The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Notes to the Unaudited Consolidated Financial Statements
1.
Nature of Operations and Continuance of Business
The unaudited interim consolidated financial statements included herein have been prepared by Net Savings Link, Inc. and its wholly owned subsidiary Global Distribution Network, Inc. (collectively, "NSL" or the "Company") in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. We believe that all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein and that the disclosures made are adequate to make the information not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements as would be required to be reported in Form 10-K have been omitted.
On June 18, 2014, NSL entered into a Share Exchange Agreement with Global Distribution Inc. ("GDI"), incorporated in the State of New York on May 5, 2014; David Saltrelli and Peter Schuster, holders of all of the issued and outstanding shares of Series A Preferred Stock of NSL; and, Steven Baritz, the sole shareholder of GDI. As a result of the Share Exchange Agreement, Steven Baritz acquired all of the issued and outstanding shares of Series A preferred stock of NSL (1,500,000 shares) from David Saltrelli and Peter Schuster in exchange for Baritz transferring all of the issued and outstanding shares of common stock of GDI to NSL. The shares of Series A preferred stock have 1,000 votes each and represent approximately 66.18% of NSL's voting power.
Effective June 18, 2013, Steven Baritz was appointed to the board of directors and appointed president, principal executive officer, secretary, treasurer, principal financial officer, and principal accounting officer, David Saltrelli, Peter Schuster, and Jon Wallen resigned as officers and directors. David Saltrelli and Peter Schuster, will continue to own 7,200,000 shares of our common stock and in the event of any action which causes a reduction in said shares, the Company will issue additional shares of common stock to David Saltrelli and Peter Schuster in order to maintain their ownership in 7,200,000 shares of the common stock.
For accounting purposes, the Share Exchange Agreement is being accounted for as a recapitalization of NSL, with GDI considered the accounting acquirer. GDI had no assets or liabilities and NSL did not recognize goodwill or any intangible assets as a result of the transaction. NSL had $739,686 of net liabilities at the date of the transaction. The historical consolidated financial statements presented include only the operations of GDI since its inception and NSL since June 18, 2014. The Company selected November 30 as its fiscal year end.
2.
Going Concern
NSL's financial statements are prepared using Generally Accepted Accounting Principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, NSL has generated minimal revenue and accumulated significant losses since inception. As of August 31, 2014, company has accumulated deficit of $69,135 and a working capital deficit of $410,877. All of these items raise substantial doubt about its ability to continue as a going concern. Management's plans with respect to alleviating the adverse financial conditions that caused management to express substantial doubt about the NSL's ability to continue as a going concern are as follows:
In order to fund the start-up of operations during the year ended November 30, 2014, NSL entered into several financing transactions and continues to try to raise funds in 2014. The continuation of NSL as a
going concern is dependent upon its ability to generating profitable operations that produce positive cash flows. If NSL is not successful, it may be forced to raise additional debt or equity financing.
There can be no assurance that NSL will be able to achieve its business plans, raise any more required capital or secure the financing necessary to achieve its current operating plan. The ability of NSL to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
3.
Convertible Promissory Notes Payable
During the period ended August 31, 2014, the holder of four Convertible Promissory Notes elected to convert a total of $91,848 in principal and interest into 422,520,696 shares of the Company's common stock at an average conversion price of $0.0002 per share.
During June 2014, NSL issued an Unsecured Convertible Promissory Notes for $53,000 (the "June 2014 Convertible Promissory Note"). The June 2014 Convertible Promissory Note is unsecured, due nine months from the date of issuance, accrues interest at 8% per annum and is convertible into shares of NSL's common stock 180 days from the date of issuance. The June 2014 Convertible Promissory Note is convertible at a discount from market of 55% of the average of the three lowest bid prices during the twenty trading days prior to the conversion date.
During June 2014, as a result of the Company's failure to pay amounts due under certain assumed convertible promissory notes from NSL, the Company incurred a penalty of $36,978, which was added to the principal amounts of the respective outstanding Convertible Promissory Notes.
During July 2014, NSL issued an Unsecured Convertible Promissory Note for $53,000 (the "July 2014 Convertible Promissory Note"). The July 2014 Convertible Promissory Note is unsecured, due nine months from the date of issuance, convertible 180 days from the date of issuance, accrues interest at 8% per annum and is convertible at a discount from market of 55% of the average of the three lowest bid prices during the twenty trading days prior to the conversion date.
4.
Derivative Liabilities
NSL analyzed the conversion options embedded in the Convertible Promissory Notes for derivative accounting consideration under ASC 815,
Derivatives and Hedging
, and determined that the instruments embedded in the above referenced convertible promissory notes should be classified as liabilities and recorded at fair value due to their being no explicit limit to the number of shares to be delivered upon settlement of the conversion options. Additionally, the above referenced convertible promissory notes contain dilutive issuance clauses. Under these clauses, based on future issuances of NSL's common stock or other convertible instruments, the conversion price of the above referenced convertible promissory notes can be adjusted downward. Because the number of shares to be issued upon settlement of the above referenced convertible promissory notes cannot be determined under this instrument, NSL cannot determine whether it will have sufficient authorized shares at a given date to settle any other future share instruments.
During the period ended August 31, 2014, one Convertible Promissory Notes became convertible into shares of the Company's common stock. The fair value of the conversion options was determined to be $62,279 using a Black-Scholes option-pricing model. Upon the date the Convertible Promissory Notes became convertible, $23,700 was recorded as debt discount and $38,579 was recorded as day one loss on derivative liability.
During the period ended August 31, 2014, $91,848 in principal and accrued interest on Convertible Promissory Notes was converted into common stock, $304,197 in related derivative liability was extinguished through a charge to paid-in capital and $72,382 was recorded as a net gain on mark-to-market of the conversion options and warrants.
The following table summarizes the derivative liabilities included in the balance sheet at August 31, 2014:
Derivative liabilities May 5, 2014 (Inception)
|
|
$
|
-
|
|
Assumption of derivative due to merger
|
|
|
572,958
|
|
Reclassification of derivative liability to additional paid-in capital due to
promissory note conversions
|
|
|
(304,197
|
)
|
Gains on change in fair value
|
|
|
(72,382
|
)
|
Balance at August 31, 2014
|
|
$
|
196,379
|
|
The following table summarizes the loss on derivative liabilities included in the income statement for the period ended August 31, 2014:
Excess of fair value of conversion option derivative liabilities over the related
notes payable
|
|
$
|
(38,597
|
)
|
Fair value of convertible note default principal penalty
|
|
|
(828,082
|
)
|
Gains on change in fair value
|
|
|
794,297
|
|
Gain on derivative liabilities
|
|
$
|
72,382
|
|
NSL valued its derivatives liabilities using the Black-Scholes option-pricing model. Assumptions used during the period ended August 31, 2014 include (1) risk-free interest rates between 0.04% to 1.53%, (2) lives of between 0 and 4.76 years, (3) expected volatility of between 200% to 409%, (4) zero expected dividends, (5) conversion prices as set forth in the related instruments, and (6) the common stock price of the underlying share on the valuation dates.
5.
Common Stock
During June 2014, the Company issued 45,336,654 shares of common stock for $20,542 of debt, or $0.0004 per share.
During July 2014, the Company issued 151,112,613 shares of common stock for $37,520 of debt and $2,136 of accrued interest, or $0.0002 per share.
During August 2014, the Company issued 226,071,429 shares of common stock for $31,650 of debt, or $0.0002 per share.
6.
Financial Instruments
ASC 820,
Fair Value Measurements
(ASC 820) and ASC 825,
Financial Instruments
(ASC 825)
,
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 -
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 -
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
- Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
NSL's financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
The following table sets forth by level with the fair value hierarchy the Company's financial assets and liabilities measured at fair value on August 31, 2014:
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
None
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
196,379
|
|
|
$
|
196,379
|
|
7.
Subsequent Events
During September 2014, the Company issued 337,142,857 shares of common stock for $36,240 of debt and accrued interest, or $0.0001 per share.
During October 2014, the Company issued 117,000,000 shares of common stock for $4,680 of debt, or $0.0004 per share.
We amended our articles of incorporation to increase our authorized shares of common stock from 1,000,000,000 shares to 3,000,000,000 shares with a par value of $0.001 per share.