the lease was again extended through May 31, 2012 with no change in the base rent. In May 2012 the lease was extended through December 31, 2012 at a monthly rate of $2,943, this lease was then extended through December 31, 2013 at the same terms. In December 2013 the lease was extended through May 31, 2014. This lease was again extended to May 31, 2016 in March of 2015.

 

Our total rent expenses were $18,400 and $21,667 during the three months ended March 31, 2016 and 2015, respectively.

 

The Company is party to a consulting agreement with its Chief Executive Officer. During the fourth quarter of 2013 the terms of this agreement were modified. The new terms called for an increased monthly consulting fee to $18,333, from $16,667 in 2011-2013, effective January 1, 2014 through December 31, 2014. During the fourth quarter of 2014 the terms of this agreement were again modified. The new terms have the same monthly consulting fee as 2013, $18,333 a month, or $220,000 per year, however; the prepayment provision called for the entire amount payable in advance and as soon as practicable following the execution and delivery of this restated agreement. Payment for the period January 1, 2015 through December 31, 2015 was made on November 20, 2014 in accordance with the terms of this new agreement. This agreement was extended thru December 31, 2016. Payment for the period January 1, 2016 through December 31, 2016 was made on December 1, 2015 in accordance with the terms of this extended agreement. There were no changes to the stock compensation portion of any earlier agreement.

 

In the three months ended March 31, 2016 and March 31, 2015 this officer was granted 300,000 shares.

 

16 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

15. RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2016, the Company sold advertising space on its Kiwibox.com website to Kwick totaling $2,337, which is included in the $54,236 balance due from Kwick at March 31, 2016. Kwick is majority-owned by Mr. Winkler, who in turn is a related party of the Company (see Note 7).

 

During the three months ended March 31, 2016 and 2015 one outside director of the Company who also serves as the Company’s general and securities counsel, was paid an aggregate $15,375 and $12,375 respectively, for legal services. The director also received 300,000 common stock options during the three month periods ending March 31, 2016 and 2015, valued at $2,970 and $2,970 respectively.

 

During the three months ended March 31, 2016 and 2015 we incurred aggregate expenses of $117,445   and $110,283, respectively, to companies controlled by the Chief Executive Officer, for website hosting, website development and technical advisory services, server farm installations and IT equipment purchases. The officer also earned 100,000 common shares per month during the three months ended March 31, 2016 and 2015 under a consulting agreement, valued at $300 and $330 respectively. The officer also received $220,000 in December 2015 for prepaid consulting fees toward 2016 under the terms of a consulting agreement.

 

Through March 31, 2016, approximately 10% of the voting stock was beneficially held by Discovery Advisory Company, located in the Bahamas, and Cambridge Services Inc., Kreuzfeld, LTD and Vermoegensverwaltungs-Gesellschaft Zurich LTD. (VGZ) of Switzerland. Discovery Advisory Company, Cambridge Services Inc., Kreuzfeld, LTD and VGZ are major creditors, having advanced operating capital against issuance by the Company of convertible promissory notes during 2016 and 2015.

 

During the three months ended March 31, 2016, Kreuzfeld, LTD advanced an additional $230,000. At March 31, 2016, $4,451,722 and $3,080,060 of such notes were outstanding and owed to Discovery Advisory Company and Cambridge Services Inc, respectively and $4,279,959 and $771,958 owed to Kreuzfeld, Ltd. and VGZ, respectively.

 

16. FAIR VALUE

 

Some of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables.

 

Effective July 1, 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance supersedes all other accounting pronouncements that require or permit fair value measurements. The Company accounted for the conversion features underlying certain convertible debentures in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares.

 

Effective July 1, 2009, the Company adopted ASC 820-10-55-23A, Scope Application to Certain Non-Financial Assets and Certain Non-Financial Liabilities, delaying application for non-financial assets and non-financial liabilities as permitted. ASC 820 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

 

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange- traded securities and exchange-based derivatives.  

 

17 
 

 

Kiwibox.Com, Inc.

Notes to Financial Statements

 

16. FAIR VALUE (Continued)

 

Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

 

Level 3 — unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently- traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models. The company values the conversion liabilities using the Black- Scholes model and the assumptions are updated using independent data such as the risk free rate, volatility and expected life for each valuation date based on changes over time.

 

For the three months ending March 31, 2016 and 2015, the fair value of the embedded conversion liabilities was determined using the Black-Scholes model calculating fair value based on the conversion discount as well as the term and short-term bond rate. During the three months ending March 31, 2016 the following assumptions were used: (1) conversion discounts of 50%; (2) a look back period of 10 days (3) bond rates of 0.17% to 0.29% and (4) volatility range of 55% to 341%.

Fluctuation in value is largely based on the change in the daily share price accompanied by the conversion discount. The change in volatility has the greater affect on the conversion liability during each reporting period, as higher volatility levels will yield larger values.

 

The following table reconciles, for the three months ended March 31, 2016, the beginning and ending balance for financial instruments that are recognized at fair value in the consolidated financial statements:

 

Conversion Liability at January 1, 2016  $16,596,380 
Value of beneficial conversion features of new bedentures   563,489 
Change in value of beneficial conversion features during period   60,719 
Conversion Liability at March 31, 2016  $17,220,588 

 

The fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for the calculated value. The Company recognizes interest expense for the recognition of the conversion liability.

 

17. SUBSEQUENT EVENTS

 

During April 2016 and through May 16, 2016 we received $160,000 of working capital from accredited investors, which are covered by convertible promissory notes.

 

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18. RECENTLY ISSUED AND NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB voted to delay the effective date of ASU 2014-09 by one year to the first quarter of 2018 to provide companies sufficient time to implement the standards. Early adoption will be permitted, but not before the first quarter of 2017. Adoption can occur using one of two prescribed transition methods. In March and April 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” and ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” which provide supplemental adoption guidance and clarification to ASC 2014-09. ASU 2016-08 and ASU 2016-10 must be adopted concurrently with the adoption of ASU 2014-09. The Company is currently evaluating the impact of these new standards.

 

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation - Stock Compensation. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. The Company adopted the provisions of this standard, but it did not have a material effect on its results of operations.

 

On August 2014, FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to continue as a Going Concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position or results of operations.

 

In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides clarification on whether a cloud computing arrangement includes a software license. If a software license is included, the customer should account for the license consistent with its accounting of other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract. This ASU is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those years. The Company adopted the provisions of this standard, but it did not have a material effect on its results of operations.

 

During February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”). The standard requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new standard.

 

In March 2016, FASB issued ASU No. 2016-09, “Improvements to Employee Share-based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the standard and the impact on its consolidated financial statements and footnote disclosures.

 

We have reviewed all FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

 

Management does not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.

 

19 
 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

CAUTIONARY STATEMENT PURSUANT TO "SAFE HARBOR" PROVISIONS OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934

 

The information in this annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their businesses so long as they identify these statements as forward looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than those statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

 

The following discussion and analysis should be read in conjunction with the consolidated financial statements of Kiwibox.Com, Inc., contained herein and in the Company’s annual report for the year ended December 31, 2015 as filed on Form 10-K. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

 

Description of Business

 

Overview

 

On December 31, 2009 Magnitude Information Systems, Inc. changed its name to Kiwibox.Com, Inc.

 

We own and operate “Kiwibox.com”, a social networking website. Initially launched in 1999, Kiwibox.com is an online social networking community. Kiwibox has a regional-based advertising-system that allows target-group-optimized ads for advertisers and sponsors.

 

Kiwibox Operations

 

Kiwibox.com is a social network for young adults all around the world for web based - and mobile usage. A community to find new friends and to meet new people online and in the real world. Kiwibox continues to follow the mobile trend by updating its mobile applications to keep members engaged across its multiple platforms. Unlike traditional social networking sites such as MySpace and Facebook, Kiwibox combines "magazine" content and social networking technology in its website, creating attractive topics for its membership to peruse and enjoy. Kiwibox provides advertisers with a superior, worry-free advertising platform with Profile targeted technology to reach Web browser based and mobile Apps Customers.

 

20 
 

 

The Company has successfully integrated Pixunity, a photo-sharing application, to the US market and will continue to add enhancement features throughout the year. At the same time we continue to increase our market presence. Our promotional teams, both inside and outside of New York City, continue to develop partnerships with event organizers and businesses along the West Coast of the United States and plan further expansion of these types of market alliances throughout 2016.

 

Our operating expenses, not including stock-based compensation, are at a level of approximately $103,000 per month. (see sections “Loans and Notes Payable”).

 

Kiwibox shall continue to rely upon its advertising agreement with Triple Double U (”TDU”), an exclusive German online advertising agency, which agreements have been negotiated by our former subsidiary, Germany-based Kwick, for the Kiwibox network for web and mobile advertisements.

 

Overall, we have equipped our entire Kiwibox.com website with the newest state-of-the-art advertising features which enable sponsors to self-direct their message to specific target audiences based on gender, age, geographic region, education, and interests. Included in this array of features is our “search and be found” function, incorporating Search-Engine optimization with privacy options that improves search results.  We focused our developed in 2013 and further enhanced during 2014, 2015 and 2016 to facilitate friends’ searches and establish networks of users on a global basis.

 

Potential Revenue Streams and Marketing Strategy

 

Currently we generate the majority of our revenue from advertising/sponsorships. We anticipate revenue growth from increased membership activity and our revitalized website as we continue to implement new marketing strategies. Our software and networking technologies we incorporated during the last 2 years now permit our mobile devices to accept and receive direct advertising. Our social networks permit us to work with potential advertisers to identify the right member groups for direct target advertising, a marketing channel that is readily accessible to our social media community.

 

Our continuing membership growth is fueled by infiltrating our users into local event venues where they participate and simultaneously communicate with our social network via the regular deployment of our cutting-edge App updates. As a result, the Kiwibox network enjoys continuing user sign-ups and continuing loyalty of users to our social network. Due to our long-time experience with our German affiliate, the KWICK! Community (“Kwick”), we were able to fulfill the front-end and back-end needs for this remarkable growth.

 

Community means social network – and thrives on membership networking. Our new website is based on the latest web technology which makes it easier for users to stay connected and to interact with each other. Most importantly, our website features permit our community members to stay informed in “real” time about events and parties in areas we are targeting through our promotional teams.

 

The results of our year-long marketing efforts clearly show the following positive trends in the growth of our community at March 31, 2016:

 

Active Members – Our Kiwibox.com website has 4.76 Million Active Members as of March 31, 2016, an increase of approximately 1.1 % over the fourth quarter, 2015. Active users are those which have logged in to Kiwibox.com during the last 30 days.
Page Impressions – We had 380.1 Million Page Impressions during the first quarter of 2016, a decrease of approximately 5. % from the fourth quarter 2015. Generally, Page Views refer to a number of pages which are viewed or clicked on our Kiwibox.com website during the quarter.
Guestbook Entries – For the first quarter ended March 31, 2016, Kiwibox.com had 158.2 Million Guestbook Entries, an increase of approximately 2.9% from the fourth quarter 2015. A Guestbook is a logging system that permits visitors to our Kiwibox.com website to leave a public comment.
Blog Entries – Our Kiwibox.com website members and visitors entered 114.3 Million Blog Entries during the first quarter of 2016, an approximate 1.4% increase from the fourth quarter 2015. A Blog Entry is a message entered in our Kiwibox.com.
Mobile Users – For the quarter ended March 31, 2016 Kiwibox.com had 6100,000 Mobile Installations, an increase of approximately 7.02% from the fourth quarter 2015.

 

21 
 

 

Market Position

 

Our social media’s market penetration continues to rely upon our innovations where we strive to enhance our member’s experiences with our community. Showcasing events and member rendezvous at select venues represents a mere token of Kiwibox’s community appeal. Our members enjoy our interactive platforms where we blog, play games, chat and share pictures. As a social media company Kiwibox strives to deploy the tools necessary for our members to readily connect, communicate and party; whether in the U.S.A. or worldwide.

The Kiwibox Network is in a unique position because it combines the excitement of a dating community with the benefits and accessibility of a real social network. The Kiwibox Network encourages members to explore local events in their area, connect with other members and enjoy the additional member exclusive benefits the social network is offering, such as games, blogging, chatting, picture-sharing and online-flirting. This community behavior binds users to the platform and is the base for our viral marketing.

Market Position-What’s New

Kiwibox continues to expand its brand in the mainstream social media community. With our continued membership offerings and communication features, more people are interacting with each other through our state-of-the-art and meeting community than ever before.

  

Safety

 

Kiwibox.com has developed an effective monitoring model which assists in maintaining a safe site for our member base, combining both technology based systems and user moderation. Users communicate and share information in an environment where they feel both secure and at ease. Members of the Kiwibox team monitor forums and groups daily to ensure the content is appropriate.

 

In addition to our monitoring system, the Kiwibox.com platform is equipped with advanced technology safety features. This includes the private sphere configuration of users, contact blocs for larger age differentials, anti-spam protection and intelligent self-learning user-scoring feature. In addition to this, Kiwibox.com has implemented state of the art security features such as former Attorney General Andrew M. Cuomo’s hash value database in order to block images of illegal sexual content. With the combination of human moderation and advanced technology, users are afforded a safe and secure site.

 

Competition

 

Our primary competitors are other online social networks, including Facebook, Instagram, Tinder and Tumbler. Facebook is widely considered as the industry leaders; however, recent statistics and strategic announcements have indicated a shift in the target audience from teens and college students to a much broader and more adult demographic, because of their international focus. We plan to distinguish ourselves by targeting the US-market and by combining the social-network advantages with user generated content – from users to users, while stressing the community feeling. As these other social networks have made changes to their websites we have been able to capitalize on the disenfranchised users and bring them into our online community.

Technology Development

 

The Company attaches great importance to its innovative technology developments and continues to follow the top social network market leaders with technology upgrades, providing its users with an alternative social networking opportunity.

The Kiwibox Network is focusing on the fast growing mobile usage phenomenon, being online with friends’ every time and everywhere. The Kiwibox Network released multiple updates in the 4th quarter of 2014 for its IOS and Android Applications. At present, more than 700,000 company Apps are installed in our social media marketplace. Our entire Event page was redesigned during the last quarter of 2014, targeted to generate income based on direct advertisement sales with partners and not through the Banner Ads market.

During the fourth quarter of 2015 we released the Kiwibox 4.0 platform for both our web and mobile community members, adding surplus efficiency to our users’ experience. In addition, the stylistic and new interactive tool on our website emphasizes our focus on the innovative interplay of our design and functionality. All of these new features to our website only reinforce our role in the worldwide social media community as sharp, smooth and easy to enjoy user interface.

22 
 

New Kiwibox “Meet and Date” App

Introduced to supplement its membership exchange opportunities, Kiwibox will release its subscription dating APP in the next few months to enhance members’ exchange for meet-and-greet and personal exchange of members’ choices.

 

Intellectual Property

 

The Kiwibox.com web and mobile software and other related intellectual property rights are important assets. We hold the Internet domain names Kiwibox.com, Kiwibox.net, Kiwibox.org, as well as other country-code top level domains and feature-based domains like 4kiwi.com.

 

Governmental Regulations

 

Our Kiwibox website operations are subject to state, federal and international laws, rules and regulations that cover on-line business, privacy policies, consumer protection and product marketing. The Kiwibox website business is subject to state, federal and international laws, rules and regulations applicable to online commerce, including user privacy policies, product pricing policies, website content and general consumer protection laws.  Various laws, rules and regulations have been adopted, and probably will be adopted in the future, that apply to the Internet, including available online content, privacy concerns, online marketing, “spam” and unsolicited commercial email, taxation issues, and regulations that effect and monitor the quality of products and services.  

 

A portion of these laws, rules and regulations that concern the Internet and its uses have been only recently adopted. Courts and administrative agencies have not yet fully interpreted these legal requirements as to their application and scope. Accordingly, our Kiwibox website business is subject to the uncertainties of future interpretations and application of these legal requirements. The application and interpretation of these legal requirements or the passage of new and/or revised laws, rules and regulations could reduce the demand for Kiwibox website services, increase its operational costs, and expose it to potential liability. Any such events could have a material adverse effect upon our Kiwibox website business and financial condition. Our failure, or that of our business partners, to accurately predict and anticipate the interpretation or application of these laws, rules and regulations, whether now in force or adopted in the future, could have a detrimental impact on our operations, create negative publicity for us and expose us to potential liability.

 

State and federal agencies are applying consumer protection laws to regulate the on-line use, collection and dissemination of personal information and website content. These laws require us to implement programs to notify our website users of our privacy and security programs. Consumer protection laws will require us to obtain the consent of our website users if we want to collect and use certain portions of their personal information. We are currently voluntarily working in partnership with the New York State Attorney General’s office and have incorporated hash value technology into our website.

 

The Federal Trade Commission (“FTC”) is the lead federal agency monitoring Internet websites and their content. State attorneys general have become active monitors of the Internet at the local State level. These governmental bodies may investigate or bring enforcement actions against website operators they deem in violation of applicable consumer protection laws. We believe that our Kiwibox website’s collection and dissemination of information programs, including our privacy policies, do and will continue to comply with existing laws. However, a decision by a federal or state agency that any of our Kiwibox website’s business practices do not meet applicable legal standards could result in liability and have a material adverse effect on our business and financial condition.

 

Employees

 

Currently, we have 3 employees.

 

23 
 

 

Results of Operations for the Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

 

Our website presence is not yet supported by a volume of active members-users that would provide a basis for significant growth in advertising revenue. For the quarter ended March 31, 2016, total revenues amounted to $2,337 compared to $8,955 recorded in the first quarter in 2015 All revenue was received from our affiliate company Kwick.

 

Gross profit (loss) for the quarter ended March 31, 2016 amounted to $687 as compared to $6,122 for the corresponding interim period in 2015.

 

After deducting selling and general and administrative expenses of $311,587 for the first quarter ended March 31, 2016 compared to $330,333 recorded in the same period in 2015, the Company realized an operating loss of $310,900 for the first quarter of 2016 as compared to an operating loss of $324,211 for the same period in 2015. These operating expenses went down primarily due to two reasons. Two major investors have not committed to future financing and the other investors have given the order to reduce costs by 5-10% on the employee side. Therefore some of the growing services (support) were outsourced. Receiving less money had the effect of not being able to spend more. Additionally, the hardware costs became cheaper by merging pixunity into Kiwibox and optimizing hardware. Based on newer technology, more features could be used with less hardware and therefore the associated management costs and development costs decreased. For the year 2016 management expects operating expenses to remain steady and an expected increase in revenues due to new mobile advertising, this will start a process of putting the company on a path towards eventually eliminating the erosion of shareholder value.

 

The quarter concluded with a net loss of $1,255,736. After accounting for dividends accrued on outstanding preferred stock, which totaled $12,816, the net loss applicable to common shareholders was $1,268,552 or $0.002 per share compared to a net loss applicable to common shareholders of $1,049,128 or $0.002 per share for the first quarter in the previous year.

 

Liquidity and Capital Resources

 

We have financed our business with new debt since our cash flow is insufficient to provide the working capital necessary to fund our operations. We received $230,000 in cash from short-term loans from accredited private investors during the quarter. We have an ongoing and urgent need for working capital to fund our operations. If we are unable to continue to receive new equity investments or obtain loans, we will not be able to fund our operations and we will be required to close our business.

 

Our deficit in working capital amounted to $36,513,652 at March 31, 2016, as compared to $35,250,110 at December 31, 2015. Stockholders’ equity showed an impairment of $36,499,049 at the end of the period, compared to an impairment of $35,235,057 at the beginning of the year. The negative cash flow from operations during the three months totaled $255,846 and was financed by new debt.

 

The Company has $0 of bank debt as of March 31, 2016. Aside from trade payables and accruals, our remaining indebtedness at March 31, 2016 consisted of certain notes and loans aggregating $13,023,700 and the following obligations. Amounts due to related parties were $143,115. The liabilities from derivative conversion features were $17,220,588. The position “Obligations to be settled in stock” of $286,318 accounts for common shares due under consulting agreements, and for services to be settled in common stock options and warrants, where the underlying securities had not yet been issued. Current liabilities also include $799,734 accrued unpaid dividends on outstanding preferred stock. Such dividends will be paid only if and when capital surplus and cash-flow from operations are sufficient to cover the outstanding amounts without thereby unduly impacting the Company’s ability to continue operating and growing its business.

 

Our current cash reserves and net cash flow from operations expected during the near future will be insufficient to fund our operations and website development and marketing plan over the next twelve months. We expect to fund these requirements with further investments in form of debt or equity capital and are in ongoing discussions with existing investors to secure funding. There can be no assurance, however, that we will be able to secure needed financing in the future and identify a financing source or sources, and if we do, whether the terms of such financing will be acceptable or commercially reasonable.

 

Absent the receipt of needed equity investment or loans, we will be compelled to severely curtail operations and possibly, close our business operations. Assuming we can receive current funds to continue to operate our businesses, we may need additional funding for marketing and website development, absent of which our website development, results of operations and financial condition could be subject to material adverse consequences.

 

24 
 

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4T. CONTROLS AND PROCEDURES

 

(a) Evaluation of Disclosure Controls and Procedures.

 

The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ended March 31, 2016 covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

 

As of March 31, 2016, management assessed, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective as more fully described below.  Based on management’s assessment over financial reporting, management believes as of March 31, 2016, the Company’s internal control over financial reporting was not effective due to the following deficiencies:

 

1. The Company’s control environment did not have adequate segregation of duties and lacked adequate accounting resources to address non routine and complex transactions and financial reporting matters on a timely basis.

 

The Company had only a part time chief financial officer performing all accounting related duties on site, presenting the risk that the reporting of these non routine and complex transactions during the preparation of our future financial statements and disclosures may not be accomplished in a timely manner. Additionally in September 2012 the Company hired a comptroller to assist the Chief Financial Officer. Effective May 31, 2015 the chief financial officer resigned and the CEO Andre Scholz took over the position as chief financial officer while comptroller that was assisting the previous part time chief financial officer assumed the day to day transactional activity.

 

Company management believes that notwithstanding the above identified deficiencies that constitute our material weakness, that the financial statements fairly present, in all material respects, the Company’s consolidated balance sheets as of March 31, 2016 and December 31, 2015 and the related statements of operations, and cash flows for the three months ended March 31, 2016 and 2015, in conformity with generally accepted accounting principles.

 

Management’s Remediation Initiatives

 

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

 

-When available, we will devote additional resources to supplement, where necessary, existing resources with additional qualified third party consultants;
-We are continuing to institute more stringent approval processes for financial transactions, and
-We are continuing to perform additional procedures and analyses for significant transactions as a mitigating control in the control environment due to segregation of duties issues.

 

Changes in Internal Controls over Financial Reporting

 

Other than as stated above, during the quarter ended March 31, 2016, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

25 
 

PART II - OTHER INFORMATION

 

Item 1 LEGAL PROCEEDINGS

 

At the time of this report, the Company is not a party in any pending material legal proceedings.

 

Item 1A. RISK FACTORS

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

a)Issuance of unregistered securities

 

During the first quarter in 2016 the Company did sell any unregistered securities.

 

b)Not applicable

 

c)None

 

Item 3 DEFAULTS UPON SENIOR SECURITIES

 

The Company, as of the date of this filing, is in arrears on the payment of certain dividends on its Series A, C, and D Senior Convertible Preferred Stock. Such arrears total approximately $790,734. These dividends have been accrued, however, the Company’s management has refrained from making payments at this time because of the absence of positive equity and/or surplus funds.

 

Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None

 

Item 5 OTHER INFORMATION

 

26 
 

Item 6 EXHIBITS AND REPORTS ON FORM 8-K

 

(a) Exhibits

 

31.01.   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 15, 2013.
   
31.02.   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 16, 2013.
   
32.01.   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 16, 2013.

 

(b) Reports on Form 8-K:

 

On February 2, 2016 the company filed a report on 8K disclosing fourth quarter 2015 operational highlights.

 

27 
 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  

Date: May 20, 2016   KiwiboxCom, Inc.
     
  By: /s/ Andre Scholz
    Andre Scholz
  Chief Financial Officer
    (Principal financial officer and principal accounting officer)

 

28 
 

 

EX-31.01 2 kiwb033116exh31_01.htm EXHIBIT 31_01

Exhibit 31.01

 

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Andre Scholz, certify that:

 

(1) I have reviewed  the quarterly report on Form 10-Q of Kiwibox.Com, Inc.;

 

(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 small business issuer as of, and for, the periods presented in this report;

 

(4) The small business issuer’s 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 Rules 13a-15(f) and 15d-15(f)) for the small business issuer 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 small business issuer, 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 account principles;

 

  (c) Evaluated the effectiveness of the small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

(5) The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’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 small business issuer’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 small business issuer’s internal control over financial reporting.

 

       
  May 20, 2016 /s/ Andre Scholz  
    Andre Scholz  
   

President, Chief Executive Officer

(principal executive officer)

EX-31.02 3 kiwb033116exh31_02.htm EXHIBIT 31_02

Exhibit 31.02

 

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Andre Scholz, certify that:

 

(1) I have reviewed  the quarterly report on Form 10-Q of Kiwibox.Com, Inc.;

 

(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 small business issuer as of, and for, the periods presented in this report;

 

(4) The small business issuer’s 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 Rules 13a-15(f) and 15d-15(f)) for the small business issuer 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 small business issuer, 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 account principles;

 

  (c) Evaluated the effectiveness of the small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

(5) The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’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 small business issuer’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 small business issuer’s internal control over financial reporting.

 

       
  May 20, 2016 /s/ Andre Scholz  
    Andre Scholz  
   

Chief Financial Officer

(principal financial officer and principal

accounting officer)

 

 

 

 

 

EX-32.01 4 kiwb033116exh32_01.htm EXHIBIT 32.01

Exhibit 32.01

 

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Kiwibox.Com, Inc.(the “Company”) on Form 10-Q for the period ended March 31, 2016 (the “Report”), each of the undersigned, Andre Scholz, President and Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

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

 

  2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

     
Date:  May 20, 2016      
       
  By: /s/ Andre Scholz  
    Andre Scholz  
    President and Chief Executive Officer  
    (principal executive officer)  

 

 

 

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Document And Entity Information - shares
3 Months Ended
Mar. 31, 2016
May. 15, 2016
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q1  
Trading Symbol KIWB  
Entity Common Stock, Shares Outstanding   688,493,060
Entity Registrant Name Kiwibox.Com, Inc.  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Central Index Key 0000838796  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
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CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Current Assets    
Cash and cash equivalents $ 795
Accounts receivable - affiliate, net allowance for doubtful accounts of $0 54,236 $ 51,898
Prepaid expenses and other current assets 173,878 229,038
Total Current Assets 228,909 280,936
Property and equipment, net of accumulated depreciation of $114,675 and $110,225, respectively $ 2,596 $ 3,046
Website development costs, net of accumulated amortization of $254,264 and $254,264, respectively
Other assets $ 12,007 $ 12,007
Total Assets 243,512 295,989
Current Liabilities    
Accounts payable 283,337 284,912
Accrued expenses 4,953,240 4,634,763
Due to related parties 146,115 116,474
Obligations to be settled in stock 286,318 284,368
Dividends payable 799,734 786,919
Loans and notes payable - other 100,000 100,000
Loans and notes payable - related parties 340,000 340,000
Convertible notes payable - related parties 12,583,700 12,353,700
Current maturities of long-term debt 33,529 33,529
Liability for derivative conversion feature -related parties 17,220,588 16,596,381
Total Current Liabilities 36,742,561 35,531,046
Stockholders' Equity (Impairment)    
Preferred Stock, $0.001 par value, non-voting, 3,000,000 shares authorized; 85,890 shares issued and outstanding 86 86
Common Stock, $0.0001 par value, 1,400,000,000 shares authoirzed; issued and outstanding 688,493,060 and 686,093,060 shares respectively 68,847 68,607
Additional paid-in capital 52,733,065 52,728,745
Accumulated deficit (89,301,047) (88,032,495)
Total Stockholders' Equity (Impairment) (36,499,049) (35,235,057)
Total Liabilities and Equity (Impairment) $ 243,512 $ 295,989
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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]    
Net of allowance for doubtful accounts $ 0 $ 0
Property and equipment, accumulated depreciation 114,675 114,225
Website development costs, accumulated amortization $ 254,264 $ 254,264
Preferred Stock, par value $ .001 $ .001
Preferred Stock, shares authorized 3,000,000 3,000,000
Preferred Stock, shares issued 85,890 85,890
Preferred Stock, shares outstanding 85,890 85,890
Common Stock, par value $ 0.0001 $ 0.0001
Common Stock, shares authorized 1,400,000,000 1,400,000,000
Common Stock, issued 688,493,060 686,093,060
Common Stock, outstanding 688,493,060 686,093,060
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Net Sales    
Advertising - affiliate $ 2,337 $ 8,955
Other
Total Net Sales $ 2,337 $ 8,955
Cost of Goods Sold    
Website hosting expenses 1,650 2,833
Total Cost of Goods Sold 1,650 2,833
Gross Profit (Loss) 687 6,122
Selling expenses 135,663 $ 150,741
Stock-based compensation 2,280
General and administrative expenses 173,644 $ 179,592
Loss From Operations (310,900) $ (324,211)
Other Income (Expense)    
Miscellaneous income/(expense) (960)
Interest expense (319,668) $ (286,709)
Interest expense-derivative conversion features (563,489) (562,130)
Change in fair value - derivative liability (60,719) 136,738
Total Other Income (Expense) (944,836) (712,101)
Loss Before Benefit (Provision) for Income Taxes $ (1,255,736) $ (1,036,312)
Benefit (Provision) for Income Taxes
Net Loss $ (1,255,736) $ (1,036,312)
Dividends on Preferred Stock (12,816) (12,816)
Net Loss Applicable to Common Shareholders, basic and diluted $ (1,268,552) $ (1,049,128)
Net Loss Per Common Share, basic and diluted $ (0.002) $ (0.002)
Weighted Average of Common Shares Outstanding 685,275,478 683,693,060
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.4.0.3
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Cash Flows from Operating Activities    
Net Loss $ (1,255,736) $ (1,036,312)
Adjustments to Reconcile Net Loss to Net Cash Used by Operations    
Depreciation and amortization 450 $ 1,249
Securities issued for services 2,280
Loss on debt extinguishment 960
Change in fair value - derivative liabilities 60,719 $ (136,738)
Intrinsic value of beneficial conversion feature 563,489 562,130
Decreases (Increases) in Assets    
Accounts receivable - affiliates $ (2,338) (8,955)
Due from related party (74)
Prepaid expenses $ 55,160 $ 60,654
Increase (Decreases) in Liabilities    
Bank overdraft
Liabilities to be settled in stock $ 3,270 $ 4,290
Accounts payable (2,576) (13,031)
Accrued expenses 318,476 284,650
Net Cash Used by Operating Activities $ (255,846) (282,137)
Cash Flows From Investing Activities    
Cash proceeds (outlay) - other assets 4,972
Purchases of property and equipment (999)
Net Cash Provided by Investing Activities 3,973
Cash Flows From Financing Activities    
Proceeds from loans/notes payable $ 230,000 275,000
Net proceeds (repayments) to related parties 26,641 4,060
Net Cash Provided by Financing Activities 256,641 279,060
Net Increase (Decrease) in Cash $ 795 896
Cash at beginning of period 299
Cash at end of period $ 795 $ 1,195
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION    
Interest Paid
Income taxes paid $ 31 $ 300
NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Settlement of obligations with common stock 2,280
Quarter to date dividend accruals $ 12,816 $ 12,816
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.4.0.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The condensed balance sheet at December 31, 2015 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed financial statements should be read in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2015.  

 

Nature of Organization

 

Kiwibox.Com, Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc. On November 18, 1998, the Company changed its name to Magnitude Information Systems, Inc. On December 31, 2009, the Company changed its name to Kiwibox.com, Inc.

 

On August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc.

 

The Company, Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox Media, Inc. being a wholly owned subsidiary. On December 31, 2009, the two subsidiaries, Magnitude, Inc. and Kiwibox Media, Inc. merged into the Company.

 

On September 30, 2011, Kiwibox.com acquired the German based social network Kwick! Community GmbH & Co. KG (“Kwick”), a wholly-owned subsidiary.

 

On September 24, 2013, Kwick Community GmbH & Co. KG signed an equity purchase agreement to acquire Interscholz Internet Services GmbH and Co KG, a German limited liability company, and all the equity of its general partner, Interscholz Beteiligungs GmbH. As of the balance sheet date, and pursuant to the terms of the contract, since full payment was not made for the purchase price of Interscholz Internet Services GmbH & Co KG, ownership does not transfer to Kwick Community GmbH & Co KG. Full payment must be made for ownership to transfer to Kwick. As of December 31, 2013 only $515,037 of the total purchase price of $1,352,000 was made. On December 9, 2013 the acquisition of Interscholz Internet Services GmbH and Co KG by Kwick was rescinded due to non compliance with the terms of the addendum to the contract, calling for the full purchase price to have been paid. However, Kwick did acquire all the equity of the general partner, Interscholz Beteiligungs GmbH, as full payment was not a requirement for transfer of ownership of that entity.

 

On December 10, 2013, the Company signed an Equity Purchase Agreement with Marcus Winkler to sell to him eighty (80%) percent of the equity of its German subsidiary, KWICK! Community GmbH & Co. KG, a German limited liability company, and Kwick! Beteiligungs GmbH, its general partner (collectively, “Kwick”). The sale was approved on December 18, 2013. Due to the fact that the parent company ceased to have a controlling financial interest in Kwick, the subsidiary was deconsolidated from that date forward. On December 30, 2013 a total of 15% of the remaining 20% of the equity of Kwick was transferred to the Chief Executive Officer of Kwick (the “Kwick CEO”), in consideration for the Kwick CEO pledging to the bank 5,000 Euros as collateral, on behalf of Kiwibox, for bank overdrafts incurred by “Kwick’s” wholly-owned subsidiary Interscholz Beteiligungs GmbH, as general partner (managing partner) for Interscholz Internet Services GmbH & Co KG; as it is the duty of the general/managing partner to secure liquidity for the partnership. Since Kiwibox owned 20% of Kwick they were required, under German law, as managing partner of Interscholz Beteiligungs GmbH to secure liquidity for Interscholz Internet Services GmbH & Co KG. Therefore, 15% of Kiwibox’s 20% of Kwick was given to the Kwick CEO in exchange for the CEO pledging the necessary collateral. In addition to the collateral given by the Kwick CEO, as new 15% shareholder of Kwick, the Kwick CEO also agreed to keep the Interscholz Beteiligungs GmbH business going. This transfer was unanimously approved with written consent of the Board of Directors. Since the fair value of Kiwibox’s interest in Kwick is zero, this transaction had no material impact on the financial statements.

 

Cash and Cash Equivalents

 

The Company accounts for cash and other highly liquid investments with original maturities of three months or less as cash and cash equivalents.

 

Depreciation and Amortization

 

Property and equipment are recorded at cost. Depreciation on equipment, furniture and fixtures and leasehold improvements is computed on the straight-line method over the estimated useful lives of such assets between 3-10 years, or lease term for leasehold improvements, if for a shorter period. Maintenance and repairs are charged to operations as incurred. Software costs are amortized using the straight line method and amortized over their estimated useful lives. Amortization begins when the related software is ready for its intended use in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, Subsequent Measurement.

 

Advertising Costs

 

Advertising costs are charged to operations when incurred. Advertising expense was $1,500 and $1,000 for the three months ended March 31, 2016 and 2015, respectively.

 

Evaluation of Long Lived Assets

 

Long-lived assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated undiscounted future net cash flows of the related long-lived asset.

 

Any impairment of the Company’s internally-developed software is recognized and measured in accordance with the provisions of ASC 360-10-35, Intangibles-Goodwill and Other, Internal-Use Software, Subsequent Measurement, which requires that assets be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs related to computer software being developed or currently in use indicating that the carrying amount may not be recoverable:

 

a.   Internal-use computer software is not expected to provide substantive service potential.

 

b.   A significant change occurs in the extent or manner in which the software is used or is expected to be used.

 

c.   A significant change is made or will be made to the software program.

 

d.   Costs of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify the software.

 

 

Fair Value Measurements

 

The Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Under ASC 820, a framework was established for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Company accounted for certain convertible debentures issued in the year ended December 31, 2014 and the three months ended March 31, 2015 as derivative liabilities required to be bifurcated from the host contract in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares (see Note 13).

 

Securities Issued for Services

 

The Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair value method. For non-employees, the fair market value of the Company’s stock on the date of stock issuance or option/grant is used. The Company has determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model. The Company has adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant).

 

Reclassification of Certain Securities Under ASC 815-15

 

Pursuant to ASC 815-15, “Contracts in Entity’s own Equity”, if a company has more than one contract subject to this Issue, and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions of contracts, should be reclassified. The Company's method for reclassification of such contracts is reclassification of contracts with the latest maturity date first.

 

Capitalization of Software /Website development costs

 

The Company capitalizes outside-contracted development work in accordance with the guidelines published under ASC 350-50, “Website Development Costs”. Under ASC 350-50, costs incurred during the planning stage are expensed, while costs relating to software used to operate a web site or for developing initial graphics should be accounted for under ASC 350-50, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, unless a plan exists or is being developed to market the software externally. Under ASC 350-50, internal and external costs incurred to develop internal-use computer software during the application development stage should be capitalized. Costs to develop or obtain software that allows for access or conversion of old data by new systems should also be capitalized, excluding training costs.

 

Fees incurred for web site hosting, which involve the payment of a specified, periodic fee to an Internet service provider in return for hosting the web site on its server(s) connected to the Internet, are expensed over the period of benefit, and included in cost of sales in the accompanying financial statements.

 

A total of $0 and $0 was capitalized for web-site development work during the three months ended March 31, 2016 and 2015, respectively.

 

Income Taxes

 

The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in the Company’s income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset.

 

Net Loss Per Share

 

Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. Such common stock equivalents totaled 86,441,799 common shares at March 31, 2016, comprised of 7,000,000 shares issuable upon exercise of stock purchase warrants, 4,500,000 shares issuable upon exercise of stock options, 729,537 shares exercisable upon conversion of convertible preferred shares, and 74,212,262 shares potentially issuable upon conversion of convertible debt. Such debt and the related accrued interest, is presently convertible at the option of four holders at a conversion price of 50% of the ten day trailing market price. The total principal due under these notes of $12,583,700 would yield in excess of 24.5 billion shares if fully converted, however, the respective notes, all of which were issued to these four investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion, may in the aggregate not exceed a number that would increase the total share holdings beneficially owned by such investor to a level above 9.99%. At the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the aforementioned conversions or exercises, as the case may be, are at the option of the holders.

 

Revenue Recognition

 

The Company’s revenue is derived from advertising on the Kiwibox.Com or, formerly, Kwick websites. Most contracts require the Company to deliver the customer impressions, click-throughs or new customers, or some combination thereof. Accordingly, advertising revenue is estimated and recognized for the period in which customer impressions, click through or new customers are delivered. Licensing or hosting revenue consists of an annual contract with clients to provide web-site hosting and assistance.

 

Use of Estimates

 

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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

XML 17 R7.htm IDEA: XBRL DOCUMENT v3.4.0.3
GOING CONCERN
3 Months Ended
Mar. 31, 2016
Going Concern [Abstract]  
GOING CONCERN

2. GOING CONCERN

 

The ability of the Company to continue its operations is dependent on increasing sales and obtaining additional capital and financing. Our revenues during the foreseeable future are insufficient to finance our business and we are entirely dependent on the willingness of existing investors to continue supporting the Company with working capital loans and equity investments, and our ability to find new investors should the financial support from existing investors prove to be insufficient. If we were unable to obtain a steady flow of new debt or equity-based working capital we would be forced to cease operations. In their report for the fiscal year ended December 31, 2015, our auditors had expressed an opinion that, as a result of the above, there was substantial doubt regarding our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern. Management’s plans are to continue seeking equity and debt capital until cash flow from operations cover funding needs.

 

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.4.0.3
CONCENTRATIONS OF BUSINESS AND CREDIT RISK
3 Months Ended
Mar. 31, 2016
Risks and Uncertainties [Abstract]  
CONCENTRATIONS OF BUSINESS AND CREDIT RISK

3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK

 

The Company maintains cash balances in a financial institution which is insured by the Federal Deposit Insurance Corporation up to $250,000. Balances in these accounts may, at times, exceed the federally insured limits. At March 31, 2016, cash balances in bank accounts did not exceed this limit. The Company provides credit in the normal course of business to customers located throughout the U.S. and overseas. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.4.0.3
PREPAID EXPENSES
3 Months Ended
Mar. 31, 2016
Prepaid Expenses [Abstract]  
PREPAID EXPENSES

4. PREPAID EXPENSES

Prepaid expenses consist of the following at:

 

      March 31, 2016       December 31, 2015  
          Consulting fees   $ 165,000     $ 220,000  
          Business insurance     8,878       9,038  
    $ 173,878     $ 229,038  

 

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.4.0.3
PROPERTY AND EQUIPMENT
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

5. PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following at:

 

    March 31, 2016   December 31, 2015
          Furniture   $ 15,040     $ 15,040  
          Leasehold Improvements     24,130       24,130  
          Equipment     78,101       78,101  
      117,271       117,271  
          Less accumulated depreciation     114,675       114,225  
          Total   $ 2,596     $ 3,046  

 

Depreciation expense charged to operations was $450 and $1,249 in the first three months of 2016 and 2015, respectively.

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.4.0.3
INTANGIBLE ASSETS
3 Months Ended
Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

6. INTANGIBLE ASSETS

 

Intangible assets consisted of software for website development costs as follows:

 

    March 31, 2016   December 31, 2015
        Website development costs   $ 254,264     $ 254,264  
        Less accumulated amortization     254,264       254,264  
        Total   $ 0     $ 0  

 

Amortization expense for the three months ended March 31, 2016 and 2015 was $0 and $0, respectively.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.4.0.3
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
3 Months Ended
Mar. 31, 2016
Investment In Unconsolidated Subsidiary [Abstract]  
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

7. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

 

On December 10, 2013, the company signed an equity purchase agreement with Marcus Winkler to sell to him eighty (80%) percent of the equity of its German subsidiary, Kwick. Pursuant to the terms of the agreement, the purchaser paid 36,000 Euros as the purchase price and the company was required to obtain shareholder approval of the sale as required under applicable Delaware Law. The majority shareholder approval was obtained on December 18, 2013. In addition, the Company and Mr. Winkler signed a Lock-Up and Standstill Agreement pursuant to the general terms of which the Company agreed not to participate in the management, operations or finances of Kwick, which shall be exclusively managed and under control of the purchaser. Accordingly, the Company’s minority ownership position shall be subject, in all respects, to the exclusive control of the purchaser. Mr. Winkler also has investment and voting control over Kreuzfeld Ltd., a major creditor of the company, which holds a Class AA convertible promissory note with an outstanding balance (including accrued interest) of $5,825,613 as of March 31, 2016. On June 22, 2015, a Class A Senior Revolving Promissory Note with a principal amount of $340,000 was assigned from Ulrich Schuerch to Mr. Winkler.

 

On December 30, 2013 a total of 15% of the remaining 20% of the equity of Kwick was transferred to the Chief Executive Officer of Kwick (the “Kwick CEO”), in consideration for the Kwick CEO pledging to the bank 5,000 Euros as collateral, on behalf of Kiwibox, for bank overdrafts incurred by “Kwick’s” wholly-owned subsidiary Interscholz Beteiligungs GmbH, as general partner (managing partner) for Interscholz Internet Services GmbH & Co KG: as it is the duty of the general partner/managing partner to secure liquidity for the partnership. Since Kiwibox owned 20% of Kwick they were required, under German law, as managing partner of Interscholz Beteiligungs GmbH to secure liquidity for Interscholz Internet Services GmbH & Co KG. Therefore, 15% of Kiwibox’s 20% was given to the Kwick CEO in exchange for the CEO pledging the necessary collateral. In addition to the collateral given by the Kwick CEO, as new 15% shareholder of Kwick, the Kwick CEO also agreed to keep the Interscholz Beteiligungs GmbH business going. This transfer was unanimously approved with written consent of the Board of Directors. Since the fair value of Kiwibox’s interest in Kwick is zero, this transaction had no material impact on the financial statements.

 

Due to the significant reductions in fair value of this reporting unit that were considered other than temporary, and impairment of the related goodwill, the carrying value of this cost method investment was zero at December 31, 2015 and March 31, 2016.

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.4.0.3
ACCRUED EXPENSES
3 Months Ended
Mar. 31, 2016
Payables and Accruals [Abstract]  
ACCRUED EXPENSES

8. ACCRUED EXPENSES

 

Accrued expenses consisted of the following at:

 

    March 31, 2106   December 31, 2015
       Accrued interest   $ 4,762,846     $ 4,443,178  
       Accrued payroll, payroll taxes and commissions     45,733       41,541  
       Accrued professional fees     110,000       114,900  
       Accrued rent/deferred rent obligation     10,726       11,209  
       Miscellaneous accruals     23,935       23,935  
       Total   $ 4,953,240     $ 4,634,763  

 

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.4.0.3
OBLIGATIONS TO BE SETTLED IN STOCK
3 Months Ended
Mar. 31, 2016
Other Liabilities Disclosure [Abstract]  
OBLIGATIONS TO BE SETTLED IN STOCK

9. OBLIGATIONS TO BE SETTLED IN STOCK

 

Obligations to be settled in stock consisted of the following at:

 

    March 31, 2016   December 31, 2015
Obligation for warrants granted for compensation   $ 100,000     $ 100,000  
600,000 common shares issuable to a consultant who was a director of the company, for services
rendered.
    36,000       36,000  
300,000 (2016) and 1,200,000 (2015) common shares, and 2,900,000 (2016) and 2,900,000 (2015) stock options issuable to two officers of the Company pursuant to their respective employment Agreements     57,158       58,178  
8,400,000 (2016) and 8,100,000 (2015) stock options issuable to one director who also serves as the Company’s general counsel     83,160       80,190  
1,000,000 warrants granted on the Picunity.de assest Purchase     10,000       10,000  
    $ 286,318     $ 284,368  

 

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.4.0.3
LOANS PAYABLE
3 Months Ended
Mar. 31, 2016
Debt Disclosure [Abstract]  
LOANS PAYABLE

10. LOANS PAYABLE

 

The Company (formerly Magnitude, Inc.) had borrowings under short term loan agreements with the following terms and conditions at March 31, 2016 and December 31, 2015:

 

 

On December 4, 1996, the company (formerly Magnitude, Inc.) repurchased 500,000 shares of its common stock and retired same against issuance of a promissory note maturing twelve months thereafter accruing interest at 5% per annum and due December 4, 1998. This note is overdue as of September 30, 2005 and no demand for payment has been made.

  $ 75,000  
Total   $ 75,000  

 

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.4.0.3
NOTES PAYABLE
3 Months Ended
Mar. 31, 2016
Notes Payable [Abstract]  
NOTES PAYABLE

11. NOTES PAYABLE

 

    March 31,   December 31,
    2016   2015
Balance of non-converted notes outstanding. Attempts to locate the holder of this note, to settle this liability, have been unsuccessful.   $ 25,000     $ 25,000  
From September 2008 through March 2016 five creditors loaned the Company funds under the terms of the convertible notes issued, as modified in March 2009 and July 2010 and April 2011 and August 2012(see Note 13).     12,583,700       12,353,700  
In January 2011 and again in February 2011, a shareholder loaned the Company $50,000 under a demand note at 10%. In 2010, this shareholder loaned the Company $240,000 under a demand note at 10%. On June 22, 2015 this shareholder assigned all of his right, title and interest in this note to Mr. Marcus Winkler. Mr. Winkler has an investment and voting control over two of the company’s lenders.     340,000       340,000  
Total   $ 12,948,700     $ 12,718,700  

 

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.4.0.3
LONG-TERM DEBT
3 Months Ended
Mar. 31, 2016
Long-term Debt, Unclassified [Abstract]  
LONG-TERM DEBT

12. LONG-TERM DEBT

 

Long-term debt as of December 31, 2015 and 2014 is comprised of the following:

 Discounted present value of a non-interest bearing $70,000 settlement with a former investor of Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997. The imputed interest rate used to discount the note is 8% per annum. This obligation is in default.   $ 33,529  
 Total     33,529  
     Less current maturities     33,529  
     Long-term debt, net of current maturities   $ —    

 

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.4.0.3
DERIVATIVE CONVERSION FEATURES
3 Months Ended
Mar. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE CONVERSION FEATURES

13. DERIVATIVE CONVERSION FEATURES  

 

 

On July 27, 2010, the Company issued two Class A Senior Convertible Revolving Promissory Notes (“Class A Notes”), one to Cambridge Services, Inc., in the principal amount of $683,996, consolidating the series of loans (and related accrued interest) made to the Company since June 26, 2009, and one to Discover Advisory Company, in the principal amount of $1,160,984, consolidating the series of loans (and related accrued interest) made to the Company since September 19, 2008 and including advances through September 30, 2010. Each of these promissory notes are due on demand, accrue interest at the rate of 10%, per annum, are convertible (including accrued interest) at the option of each lender into Common Stock of the Company at 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event less than $0.001 (the "Conversion Price"). Both promissory notes contain conversion caps, limiting conversions under these notes to a maximum beneficial ownership position of Company common stock to 9.99% for each lender. Each of these notes contains Company covenants, requiring the lenders’ prior written consent in order for the Company to merge, issue any common or preferred stock or any convertible debt instruments, declare a stock split or dividends, increase any compensation to its officers or directors by more than five (5%) during any calendar year. During the three months ended March 31, 2016, no debt was converted. During the three months ended March 31, 2016, no debt was converted.

 

The Company renegotiated certain outstanding promissory notes with its four major creditors, Discover Advisory Company of the Bahamas (“DAC”), Kreuzfeld Ltd. of Switzerland (“Kreuzfeld”), Cambridge Services, Inc. of Panama (“CSI”) and Vermoegensverwaltungs-Gesellschaft Zurich LTD of Switzerland (“VGZ”). As of August 1, 2012, the Company authorized the issue of a new series of corporate notes, the Class AA Senior Secured Convertible Revolving Promissory Notes, dated as of August 1, 2012 (the New Note(s)”) and issued New Notes: (1) to DAC, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated July 27, 2010, in the original principal amount of $1,080,984, now cancelled, which had an outstanding balance due (including accrued interest) of $5,915,726 as of December 31, 2015 and $6,027,284 at March 31, 2016; (2) to Kreuzfeld, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 16, 2011, in the original principal amount of $2,000,000, now cancelled, which had an outstanding balance due (including accrued interest) of $5,490,657 at December 31, 2015 and $5,825,613 at March 31, 2016; (3) to CSI, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated August 1, 2011, in the original principal amount of $1,303,996, now cancelled, with an outstanding balance due (including accrued interest) of $4,040,407 as of December 31, 2015, and $4,115,914 at March 31, 2016 and; (4) to VGZ, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 30, 2010, in the original principal amount of $2,000,000, now cancelled, with an outstanding balance due (including accrued interest) of $1,109,550 as of December 31, 2015 and $1,128,744 at March 31, 2016. All of the New Notes accrue interest at the rate of 10%, are convertible into common shares at the conversion rate equal to 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event less than $0.001, and are due on demand.. Pursuant to an Equity and Stock Pledge Agreement, also negotiated and executed as of August 1, 2012, the repayment of the outstanding indebtedness of the New Notes is secured by all of the limited partnership interests of the Company’s partly-owned (now deconsolidated) German subsidiary, KWICK! Community GmbH & Co. KG, a private German limited partnership (“KG”), and all of its shares of the sole general partner of KG, KWICK! Community Beteiligungs GmbH.

 

The Company accounted for the conversion features underlying these convertible debentures in accordance with ASC 815-40, Contract in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares. The Company determined the value of the derivate conversion features of new debentures issued to these holders plus accrued interest during the three months ended March 31, 2016 under these terms at the relevant commitment dates to be $563,489 utilizing a Black-Scholes valuation model. The change in fair value of the liability for the conversion feature resulted in expense of $60,719 for the three months ended March 31, 2016, which is included in Other Income (Expense) in the accompanying financial statements. The fair value of these derivative conversion features was determined to be $17,220,588 at March 31, 2016.

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COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

14. COMMITMENTS AND CONTINGENCIES

 

We maintain offices for our operations at 330 W. 42th Street, New York, New York 10036, for approximately 990 square feet. This lease requires initial minimum monthly rentals of $3,833 plus tenants’ share of utility/cam/property tax charges which average approximately $291 per month. During 2013 the Company successfully negotiated a 5 year lease, with future minimum rentals as follows:

 

  2016       37,089  
  2017       50,768  
  2018       47,847  

 

In May 2010 the Company negotiated a lease of an apartment in New York City for the CEO in order to reduce travel costs. The lease was for 12 months at $2,775 per month through May 31, 2011. In May 2011 the lease was extended through August 31, 2011 at the rate of $2,837. In August 2011 the lease was extended through December 31, 2011 at the rate of $2,837 per month. In December 2011 the lease was again extended through May 31, 2012 with no change in the base rent. In May 2012 the lease was extended through December 31, 2012 at a monthly rate of $2,943, this lease was then extended through December 31, 2013 at the same terms. In December 2013 the lease was extended through May 31, 2014. This lease was again extended to May 31, 2016 in March of 2015.

 

Our total rent expenses were $18,400 and $21,667 during the three months ended March 31, 2016 and 2015, respectively.

 

The Company is party to a consulting agreement with its Chief Executive Officer. During the fourth quarter of 2013 the terms of this agreement were modified. The new terms called for an increased monthly consulting fee to $18,333, from $16,667 in 2011-2013, effective January 1, 2014 through December 31, 2014. During the fourth quarter of 2014 the terms of this agreement were again modified. The new terms have the same monthly consulting fee as 2013, $18,333 a month, or $220,000 per year, however; the prepayment provision called for the entire amount payable in advance and as soon as practicable following the execution and delivery of this restated agreement. Payment for the period January 1, 2015 through December 31, 2015 was made on November 20, 2014 in accordance with the terms of this new agreement. This agreement was extended thru December 31, 2016. Payment for the period January 1, 2016 through December 31, 2016 was made on December 1, 2015 in accordance with the terms of this extended agreement. There were no changes to the stock compensation portion of any earlier agreement.

 

In the three months ended March 31, 2016 and March 31, 2015 this officer was granted 300,000 shares.

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RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2016
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

15. RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2016, the Company sold advertising space on its Kiwibox.com website to Kwick totaling $2,337, which is included in the $54,236 balance due from Kwick at March 31, 2016. Kwick is majority-owned by Mr. Winkler, who in turn is a related party of the Company (see Note 7).

 

During the three months ended March 31, 2016 and 2015 one outside director of the Company who also serves as the Company’s general and securities counsel, was paid an aggregate $15,375 and $12,375 respectively, for legal services. The director also received 300,000 common stock options during the three month periods ending March 31, 2016 and 2015, valued at $2,970 and $2,970 respectively.

 

During the three months ended March 31, 2016 and 2015 we incurred aggregate expenses of $117,445   and $110,283, respectively, to companies controlled by the Chief Executive Officer, for website hosting, website development and technical advisory services, server farm installations and IT equipment purchases. The officer also earned 100,000 common shares per month during the three months ended March 31, 2016 and 2015 under a consulting agreement, valued at $300 and $330 respectively. The officer also received $220,000 in December 2015 for prepaid consulting fees toward 2016 under the terms of a consulting agreement.

 

Through March 31, 2016, approximately 10% of the voting stock was beneficially held by Discovery Advisory Company, located in the Bahamas, and Cambridge Services Inc., Kreuzfeld, LTD and Vermoegensverwaltungs-Gesellschaft Zurich LTD. (VGZ) of Switzerland. Discovery Advisory Company, Cambridge Services Inc., Kreuzfeld, LTD and VGZ are major creditors, having advanced operating capital against issuance by the Company of convertible promissory notes during 2016 and 2015.

 

During the three months ended March 31, 2016, Kreuzfeld, LTD advanced an additional $230,000. At March 31, 2016, $4,451,722 and $3,080,060 of such notes were outstanding and owed to Discovery Advisory Company and Cambridge Services Inc, respectively and $4,279,959 and $771,958 owed to Kreuzfeld, Ltd. and VGZ, respectively.

 

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FAIR VALUE
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
FAIR VALUE

16. FAIR VALUE

 

Some of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables.

 

Effective July 1, 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance supersedes all other accounting pronouncements that require or permit fair value measurements. The Company accounted for the conversion features underlying certain convertible debentures in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares.

 

Effective July 1, 2009, the Company adopted ASC 820-10-55-23A, Scope Application to Certain Non-Financial Assets and Certain Non-Financial Liabilities, delaying application for non-financial assets and non-financial liabilities as permitted. ASC 820 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

 

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange- traded securities and exchange-based derivatives.  

 

Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

 

Level 3 — unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently- traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models. The company values the conversion liabilities using the Black- Scholes model and the assumptions are updated using independent data such as the risk free rate, volatility and expected life for each valuation date based on changes over time.

 

For the three months ending March 31, 2016 and 2015, the fair value of the embedded conversion liabilities was determined using the Black-Scholes model calculating fair value based on the conversion discount as well as the term and short-term bond rate. During the three months ending March 31, 2016 the following assumptions were used: (1) conversion discounts of 50%; (2) a look back period of 10 days (3) bond rates of 0.17% to 0.29% and (4) volatility range of 55% to 341%.

Fluctuation in value is largely based on the change in the daily share price accompanied by the conversion discount. The change in volatility has the greater affect on the conversion liability during each reporting period, as higher volatility levels will yield larger values.

 

The following table reconciles, for the three months ended March 31, 2016, the beginning and ending balance for financial instruments that are recognized at fair value in the consolidated financial statements:

 

Conversion Liability at January 1, 2016   $ 16,596,380  
Value of beneficial conversion features of new bedentures     563,489  
Change in value of beneficial conversion features during period     60,719  
Conversion Liability at March 31, 2016   $ 17,220,588  

 

The fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for the calculated value. The Company recognizes interest expense for the recognition of the conversion liability.

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SUBSEQUENT EVENTS
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

26. SUBSEQUENT EVENTS

 

During January through April 2016 we received an aggregate $300,000 working capital loans from two accredited investors, which are both covered by convertible promissory notes carrying interest at 10% per year.

 

At February 3, 2016 the board of directors of the company granted and authorized the issuance of 1,200,000 stock grants of restricted common stock to two directors valued at $0.0019 per restricted common share, the public market price of the Company’s common shares traded in the over-the-counter market on the commitment date. These shares were issued to the two directors on March 2, 2016. The directors and the respective stock grants to these individuals were as follows:

 

Andre Scholz 800,000 restricted common shares
Joseph J. Tomasek 400,000 restricted common shares

 

At February 3, 2016 the board of directors authorized the issuance of 1,200,000 stock grants of restricted common stock to Andre Scholz; 100,000 of which shares were earned by Mr. Scholz for each of the twelve months during the period, January 1,2015 through December 31, 2015. These shares were issued to Mr. Scholz on March 2, 2016. These amounts were accrued for 2015 in the amount of $1,320 and is included in the balance sheet account Obligations to be Settled in Stock

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RECENTLY ISSUED AND NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS
3 Months Ended
Mar. 31, 2016
Accounting Changes and Error Corrections [Abstract]  
RECENTLY ISSUED AND NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS

18. RECENTLY ISSUED AND NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB voted to delay the effective date of ASU 2014-09 by one year to the first quarter of 2018 to provide companies sufficient time to implement the standards. Early adoption will be permitted, but not before the first quarter of 2017. Adoption can occur using one of two prescribed transition methods. In March and April 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” and ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” which provide supplemental adoption guidance and clarification to ASC 2014-09. ASU 2016-08 and ASU 2016-10 must be adopted concurrently with the adoption of ASU 2014-09. The Company is currently evaluating the impact of these new standards.

 

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation - Stock Compensation. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. The Company adopted the provisions of this standard, but it did not have a material effect on its results of operations.

 

On August 2014, FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to continue as a Going Concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position or results of operations.

 

In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides clarification on whether a cloud computing arrangement includes a software license. If a software license is included, the customer should account for the license consistent with its accounting of other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract. This ASU is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those years. The Company adopted the provisions of this standard, but it did not have a material effect on its results of operations.

 

During February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”). The standard requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new standard.

 

In March 2016, FASB issued ASU No. 2016-09, “Improvements to Employee Share-based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the standard and the impact on its consolidated financial statements and footnote disclosures.

 

We have reviewed all FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

 

Management does not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.

 

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

Basis of Presentation

 

The condensed balance sheet at December 31, 2015 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed financial statements should be read in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2015.  

Nature of Organization

Nature of Organization

 

Kiwibox.Com, Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc. On November 18, 1998, the Company changed its name to Magnitude Information Systems, Inc. On December 31, 2009, the Company changed its name to Kiwibox.com, Inc.

 

On August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc.

 

The Company, Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox Media, Inc. being a wholly owned subsidiary. On December 31, 2009, the two subsidiaries, Magnitude, Inc. and Kiwibox Media, Inc. merged into the Company.

 

On September 30, 2011, Kiwibox.com acquired the German based social network Kwick! Community GmbH & Co. KG (“Kwick”), a wholly-owned subsidiary.

 

On September 24, 2013, Kwick Community GmbH & Co. KG signed an equity purchase agreement to acquire Interscholz Internet Services GmbH and Co KG, a German limited liability company, and all the equity of its general partner, Interscholz Beteiligungs GmbH. As of the balance sheet date, and pursuant to the terms of the contract, since full payment was not made for the purchase price of Interscholz Internet Services GmbH & Co KG, ownership does not transfer to Kwick Community GmbH & Co KG. Full payment must be made for ownership to transfer to Kwick. As of December 31, 2013 only $515,037 of the total purchase price of $1,352,000 was made. On December 9, 2013 the acquisition of Interscholz Internet Services GmbH and Co KG by Kwick was rescinded due to non compliance with the terms of the addendum to the contract, calling for the full purchase price to have been paid. However, Kwick did acquire all the equity of the general partner, Interscholz Beteiligungs GmbH, as full payment was not a requirement for transfer of ownership of that entity.

 

On December 10, 2013, the Company signed an Equity Purchase Agreement with Marcus Winkler to sell to him eighty (80%) percent of the equity of its German subsidiary, KWICK! Community GmbH & Co. KG, a German limited liability company, and Kwick! Beteiligungs GmbH, its general partner (collectively, “Kwick”). The sale was approved on December 18, 2013. Due to the fact that the parent company ceased to have a controlling financial interest in Kwick, the subsidiary was deconsolidated from that date forward. On December 30, 2013 a total of 15% of the remaining 20% of the equity of Kwick was transferred to the Chief Executive Officer of Kwick (the “Kwick CEO”), in consideration for the Kwick CEO pledging to the bank 5,000 Euros as collateral, on behalf of Kiwibox, for bank overdrafts incurred by “Kwick’s” wholly-owned subsidiary Interscholz Beteiligungs GmbH, as general partner (managing partner) for Interscholz Internet Services GmbH & Co KG; as it is the duty of the general/managing partner to secure liquidity for the partnership. Since Kiwibox owned 20% of Kwick they were required, under German law, as managing partner of Interscholz Beteiligungs GmbH to secure liquidity for Interscholz Internet Services GmbH & Co KG. Therefore, 15% of Kiwibox’s 20% of Kwick was given to the Kwick CEO in exchange for the CEO pledging the necessary collateral. In addition to the collateral given by the Kwick CEO, as new 15% shareholder of Kwick, the Kwick CEO also agreed to keep the Interscholz Beteiligungs GmbH business going. This transfer was unanimously approved with written consent of the Board of Directors. Since the fair value of Kiwibox’s interest in Kwick is zero, this transaction had no material impact on the financial statements.

Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Company accounts for cash and other highly liquid investments with original maturities of three months or less as cash and cash equivalents.

 

Depreciation and Amortization

Depreciation and Amortization

 

Property and equipment are recorded at cost. Depreciation on equipment, furniture and fixtures and leasehold improvements is computed on the straight-line method over the estimated useful lives of such assets between 3-10 years, or lease term for leasehold improvements, if for a shorter period. Maintenance and repairs are charged to operations as incurred. Software costs are amortized using the straight line method and amortized over their estimated useful lives. Amortization begins when the related software is ready for its intended use in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, Subsequent Measurement.

 

Advertising Costs

Advertising Costs

 

Advertising costs are charged to operations when incurred. Advertising expense was $1,500 and $1,000 for the three months ended March 31, 2016 and 2015, respectively.

Evaluation of Long Lived Assets

Evaluation of Long Lived Assets

 

Long-lived assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated undiscounted future net cash flows of the related long-lived asset.

 

Any impairment of the Company’s internally-developed software is recognized and measured in accordance with the provisions of ASC 360-10-35, Intangibles-Goodwill and Other, Internal-Use Software, Subsequent Measurement, which requires that assets be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs related to computer software being developed or currently in use indicating that the carrying amount may not be recoverable:

 

a.   Internal-use computer software is not expected to provide substantive service potential.

 

b.   A significant change occurs in the extent or manner in which the software is used or is expected to be used.

 

c.   A significant change is made or will be made to the software program.

 

d.   Costs of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify the software.

Fair Value Measurements

Fair Value Measurements

 

The Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Under ASC 820, a framework was established for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Company accounted for certain convertible debentures issued in the year ended December 31, 2014 and the three months ended March 31, 2015 as derivative liabilities required to be bifurcated from the host contract in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares (see Note 13).

Securities Issued for Services

Securities Issued for Services

 

The Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair value method. For non-employees, the fair market value of the Company’s stock on the date of stock issuance or option/grant is used. The Company has determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model. The Company has adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant).

Reclassification of certain securities under ASC 815-15

Reclassification of Certain Securities Under ASC 815-15

 

Pursuant to ASC 815-15, “Contracts in Entity’s own Equity”, if a company has more than one contract subject to this Issue, and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions of contracts, should be reclassified. The Company's method for reclassification of such contracts is reclassification of contracts with the latest maturity date first.

Capitalization of Software /Website development costs

Capitalization of Software /Website development costs

 

The Company capitalizes outside-contracted development work in accordance with the guidelines published under ASC 350-50, “Website Development Costs”. Under ASC 350-50, costs incurred during the planning stage are expensed, while costs relating to software used to operate a web site or for developing initial graphics should be accounted for under ASC 350-50, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, unless a plan exists or is being developed to market the software externally. Under ASC 350-50, internal and external costs incurred to develop internal-use computer software during the application development stage should be capitalized. Costs to develop or obtain software that allows for access or conversion of old data by new systems should also be capitalized, excluding training costs.

 

Fees incurred for web site hosting, which involve the payment of a specified, periodic fee to an Internet service provider in return for hosting the web site on its server(s) connected to the Internet, are expensed over the period of benefit, and included in cost of sales in the accompanying financial statements.

 

A total of $0 and $0 was capitalized for web-site development work during the three months ended March 31, 2016 and 2015, respectively.

Income Taxes

Income Taxes

 

The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in the Company’s income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset.

Net Loss Per Share

Net Loss Per Share

 

Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. Such common stock equivalents totaled 86,441,799 common shares at March 31, 2016, comprised of 7,000,000 shares issuable upon exercise of stock purchase warrants, 4,500,000 shares issuable upon exercise of stock options, 729,537 shares exercisable upon conversion of convertible preferred shares, and 74,212,262 shares potentially issuable upon conversion of convertible debt. Such debt and the related accrued interest, is presently convertible at the option of four holders at a conversion price of 50% of the ten day trailing market price. The total principal due under these notes of $12,583,700 would yield in excess of 24.5 billion shares if fully converted, however, the respective notes, all of which were issued to these four investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion, may in the aggregate not exceed a number that would increase the total share holdings beneficially owned by such investor to a level above 9.99%. At the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the aforementioned conversions or exercises, as the case may be, are at the option of the holders.

Revenue Recognition

Revenue Recognition

 

The Company’s revenue is derived from advertising on the Kiwibox.Com or, formerly, Kwick websites. Most contracts require the Company to deliver the customer impressions, click-throughs or new customers, or some combination thereof. Accordingly, advertising revenue is estimated and recognized for the period in which customer impressions, click through or new customers are delivered. Licensing or hosting revenue consists of an annual contract with clients to provide web-site hosting and assistance.

Use of Estimates

Use of Estimates

 

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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

XML 35 R25.htm IDEA: XBRL DOCUMENT v3.4.0.3
PREPAID EXPENSES (Tables)
3 Months Ended
Mar. 31, 2016
Prepaid Expenses [Abstract]  
Prepaid Expenses

      March 31, 2016       December 31, 2015  
          Consulting fees   $ 165,000     $ 220,000  
          Business insurance     8,878       9,038  
    $ 173,878     $ 229,038  

 

XML 36 R26.htm IDEA: XBRL DOCUMENT v3.4.0.3
PROPERTY AND EQUIPMENT (Tables)
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
Property and Equipment

    March 31, 2016   December 31, 2015
          Furniture   $ 15,040     $ 15,040  
          Leasehold Improvements     24,130       24,130  
          Equipment     78,101       78,101  
      117,271       117,271  
          Less accumulated depreciation     114,675       114,225  
          Total   $ 2,596     $ 3,046  

XML 37 R27.htm IDEA: XBRL DOCUMENT v3.4.0.3
INTANGIBLE ASSETS (Tables)
3 Months Ended
Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets Consisted of Software for Website Development Costs

    March 31, 2016   December 31, 2015
        Website development costs   $ 254,264     $ 254,264  
        Less accumulated amortization     254,264       254,264  
        Total   $ 0     $ 0  

 

XML 38 R28.htm IDEA: XBRL DOCUMENT v3.4.0.3
ACCRUED EXPENSES (Tables)
3 Months Ended
Mar. 31, 2016
Payables and Accruals [Abstract]  
Accrued Expenses

    March 31, 2106   December 31, 2015
       Accrued interest   $ 4,762,846     $ 4,443,178  
       Accrued payroll, payroll taxes and commissions     45,733       41,541  
       Accrued professional fees     110,000       114,900  
       Accrued rent/deferred rent obligation     10,726       11,209  
       Miscellaneous accruals     23,935       23,935  
       Total   $ 4,953,240     $ 4,634,763  

 

XML 39 R29.htm IDEA: XBRL DOCUMENT v3.4.0.3
OBLIGATIONS TO BE SETTLED IN STOCK (Tables)
3 Months Ended
Mar. 31, 2016
Other Liabilities Disclosure [Abstract]  
Obligations to be Settled in Stock

    March 31, 2016   December 31, 2015
Obligation for warrants granted for compensation   $ 100,000     $ 100,000  
600,000 common shares issuable to a consultant who was a director of the company, for services
rendered.
    36,000       36,000  
300,000 (2016) and 1,200,000 (2015) common shares, and 2,900,000 (2016) and 2,900,000 (2015) stock options issuable to two officers of the Company pursuant to their respective employment Agreements     57,158       58,178  
8,400,000 (2016) and 8,100,000 (2015) stock options issuable to one director who also serves as the Company’s general counsel     83,160       80,190  
1,000,000 warrants granted on the Picunity.de assest Purchase     10,000       10,000  
    $ 286,318     $ 284,368  

 

XML 40 R30.htm IDEA: XBRL DOCUMENT v3.4.0.3
LOANS PAYABLE (Tables)
3 Months Ended
Mar. 31, 2016
Debt Disclosure [Abstract]  
Borrowings under Short Term Loan Agreements

 

On December 4, 1996, the company (formerly Magnitude, Inc.) repurchased 500,000 shares of its common stock and retired same against issuance of a promissory note maturing twelve months thereafter accruing interest at 5% per annum and due December 4, 1998. This note is overdue as of September 30, 2005 and no demand for payment has been made.

  $ 75,000  
Total   $ 75,000  

 

XML 41 R31.htm IDEA: XBRL DOCUMENT v3.4.0.3
NOTES PAYABLE (Tables)
3 Months Ended
Mar. 31, 2016
Notes Payable [Abstract]  
Notes Payable

    March 31,   December 31,
    2016   2015
Balance of non-converted notes outstanding. Attempts to locate the holder of this note, to settle this liability, have been unsuccessful.   $ 25,000     $ 25,000  
From September 2008 through March 2016 five creditors loaned the Company funds under the terms of the convertible notes issued, as modified in March 2009 and July 2010 and April 2011 and August 2012(see Note 13).     12,583,700       12,353,700  
In January 2011 and again in February 2011, a shareholder loaned the Company $50,000 under a demand note at 10%. In 2010, this shareholder loaned the Company $240,000 under a demand note at 10%. On June 22, 2015 this shareholder assigned all of his right, title and interest in this note to Mr. Marcus Winkler. Mr. Winkler has an investment and voting control over two of the company’s lenders.     340,000       340,000  
Total   $ 12,948,700     $ 12,718,700  

 

XML 42 R32.htm IDEA: XBRL DOCUMENT v3.4.0.3
LONG-TERM DEBT (Tables)
3 Months Ended
Mar. 31, 2016
Long-term Debt, Unclassified [Abstract]  
Components Of Long-term debt

12. LONG-TERM DEBT

 

Long-term debt as of December 31, 2015 and 2014 is comprised of the following:

 Discounted present value of a non-interest bearing $70,000 settlement with a former investor of Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997. The imputed interest rate used to discount the note is 8% per annum. This obligation is in default.   $ 33,529  
 Total     33,529  
     Less current maturities     33,529  
     Long-term debt, net of current maturities   $ —    

 

XML 43 R33.htm IDEA: XBRL DOCUMENT v3.4.0.3
COMMITMENTS AND CONTINGENCIES (Tables)
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Operating Lease Commitments

2016       37,089  
2017       50,768  
2018       47,847  

XML 44 R34.htm IDEA: XBRL DOCUMENT v3.4.0.3
FAIR VALUE (Tables)
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Reconciliation of Financial Instruments that are Recognized at Fair Value in Consolidated Financial Statements

Conversion Liability at January 1, 2016   $ 16,596,380  
Value of beneficial conversion features of new bedentures     563,489  
Change in value of beneficial conversion features during period     60,719  
Conversion Liability at March 31, 2016   $ 17,220,588  

 

XML 45 R35.htm IDEA: XBRL DOCUMENT v3.4.0.3
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2012
Dec. 31, 2015
Dec. 30, 2013
Dec. 10, 2013
Summary Of Significant Accounting Policies [Line Items]            
Entity Incorporation, Date of Incorporation Apr. 19, 1988          
Entity Information, Date To Change Former Legal Or Registered Name Dec. 31, 2009          
Business Acquisition Cost Acquired Entity Cash Paid     $ 515,037      
Business Acquisition Cost Acquired Entity Purchase Price     $ 1,352,000      
Advertising expense $ 1,500 $ 1,000        
Capitalized for website development $ 0 $ 0        
Common equivalents, dilutive potential common shares 86,441,799          
Shares issuable upon exercise of stock purchase warrants 7,000,000          
Shares issuable upon exercise of stock options 4,500,000          
Shares exercisable upon conversion of convertible preferred shares 729,537          
Shares issuable upon conversion of convertible debt 74,212,262          
Debt instrument, convertible, terms of conversion feature

Such debt and the related accrued interest, is presently convertible at the option of four holders at a conversion price of 50% of the ten day trailing market price. The total principal due under these notes of $12,583,700 would yield in excess of 24.5 billion shares if fully converted, however, the respective notes, all of which were issued to these four investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion, may in the aggregate not exceed a number that would increase the total share holdings beneficially owned by such investor to a level above 9.99%. At the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the aforementioned conversions or exercises, as the case may be, are at the option of the holders.

         
Shares issuable upon conversion of convertible debt conversion price, as percentage of the average closing price preceding 10 days 50.00%     50.00%    
Percentage of ownership interest of investors 9.99%     9.99%    
Accrued interest principal amount $ 12,583,700          
Kwick            
Summary Of Significant Accounting Policies [Line Items]            
Equity Method Investment, Ownership Percentage 20.00%       15.00%  
Kwick CEO            
Summary Of Significant Accounting Policies [Line Items]            
Equity Method Investment, Ownership Percentage         15.00%  
Germany | Subsidiary            
Summary Of Significant Accounting Policies [Line Items]            
Equity Method Investment, Ownership Percentage           80.00%
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.4.0.3
Concentrations of Business and Credit Risk (Details Narrative)
3 Months Ended
Mar. 31, 2016
USD ($)
Disclosure Concentration Of Business and Credit Risk Additional Information [Abstract]  
Cash, FDIC insurance limit $ 250,000
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.4.0.3
Prepaid Expenses (Detail) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Disclosure Prepaid Expenses [Abstract]    
Consulting fees $ 165,000 $ 220,000
Business insurance 8,878 9,038
Total Prepaid Expenses $ 173,878 $ 229,038
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.4.0.3
Component of Property and Equipment (Detail) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Line Items]    
Property Plant And Equipment $ 117,271 $ 117,271
Less accumulated depreciation 114,675 114,225
Total 2,596 3,046
Furniture    
Property, Plant and Equipment [Line Items]    
Property Plant And Equipment 15,040 15,040
Leasehold Improvements    
Property, Plant and Equipment [Line Items]    
Property Plant And Equipment 24,130 24,130
Equipment    
Property, Plant and Equipment [Line Items]    
Property Plant And Equipment $ 78,101 $ 78,101
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.4.0.3
Property and Equipment (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Disclosure Property and Equipment Additional Information [Abstract]    
Depreciation expense $ 450 $ 1,249
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.4.0.3
Intangible Assets Consisted of Software for Website Development Costs (Detail) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]    
Less accumulated amortization $ 254,264 $ 254,264
Total
Website    
Finite-Lived Intangible Assets [Line Items]    
Website development costs $ 254,264 $ 254,264
Less accumulated amortization 254,264 254,264
Total $ 0 $ 0
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.4.0.3
Intangible Assets (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Disclosure Intangible Assets Additional Information [Abstract]    
Amortization expense $ 0 $ 0
XML 52 R42.htm IDEA: XBRL DOCUMENT v3.4.0.3
Investment in Unconsolidated Subsidiary (Details Narrative)
Mar. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Jun. 22, 2015
USD ($)
Dec. 30, 2013
Dec. 10, 2013
EUR (€)
Investment In Unconsolidated Subsidiary [Line Items]          
Carrying value of cost method investment $ 0 $ 0      
Kreuzfeld Ltd | Senior Class Notes          
Investment In Unconsolidated Subsidiary [Line Items]          
Promissory Note $ 582,561,300        
Ulrich Schuerch | Senior Class Notes          
Investment In Unconsolidated Subsidiary [Line Items]          
Promissory Note     $ 34,000,000    
Kwick          
Investment In Unconsolidated Subsidiary [Line Items]          
Equity method investment ownership percentage 20.00%     15.00%  
Germany | Subsidiary          
Investment In Unconsolidated Subsidiary [Line Items]          
Equity method investment ownership percentage         80.00%
Payment to purchase of equity subsidiary | €         € 3,600,000
XML 53 R43.htm IDEA: XBRL DOCUMENT v3.4.0.3
Accrued Expenses (Detail) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Disclosure Accounts Payable and Accrued Expenses [Abstract]    
Accrued interest $ 4,762,846 $ 4,443,178
Accrued payroll, payroll taxes and commissions 45,733 41,541
Accrued professional fees 110,000 114,900
Accrued rent/deferred rent obligation 10,726 11,209
Miscellaneous accruals 23,935 23,935
Total $ 4,953,240 $ 4,634,763
XML 54 R44.htm IDEA: XBRL DOCUMENT v3.4.0.3
Obligations to be Settled in Stock (Detail) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Short-term Debt [Line Items]    
Obligations to be settled in stock $ 286,318 $ 284,368
Employment Agreement | Former Director    
Short-term Debt [Line Items]    
Obligations to be settled in stock 57,158 58,178
Services | Former Director    
Short-term Debt [Line Items]    
Obligations to be settled in stock 36,000 36,000
Consulting Services | Chief Executive Officer    
Short-term Debt [Line Items]    
Obligations to be settled in stock 83,160 80,190
Warrant [Member]    
Short-term Debt [Line Items]    
Obligations to be settled in stock 100,000 100,000
Warrant [Member] | Pixunity Dot De    
Short-term Debt [Line Items]    
Obligations to be settled in stock $ 10,000 $ 10,000
XML 55 R45.htm IDEA: XBRL DOCUMENT v3.4.0.3
Obligations to be Settled in Stock (Detail) (Parenthetical) - shares
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Director    
Stock options issuable 8,400,000 8,100,000
Employment Agreement | Former Director    
Common shares issuable, for services rendered 300,000 1,200,000
Services | Former Director    
Common shares issuable, for services rendered 600,000 600,000
Employement Agreements | Former Director    
Stock options issuable 2,900,000 2,900,000
Warrant [Member] | Pixunity Dot De    
Warrants granted on Pixunity.de asset Purchase 1,000,000 1,000,000
XML 56 R46.htm IDEA: XBRL DOCUMENT v3.4.0.3
Borrowings under Short Term Loan Agreements (Detail) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Disclosure Borrowings Under Short Term Loan Agreements [Abstract]    
On December 4, 1996, The company (Formerly Magnitude, Inc.) repurchased 500,000 shares of its common stock and retired same against issuance of a promissory note maturing twelve months thereafter accruing interest at 5% per annum and due December 4, 1998. This note is overdue as of September 30, 2005 and no demand for payment has been made. $ 75,000 $ 75,000
Total $ 75,000 $ 75,000
XML 57 R47.htm IDEA: XBRL DOCUMENT v3.4.0.3
Borrowings under Short Term Loan Agreements (Detail) (Parenthetical)
1 Months Ended
Dec. 04, 1996
shares
Disclosure Borrowings Under Short Term Loan Agreements [Abstract]  
Common stock repurchased and retired against issuance of promissory note 500,000
Debt maturity date Dec. 04, 1998
Accruing interest per annum 5.00%
XML 58 R48.htm IDEA: XBRL DOCUMENT v3.4.0.3
Component of Note Payable (Detail) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Debt Instrument [Line Items]    
Convertible note payable-other $ 12,583,700 $ 12,353,700
Total 12,718,700 11,558,700
Related Party Transactions | Period Issuance Two    
Debt Instrument [Line Items]    
Convertible note payable-other 12,353,700 11,193,700
Demand Notes | All Other    
Debt Instrument [Line Items]    
Notes and loans payable 50,000 50,000
Demand Notes | Related Party Transactions    
Debt Instrument [Line Items]    
Notes and loans payable $ 240,000 $ 240,000
XML 59 R49.htm IDEA: XBRL DOCUMENT v3.4.0.3
Component of Note Payable (Detail) (Parenthetical) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Dec. 04, 1996
Debt instrument interest rate     5.00%
Demand Notes | Related Party Transactions      
Notes and loans payable $ 240,000 $ 240,000  
Debt instrument interest rate 10.00% 10.00%  
Demand Notes | All Other      
Notes and loans payable $ 50,000 $ 50,000  
XML 60 R50.htm IDEA: XBRL DOCUMENT v3.4.0.3
Components of Long-Term Debt (Detail) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Disclosure Components Of Long Term Debt [Abstract]    
Discounted present value of a non-interest bearing $70,000 settlement with a former investor of Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997. The imputed interest rate used to discount the note is 8% per annum. This obligation is in default. $ 33,529 $ 33,529
Total 33,529 33,529
Less current maturities $ 33,529 $ 33,529
Long-term debt, net of current maturities
XML 61 R51.htm IDEA: XBRL DOCUMENT v3.4.0.3
Components of Long-Term Debt (Detail) (Parenthetical)
3 Months Ended 12 Months Ended
Mar. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Disclosure Components Of Long Term Debt [Abstract]    
Non-interest bearing obligation $ 70,000 $ 70,000
Debt instrument, number of periodic payment 24 24
Debt instrument, frequency of periodic payment monthly monthly
Debt instrument, date of first required payment Jul. 01, 1997 Jul. 01, 1997
Imputed interest rate used to discount the note 8.00% 8.00%
XML 62 R52.htm IDEA: XBRL DOCUMENT v3.4.0.3
Derivative Conversion Features (Detail) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Aug. 01, 2012
Sep. 16, 2011
Aug. 01, 2011
Sep. 30, 2010
Jul. 27, 2010
Dec. 04, 1996
Derivative [Line Items]                  
Accrued interest rate per annum                 5.00%
Shares issuable upon conversion of convertible debt conversion price, as percentage of the average closing price preceding 10 days 50.00%   50.00%            
Percentage of ownership interest of investors 9.99%   9.99%            
Value of derivative conversion feature $ 2,392,694 $ 2,444,269              
Derivative conversion feature, Black-Scholes valuation model 563,489                
Fair value of derivative conversion feature 17,220,588                
Change in value of beneficial conversion features during period (60,719)                
Minimum                  
Derivative [Line Items]                  
Shares issuable upon conversion of convertible debt, price per share               $ 0.001  
Consent required for increase in compensation, minimum percentage               5.00%  
Maximum                  
Derivative [Line Items]                  
Percentage of ownership interest of investors               9.99%  
Cambridge Service Inc                  
Derivative [Line Items]                  
Original principal amount, now cancelled 1,303,996                
Convertible promissory notes, outstanding 4,115,914   $ 4,040,407            
Cambridge Service Inc | Senior Class Notes                  
Derivative [Line Items]                  
Convertible promissory notes               $ 683,996  
Accrued interest rate per annum               10.00%  
Shares issuable upon conversion of convertible debt conversion price, as percentage of the average closing price preceding 10 days               50.00%  
Line of credit facility, maximum borrowing capacity           $ 2,000,000      
Discover Advisory Company                  
Derivative [Line Items]                  
Line of credit facility, maximum borrowing capacity       $ 5,000,000          
Discover Advisory Company | Senior Class Notes                  
Derivative [Line Items]                  
Convertible promissory notes               $ 1,160,984  
Accrued interest rate per annum               10.00%  
Discovery Advisory Company                  
Derivative [Line Items]                  
Original principal amount, now cancelled 1,080,984                
Convertible promissory notes, outstanding 5,915,726   6,027,284            
Kreuzfeld Ltd                  
Derivative [Line Items]                  
Line of credit facility, maximum borrowing capacity         $ 5,000,000        
Kreuzfeld Ltd | Senior Class Notes                  
Derivative [Line Items]                  
Original principal amount, now cancelled 2,000,000                
Convertible promissory notes, outstanding 5,825,613   5,490,657            
Vermoegensverwaltungs Gesellschaft Zurich Ltd | Senior Class Notes                  
Derivative [Line Items]                  
Line of credit facility, maximum borrowing capacity             $ 2,000,000    
Vgz [Member]                  
Derivative [Line Items]                  
Original principal amount, now cancelled 2,000,000                
Convertible promissory notes, outstanding $ 1,128,744   $ 1,109,550            
XML 63 R53.htm IDEA: XBRL DOCUMENT v3.4.0.3
Operating Lease Commitments (Detail)
Mar. 31, 2016
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2016 $ 37,089
2017 50,768
2018 $ 47,847
XML 64 R54.htm IDEA: XBRL DOCUMENT v3.4.0.3
Commitments and Contingencies (Details Narrative)
3 Months Ended
Mar. 31, 2016
USD ($)
shares
Mar. 31, 2015
USD ($)
shares
Dec. 31, 2015
USD ($)
ft²
Jan. 02, 2014
USD ($)
Oct. 06, 2010
USD ($)
Commitments and Contingencies Disclosure [Line Items]          
Office area rented | ft²     990    
Lease and rent expenses $ 18,400 $ 21,667      
Operating lease term   5 years      
Prepaid consulting fees     $ 18,333   $ 16,667
Shares granted | shares 300,000 300,000      
Agreement Nine          
Commitments and Contingencies Disclosure [Line Items]          
Prepaid consulting fees       $ 220,000  
Monthly Payment          
Commitments and Contingencies Disclosure [Line Items]          
Minimum monthly rentals $ 3,833        
Tenants share of utility/cam/property tax charges 291        
Monthly Payment | Agreement One          
Commitments and Contingencies Disclosure [Line Items]          
Lease and rent expenses 2,775        
Monthly Payment | Agreement Two          
Commitments and Contingencies Disclosure [Line Items]          
Lease and rent expenses 2,837        
Monthly Payment | Agreement Three          
Commitments and Contingencies Disclosure [Line Items]          
Lease and rent expenses 2,837        
Monthly Payment | Agreement Eight          
Commitments and Contingencies Disclosure [Line Items]          
Lease and rent expenses $ 2,943        
XML 65 R55.htm IDEA: XBRL DOCUMENT v3.4.0.3
Related Party Transactions (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Oct. 06, 2010
Related Party Transaction [Line Items]          
Prepaid consulting fees       $ 18,333 $ 16,667
Discovery Advisory Company          
Related Party Transaction [Line Items]          
Owed to related party $ 4,451,722        
Variable Interest Entity, Qualitative or Quantitative Information, Ownership Percentage 10.00%   10.00%    
Kreuzfeld Ltd [Member]          
Related Party Transaction [Line Items]          
Owed to related party $ 4,279,959        
Advancement from related party 230,000        
Cambridge Service Inc          
Related Party Transaction [Line Items]          
Owed to related party 3,080,060        
Vgz [Member]          
Related Party Transaction [Line Items]          
Owed to related party 771,958        
Kwick          
Related Party Transaction [Line Items]          
Advertising Agreement 2,337        
Accounts Receivable, related parties 54,236        
Loan to subsidiary 21,524        
Owed to related party 21,524        
Legal Services          
Related Party Transaction [Line Items]          
Legal fees $ 15,375 $ 12,375      
Share-based compensation arrangement by share-based payment award, options, grants in period per month 300,000 300,000      
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value $ 2,970 $ 2,970      
Owed to related party $ 300 330      
Website Development, Technology Services          
Related Party Transaction [Line Items]          
Share-based compensation arrangement by share-based payment award, options, grants in period per month 100,000        
Website Development Related Services $ 117,445 $ 110,283      
Prepaid consulting fees       $ 220,000  
XML 66 R56.htm IDEA: XBRL DOCUMENT v3.4.0.3
Reconciliation of Financial Instruments that are Recognized at Fair Value in Consolidated Financial Statements (Detail) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Disclosure Reconciliation Of Financial Instruments That Are Recognized At Fair Value In Consolidated Financial Statements [Abstract]    
Conversion Liability $ 17,220,588 $ 16,596,380
Value of beneficial conversion features of new debentures 563,489  
Change in value of beneficial conversion features during period $ 60,719  
XML 67 R57.htm IDEA: XBRL DOCUMENT v3.4.0.3
Fair Value (Details Narrative)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Conversion discounts 0.50 0.50
Look back period 10 days 10 days
Minimum    
Bond rates 0.17%  
Volatility 55.00%  
Maximum    
Bond rates 0.29%  
Volatility 341.00%  
XML 68 R58.htm IDEA: XBRL DOCUMENT v3.4.0.3
Subsequent Events (Detail)
2 Months Ended
May. 16, 2016
USD ($)
Subsequent Events [Abstract]  
Working capital $ 160,000
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