Digital Locations, Inc. (Form: 8-K/A, Received: 02/13/2019 16:27:15)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 30, 2018

DIGITAL LOCATIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada

000-54817

20-5451302

(State or other jurisdiction

of incorporation or organization)

(Commission

File Number)

IRS Employer

Identification No.)

3700 State Street, Suite 350, Santa

Santa Barbara, CA

93105

(Address of Principal Executive Offices)

(Zip Code)

(805) 456-7000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Explanatory Note

On December 3, 2018, Digital Locations, Inc. (the “Company”) filed a Current Report on Form 8-K relating to the merger of EllisLab, Inc. with and into EllisLab Corp., a wholly owned subsidiary of the Company. This Amendment No. 1 on Form 8-K/A (the “Form 8-K/A”) amends the Current Report on 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on December 3, 2018 (the “Original 8-K”) and is being filed to include the required financial statements and pro forma financial information within the time period permitted by Item 9.01 and to include Item 2.01.

Item 1.01 Entry into a Material Definitive Agreement.

Agreement and Plan of Merger with EllisLab Corp. and EllisLab, Inc.

On November 30, 2018, the Company, entered into an Agreement and Plan of Merger (the “Plan of Merger”) with EllisLab, Inc., an Oregon corporation (“EllisLab”), Rick Ellis (the “EllisLab Shareholder”), and EllisLab Corp., a newly formed Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”) pursuant to which EllisLab merged with and into Merger Sub (the “Merger”). Pursuant to the terms of the Plan of Merger, the EllisLab Shareholder received thirty six thousand (36,000) shares (the “Stock Consideration”) of the Company’s newly designated Series C Convertible Preferred Stock (the “Series C Preferred Stock”), with a stated value of $100 per share, in exchange for the cancellation of his all of his shares of common stock of EllisLab, which shares represented 100% of the issued and outstanding capital stock of EllisLab.

Pursuant to the Articles of Merger that were filed with the Secretary of State of the State of Nevada and with the Secretary of State of the State of Oregon on November 30, 2018 (the “Effective Time”), the separate legal existence of EllisLab ceased, and Merger Sub became the surviving company in the Merger and shall continue its corporate existence under the laws of the State of Nevada under the name “EllisLab Corp.”

At the Effective Time of the Merger, automatically by virtue of the Merger, each common share of EllisLab that was issued and outstanding immediately prior to the Effective Time was converted, on a pro rata basis, into validly issued, fully paid and nonassessable shares of Series C Preferred Stock representing their pro rata interest in the Company and the Stock Consideration.

Pursuant to the Plan of Merger, the EllisLab Shareholder has agreed to a covenant not to compete subject to the terms and conditions in the Plan of Merger for a period of two (2) years following the Effective Time (the “Non - Competition Period”). The EllisLab Shareholder further agreed that during the Non-Competition Period, he will not directly or indirectly solicit or agree to service for his benefit or the benefit of any third-party, any of EllisLab’s, the Company’s, or Merger Sub’s customers.

Pursuant to the Plan of Merger, during the period beginning on the Effective Time and ending on the twenty four (24) month anniversary thereof, the EllisLab Shareholder will not directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell, or otherwise transfer or dispose of, any portion of the Stock Consideration, or any shares of the Company’s common stock underlying the Stock Consideration (collectively the “Lock - Up Securities”), beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, by such holder on the Effective Date, or hereafter acquired or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any portion of the Lock-Up Securities.

Each of the parties to the Plan of Merger has made customary representations and warranties in the Plan of Merger.

The Plan of Merger has been included to provide investors and shareholders with information regarding its terms. It is not intended to provide any other factual information about the Company, EllisLab, the EllisLab Shareholder or Merger Sub. The Plan of Merger contains representations and warranties that the parties to the Plan of Merger made to and solely for the benefit of each other, and the assertions embodied in such representations and warranties are qualified by information contained in confidential disclosure schedules that the parties exchanged in connection with signing the Plan of Merger. Accordingly, investors and shareholders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances, since they were only made as of the date of the Plan of Merger (or such other date as specified therein) and are modified in important part by the underlying disclosure schedules.

The foregoing description of the Plan of Merger does not purport to be complete and is qualified in its entirety by reference to the full text of the Plan of Merger and any Exhibits thereto, which is attached as Exhibit 2.1 to the Original 8-K and is incorporated herein by reference.

Certificate of Designation of Series C Preferred Stock

As set forth above, the Company issued 36,000 shares of Series C Preferred Stock to the EllisLab Shareholder. The holders of outstanding shares of the Series C Preferred Stock (the “Holders”) shall be entitled to receive dividends pari passu (on a pro rata basis) with the holders of Series B Preferred Stock and Common Stock, except upon a liquidation, dissolution and winding up of the Company. Such dividends shall be paid equally to all outstanding shares of Series C Preferred Stock, Series B Preferred Stock and Common Stock, on an as-if-converted basis with respect to the Series C Preferred Stock and Series B Preferred Stock.

In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Holder of each outstanding share of the Series C Preferred Stock shall be entitled to receive, on a pro rata basis with the outstanding Series B Preferred Stock, out of the assets of the Company available for distribution to its shareholders upon such liquidation, whether such assets are capital or surplus of any nature, an amount equal to one hundred dollars ($100.00) for each such share of the Series C Preferred Stock (as adjusted for any combinations. consolidations, stock distributions, stock splits or stock dividends with respect to such shares), plus all dividends, if any, declared and unpaid thereon as of the date of such distribution, before any payment shall be made or any assets distributed to the holders of the Common Stock, and, after such payment, the remaining assets of the Company shall be distributed to the holders of Common Stock.

Each share of Series C Preferred Stock is convertible into twenty thousand (20,000) shares of the Company’s fully paid and nonassessable shares of Common Stock, as adjusted. The Series C Preferred Stock shall contain the respective rights, privileges and designations as are set forth in the Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock appended hereto as Exhibit 4.1 . The Series C contains a blocker that prevents the Holder from converting the Series C Preferred if such exercise would result in beneficial ownership of re than 4.99% of the outstanding shares of the Company’s stock, without at least 61 days of prior notice. Under the Series C Preferred Stock, the Holder is also subject to the Rule 144 restrictions of an affiliate.

Except as required by law or as specifically provided in the Certificate of Designation, the Holders of Series C Preferred Stock shall not be entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting); provided, however, that each Holder of outstanding shares of Series C Preferred Stock shall be entitled, on the same basis as holders of Common Stock, to receive notice of such action or meeting.

The foregoing description of the Certificate of Designation of Series C Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the full text of the Certificate of Designation of Series C Preferred Stock, which is attached as Exhibit 4.1 to the Original 8-K and is incorporated herein by reference.

Option Agreement

On November 30, 2018, in connection with and pursuant to the Merger Agreement, the Company entered into a Nonstatutory Stock Option Agreement (the “Option Agreement”) with Derek Jones (the “Optionee”), whereby the Company issued to the Optionee an option to purchase 100,000,000 shares of the Common stock of the Company, at an exercise price of $0.005, in exchange for his surrender of an option to purchase 10% of the shares of outstanding common stock of EllisLab. The option is vested but may not be exercised for 2 years from the date of the Merger Agreement. The option contains a blocker that prevents the Optionee from exercising the Option if such exercise would result in beneficial ownership of more than 4.99% of the outstanding shares of the Company’s stock, without at least 61 days of prior notice. Under the Option the Optionee is also subject to the Rule 144 restrictions of an affiliate.

The foregoing description of the Option Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Option Agreement, which is attached as Exhibit 10.1 to the Original 8-K and is incorporated herein by reference.

Item 2.01 Completion of Acquisition of Acquisition or Disposition of Assets

The information set forth in Item 1.01 is incorporated by reference herein.

Item 3.03 Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 is incorporated by reference herein.

On November 30, 2018, the Company issued an aggregate of 36,000 shares of Series C Preferred Stock pursuant to the terms of the Plan of Merger which is described in Item 1.01, which is incorporated by reference, in its entirety, into this Item 3.03. Issuance of the Series C Preferred Stock pursuant to the Plan of Merger was not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state. These securities were offered and issued in reliance upon the exemption from registration under the Securities Act, afforded by Section 4(a)(2).

In connection with and pursuant to the Merger Agreement, the Company issued an option to purchase 100,000,000 shares of the Common stock of the Company to Derek Jones (the “Optionee”), at an exercise price of $0.005, in exchange for his surrender of an option to purchase 10% of the shares of outstanding common stock of EllisLab. The option is vested but may not be exercised for 2 years from the date of the Merger Agreement. The option contains a blocker that prevents the Optionee from exercising the Option if such exercise would result in beneficial ownership of more than 4.99% of the outstanding shares of the Company’s stock, without at least 61 days of prior notice. Under the Option the Optionee is also subject to the Rule 144 restrictions of an affiliate.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

The information set forth in Item 1.01 is incorporated by reference herein.

Pursuant to the Plan of Merger, dated as of November 30, 2018, effective upon the Closing, Rick Ellis was appointed as a director of the Company to serve on the Company’s Board of Directors. Except with respect to the Merger Agreement and the transactions described there in, Mr. Ellis has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The information set forth in Item 1.01 is incorporated by reference herein.

Certificate of Designation of Series C Preferred Stock

On November 30, 2018, the Company filed the Certificate of Designation of Series C Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Nevada, setting forth the terms of the Series C Preferred Stock. A copy of the Series C Certificate of Designation is appended as Exhibit 4.1 to the Original 8-K and is incorporated herein by reference. The foregoing does not purport to be a complete description of the Series C Certificate of Designation and is qualified in its entirety by reference to the full text of the Series C Certificate of Designation.

Item 7.01. Regulation FD Disclosure.

A copy of the press release issued by the Company on December 3, 2018 announcing the completion of the Merger and the Purchase is furnished as Exhibit 99.1 to the Original 8-K.

The foregoing information in this Item 7.01 (including Exhibit 99.1 hereto) is being furnished under “Item 7.01 Regulation FD Disclosure.” Such information (including Exhibit 99.1 hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(a)	Financial Statements of Businesses Acquired.

(b)	Pro Forma Financial Information.

In accord with Item 9.01, the following are filed as exhibits to this Current Report on Form 8-K/A:

Audited financial statements of EllisLab as of and for the years ended December 31, 2017 and 2016 are filed as Exhibit 99.2 hereto.

Unaudited condensed financial statements of EllisLab as of September 30, 2018 and December 31, 2017 and for the nine months ended September 30, 2018 and 2017 are filed as Exhibit 99.3 hereto.

Unaudited pro forma condensed combined financial information of the Company, as of and for the nine months ended September 30, 2018 and for the year ended December 31, 2017 is filed as Exhibit 99.4 hereto.

(d)

Exhibits.

2.1		Agreement and Plan of Merger, dated as of November 30, 2018, by and among Digital Locations, Inc., EllisLab, Inc., Rick Ellis and EllisLab Corp. (Incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed December 3, 2018)

4.1		Certificate of Designation of Series C Convertible Preferred Stock of Digital Locations, Inc. (Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed December 3, 2018)

10.1		Nonstatutory Stock Option Agreement, dated as of November 30, 2018, between Digital Locations, Inc, and Derek Jones. (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed December 3, 2018)

99.1		Press Release dated December 3, 2018. (Incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed December 3, 2018)

99.2		Audited financial statements of EllisLab, Inc. as of and for the years ended December 31, 2017 and 2016

99.3		Unaudited condensed financial statements of EllisLab, Inc. as of September 30, 2018 and December 31, 2017 and for the nine months ended September 30, 2018 and 2017

99.4		Unaudited pro forma condensed combined financial information of Digital Locations, Inc. as of and for the nine months ended September 30, 2018 and for the year ended December 31, 2017

SIGNATURES

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

	DIGITAL LOCATIONS, INC.

Date: February 13, 2019	By:	/s/ William E. Beifuss, Jr.
	Name:	William E. Beifuss, Jr.
	Title:	President

EXHIBIT 99.2

ELLISLAB, INC.

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements of EllisLab, Inc.

	Page
Report of Independent Registered Public Accounting Firm		2
Balance Sheets as of December 31, 2017 and 2016		3
Statements of Operations for the Years Ended December 31, 2017 and 2016		4
Statements of Stockholder’s Equity for the Years Ended December 31, 2017 and 2016		5
Statements of Cash Flows for the Years Ended December 31, 2017 and 2016		6
Notes to Financial Statements		7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of EllisLab, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of EllisLab, Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of operations, stockholder’s equity, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company currently has ongoing operating losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2018.

Houston, TX

January 13, 2019

ELLISLAB, INC.

BALANCE SHEETS

	December 31,
	2017		2016

ASSETS

Current assets:
Cash	$	54,486	$	77,813
Prepaid expenses		7,476		6,987
Total current assets		61,962		84,800

Property and equipment, net		6,416		6,681

Total assets	$	68,378	$	91,481

LIABILITIES AND STOCKHOLDER’S EQUITY

Current liabilities:
Accounts payable	$	44,903	$	78,872
Deferred revenue		4,076		4,952
Total current liabilities		48,979		83,824

Total liabilities		48,979		83,824

Commitments and contingencies

Stockholder’s equity:
Common stock; no par value, 1,000,000 shares authorized, 90,000 shares issued and outstanding		115		115
Retained earnings		19,284		7,542
Total stockholder’s equity		19,399		7,657

Total liabilities and stockholder’s equity	$	68,378	$	91,481

The accompanying notes are an integral part of the financial statements

ELLISLAB, INC.

STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2017			2016

Revenues:
Software sales	$	701,981		$	859,647
Commissions		121,887			109,080

Total revenues		823,868			968,727

Operating costs and expenses:
Selling, general and administrative expenses		689,639			882,676
Depreciation expense		2,181			2,569

Total operating costs and expenses		691,820			885,245

Income from operations		132,048			83,482

Other expense:
Interest expense, net		(4,515	)		(7,755	)

Total other expense		(4,515	)		(7,755	)

Income before income taxes		127,533			75,727
Provision for income taxes		-			-

Net income	$	127,533		$	75,727

Weighted average number of common shares outstanding – basic and diluted		90,000			90,000

Income per common share – basic and diluted	$	1.42		$	0.84

The accompanying notes are an integral part of the financial statements

ELLISLAB, INC.

STATEMENTS OF STOCKHOLDER’S EQUITY

Years Ended December 31, 2017 and 2016

	Common Stock				Retained
	Shares		Amount		Earnings			Total


Balance, December 31, 2015		90,000	$	115	$	46,414		$	46,529

Distributions		-		-		(114,599	)		(114,599	)

Net income		-		-		75,727			75,727

Balance, December 31, 2016		90,000		115		7,542			7,657

Distributions		-		-		(115,791	)		(115,791	)

Net income		-		-		127,533			127,533

Balance, December 31, 2017		90,000	$	115	$	19,284		$	19,399

The accompanying notes are an integral part of the financial statements

ELLISLAB, INC.

STATEMENTS OF CASH FLOWS

Years Ended

December 31,

2017

2016

Cash flows from operating activities:

Net income

$ 127,533

$ 75,727

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

2,181

2,569

Changes in operating assets and liabilities:

Prepaid expenses

(489 )

3,005

Accounts payable

(33,969 )

(13,804 )

Deferred revenue

(876 )

(1,016 )

Net cash provided by operating activities:

94,380

66,481

Cash flows from investing activities:

Purchase of property and equipment

(1,916 )

(1,371 )

Net cash used in investing activities

(1,916 )

(1,371 )

Cash flows from financing activities:

Distributions

(115,791 )

(114,599 )

Net cash used in financing activities

(115,791 )

(114,599 )

Net decrease in cash

(23,327 )

(49,489 )

Cash at the beginning of the year

77,813

127,302

Cash at the end of the year

$ 54,486

$ 77,813

Supplemental disclosure:

$ -

$ -

Cash paid for income taxes

Cash paid for interest

$ 4,515

$ 7,755

The accompanying notes are an integral part of the financial statements

ELLISLAB, INC.

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2017 and 2016

NOTE 1 – THE COMPANY AND NATURE OF BUSINESS

EllisLab, Inc. (the “Company”) was incorporated in the state of Oregon on November 6, 2003 as pMachine, Inc. and elected S Corporation status for income tax purposes. On January 4, 2007, the name of the Company was changed to EllisLab, Inc. The Company builds software for web professionals and provides related support services.

Effective November 30, 2018, the Company merged with EllisLab Corp., a wholly-owned subsidiary of Digital Locations, Inc., a public company. See Note 9.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company’s revenues are derived primarily from the sale of its software application that customers purchase via the Company’s online store. Additionally, the Company sells monthly tech support subscriptions and receives commissions for hosting services. Sales are processed using a real-time payment processing company. Revenue from product sales is recorded net of processing costs.

The Company recognizes revenues in accordance with ASC 605, Revenue Recognition . Revenue is recognized when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured. Amounts collected from customers for support subscriptions with a contract life of one month or greater are recorded as deferred revenue and recognized over the life of the contract.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents with large commercial banks. The Federal Deposit Insurance Corporation (“FDIC”) insures these balances, up to $250,000. All of the Company’s cash balances at December 31, 2017 and December 31, 2016 were insured. At December 31, 2017 and December 31, 2016 there were no cash equivalents.

Prepaid Expenses

Insurance premiums paid in advance of the policy coverage period are recorded as prepaid expenses and expensed over the policy coverage period.

Property and Equipment

The Company’s property and equipment is stated at cost, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:

Computer equipment	5 years
Office furniture and equipment	7 years

Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

The Company assesses the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.

Concentrations of Credit Risk, Major Customers and Major Vendors

The Company’s customers are the end-consumers that purchase its products from the Company’s online store. Therefore, the Company does not have any individual customers that represent any more than a fraction of its revenue.

Income Taxes

The Company has elected S Corporation status for income tax reporting. The Company, therefore is not subject to income taxes because its income is taxed directly to its owner.

Income per Common Share

The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average common stock equivalents which would arise from the exercise of stock options, warrants or other equity rights during the period.

For the years ended December 31, 2017 and 2016, the diluted weighted average number of shares is the same as the basic weighted average number of shares as the Company does not have any common stock equivalents.

Fair Value of Financial Instruments

In accordance with current accounting standards, certain assets and liabilities must be measured at fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. ASC 820 requires that certain assets and liabilities must be measured at fair value, and the standard details the disclosures that are required for items measured at fair value. The Company had no assets and liabilities required to be measured on a recurring basis at December 31, 2017 and 2016.

Cash, prepaid expenses, accounts payable and deferred revenue reported on the Company’s balance sheets are estimated by management to approximate fair market value due to their short-term nature.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and these differences may be material.

Research and Development Costs

The Company charges costs related to research and development of products to selling, general and administrative expense as incurred. The types of costs included in research and development expenses include research materials, salaries, contractor fees, and support materials.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers and has subsequently issued a number of amendments to ASU 2014-09. The new standard, as amended, provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASU 2014-09 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will be effective for the Company effective with its merger in November 2018 and permits two methods of adoption: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company is currently unable to determine the impact on its financial statements of the adoption of this new accounting pronouncement.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.

NOTE 3 – GOING CONCERN UNCERTAINTY

Effective November 30, 2018, the Company merged with EllisLab Corp., a wholly-owned subsidiary of Digital Locations, Inc., a public company (see Note 9). The uncertainties surrounding the successful implementation of the merger, including obtaining sufficient financing moving forward, and the Company’s ability to successfully execute its current business plan, raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to reach a successful level of operations is dependent on the execution of management's plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements.

There can be no assurances that the Company will be successful in attaining a profitable level of operations or in generating additional cash from the equity/debt markets or other sources fund its operations. The financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Should the Company not be successful in its business plan or in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

	2017			2016

Computer equipment	$	37,303		$	35,387
Office furniture and equipment		7,292			7,292
Total		44,595			42,679
Less accumulated depreciation		(38,179	)		(35,998	)

Net	$	6,416		$	6,681

Depreciation expense was $2,181 and $2,569 for the years ended December 31, 2017 and 2016, respectively.

NOTE 5 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue one class of shares to be designated as common shares. The total number of shares of common stock the Company has authority to issue is 1,000,000, with no par value.

The Company had 90,000 shares of its common stock issued and outstanding as of December 31, 2017 and 2016.

The Company did not issue any shares of its common stock during the years ended December 31, 2017 and 2016.

NOTE 6 – STOCK OPTIONS

The Company granted stock options to its Chief Executive Officer in May 2011. Option activity for the years ended December 31, 2017 and 2016 is as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2015		10,275	$	51.11		5.33	$	-
Granted		-	$	-
Exercised		-	$	-
Forfeited or expired		-	$	-

Outstanding at December 31, 2016		10,275	$	51.11		4.33	$	-
Granted		-	$	-
Exercised		-	$	-
Forfeited or expired		-	$	-

Outstanding and exercisable at December 31, 2017		10,275	$	51.11		3.33	$	-

In connection with the merger discussed in Note 9, the stock options were cancelled and replaced with stock options of the public parent company.

NOTE 7 – RELATED PARTY TRANSACTIONS

The common shares of the Company are owned 100% by Rick Ellis, who serves as President. Distributions paid to Mr. Ellis totaled $115,791 and $114,599 during the years ended December 31, 2017 and 2016, respectively.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of filing of this report, there was no pending or threatened litigation against the Company.

Leases

The Company does not have any material operating leases for the rent of office space or equipment.

NOTE 9 – SUBSEQUENT EVENTS

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:

Agreement and Plan of Merger with EllisLab Corp. and EllisLab, Inc.

On November 30, 2018, Digital Locations, Inc., a Nevada public corporation (“Digital Locations”), entered into an Agreement and Plan of Merger with the Company, Rick Ellis (“Ellis”), and EllisLab Corp., a newly formed Nevada corporation and wholly owned subsidiary of Digital Locations, pursuant to which the Company merged with and into EllisLab Corp. Pursuant to the terms of the Plan of Merger, Ellis received 36,000 shares of the Digital Location’s newly designated Series C Convertible Preferred, with a stated value of $100 per share, in exchange for the cancellation of all common shares of the Company owned by Ellis, which shares represented 100% of the issued and outstanding capital stock of the Company. The separate legal existence of the Company ceased, and EllisLab Corp. became the surviving company.

Pursuant to the Merger, Ellis has agreed to a covenant not to compete for a period of 2 years following the effective date of the Merger (the “Non-Competition Period”). Ellis further agreed that during the Non-Competition Period, he will not directly or indirectly solicit or agree to service for his benefit or the benefit of any third-party, any of the Company’s, Digital Locations, or EllisLab Corp. customers.

Pursuant to the Merger, during the period beginning on the effective date and ending on the 24 month anniversary thereof, Ellis will not directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell, or otherwise transfer or dispose of, any portion of the Series C preferred shares, or any shares of the Company’s common stock underlying the preferred, beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934.

Each of the parties to the Plan of Merger has made customary representations and warranties in the Plan of Merger.

Option Agreement

On November 30, 2018, in connection with and pursuant to Merger, Digital Locations entered into a Nonstatutory Stock Option Agreement (the “Option Agreement”) with Derek Jones, the Company’s CEO, (the “Optionee”), whereby the Company issued to the Optionee an option to purchase 100,000,000 shares of the Common stock of the Company, at an exercise price of $0.005, in exchange for his surrender of an option to purchase shares of outstanding common stock of the Company. The option is vested but may not be exercised for 2 years from the date of the Merger Agreement. The option contains a blocker that prevents the Optionee from exercising the Option if such exercise would result in beneficial ownership of more than 4.99% of the outstanding shares of Digital Location’s stock, without at least 61 days of prior notice.

EXHIBIT 99.3

ELLISLAB, INC.

INDEX TO FINANCIAL STATEMENTS

Unaudited Condensed Financial Statements of Ellis Lab, Inc.

	Page

Condensed Balance Sheet as of September 30, 2018 (Unaudited) and December 31, 2017		2
Condensed Statements of Operations for the Nine Months Ended September 30, 2018 and 2017 (Unaudited)		3
Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 (Unaudited)		4
Notes to Condensed Financial Statements (Unaudited)		5

ELLISLAB, INC.

CONDENSED BALANCE SHEETS

	September 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
Current assets:
Cash	$	16,357		$	54,486
Prepaid expenses		8,654			7,476
Total current assets		25,011			61,962

Property and equipment, net		4,661			6,416

Total assets	$	29,672		$	68,378

LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	68,298		$	44,903
Deferred revenue		4,016			4,076
Total current liabilities		72,314			48,979

Total liabilities		72,314			48,979

Commitments and contingencies

Stockholder’s equity (deficit):
Common stock; no par value, 1,000,000 shares authorized, 90,000 shares issued and outstanding		115			115
Retained earnings		(42,757	)		19,284
Total stockholder’s equity (deficit)		(42,642	)		19,399

Total liabilities and stockholder’s equity (deficit)	$	29,672		$	68,378

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

ELLISLAB, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Nine Months Ended September 30,
	2018			2017

Revenues:
Software sales	$	483,152		$	507,175
Commissions		53,014			95,341

Total revenues		536,166			602,516

Operating costs and expenses:
Selling, general and administrative expenses		524,534			522,680
Depreciation expense		1,755			1,691

Total operating costs and expenses		526,289			524,371

Income from operations		9,877			78,145

Other expense:
Interest expense, net		(2,885	)		(4,565	)

Total other expense		(2,885	)		(1,890	)

Income before income taxes		6,992			73,580
Provision for income taxes		-			-

Net income	$	6,992		$	73,580

Weighted average number of common shares outstanding – basic and diluted		90,000			90,000

Income per common share – basic and diluted	$	0.08		$	0.82

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

ELLISLAB, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended

September 30,

2018

2017

Cash flows from operating activities:

Net income

$ 6,992

$ 73,580

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

1,755

1,691

Changes in operating assets and liabilities:

Prepaid expenses

(1,178 )

(489 )

Accounts payable

23,395

(22,584 )

Deferred revenue

(60 )

270

Net cash provided by operating activities:

30,904

52,468

Cash flows from investing activities:

-

-

Cash flows from financing activities:

Distributions

(69,033 )

(94,111 )

Net cash used by financing activities

(69,033 )

(94,111 )

Net decrease in cash

(38,129 )

(41,643 )

Cash at the beginning of the period

54,486

77,813

Cash at the end of the period

$ 16,357

$ 36,170

Supplemental disclosure:

$ -

$ -

Cash paid for income taxes

Cash paid for interest

$ 2,885

$ 1,890

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

ELLISLAB, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2018 and 2017

(UNAUDITED)

NOTE 1 – THE COMPANY AND NATURE OF BUSINESS

Effective November 30, 2018, the Company merged with EllisLab Corp., a wholly-owned subsidiary of Digital Locations, Inc., a public company. See Note 9.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the condensed financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

The results for the period ended September 30, 2018 are not necessarily indicative of the results of operations for the full year.

Revenue Recognition

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents with large commercial banks. The Federal Deposit Insurance Corporation (“FDIC”) insures these balances, up to $250,000. All of the Company’s cash balances at September 30, 2018 and December 31, 2017 were insured. At September 30, 2018 and December 31, 2017 there were no cash equivalents.

Prepaid Expenses

Insurance premiums paid in advance of the policy coverage period are recorded as prepaid expenses and expensed over the policy coverage period.

Property and Equipment

The Company’s property and equipment is stated at cost, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:

Computer equipment	5 years
Office furniture and equipment	7 years

Concentrations of Credit Risk, Major Customers and Major Vendors

Income Taxes

The Company has elected S Corporation status for income tax reporting. The Company, therefore is not subject to income taxes because its income is taxed directly to its owner.

Income per Common Share

For the nine months ended September 30, 2018 and 2017, the diluted weighted average number of shares is the same as the basic weighted average number of shares as the Company does not have any common stock equivalents.

Fair Value of Financial Instruments

Cash, prepaid expenses, accounts payable and deferred revenue reported on the Company’s balance sheets are estimated by management to approximate fair market value due to their short-term nature.

Use of Estimates

Research and Development Costs

Recent Accounting Pronouncements

NOTE 3 – GOING CONCERN UNCERTAINTY

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	September 30, 2018			December 31, 2017

Computer equipment	$	37,302		$	37,302
Office furniture and equipment		7,292			7,292
Total		44,594			44,594
Less accumulated depreciation		(39,933	)		(38,178	)

Net	$	4,661		$	6,416

Depreciation expense was $1,755 and $1,691 for the nine months ended September 30, 2018 and 2017, respectively.

NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT)

The Company had 90,000 shares of its common stock issued and outstanding as of September 30, 2018 and December 31, 2017.

The Company did not issue any shares of its common stock during the nine months ended September 30, 2018 and 2017.

NOTE 6 – STOCK OPTIONS

The Company granted stock options to its Chief Executive Officer in May 2011. Option activity for the nine months ended September 30, 2018:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2017		10,275	$	51.11		3.33	$	-
Granted		-	$	-
Exercised		-	$	-
Forfeited or expired		-	$	-

Outstanding and exercisable at September 30, 2018		10,275	$	51.11		2.59	$	-

In connection with the merger discussed in Note 9, the stock options were cancelled and replaced with stock options of the public parent company.

NOTE 7 – RELATED PARTY TRANSACTIONS

The common shares of the Company are owned 100% by Rick Ellis, who serves as President. Distributions paid to Mr. Ellis totaled $69,033 and $94,111 during the nine months ended September 30, 2018 and 2017, respectively.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Matters

Leases

The Company does not have any material operating leases for the rent of office space or equipment.

NOTE 9 – SUBSEQUENT EVENTS

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:

Agreement and Plan of Merger with EllisLab Corp. and EllisLab, Inc.

Each of the parties to the Plan of Merger has made customary representations and warranties in the Plan of Merger.

Option Agreement

EXHIBIT 99.4

DIGITAL LOCATIONS, INC.

INDEX TO PRO FORMA FINANCIAL INFORMATION

Unaudited Pro Forma Combined Financial Information

of Digital Locations, Inc. and EllisLab, Inc.

	Page

Unaudited Pro Forma Condensed Financial Information		2
Unaudited Pro Forma Condensed Combined Balance Sheets as of September 30, 2018		3
Unaudited Pro Forma Condensed Combined Statements of Operations for the Year Ended December 31, 2017		4
Unaudited Pro Forma Condensed Combined Statements of Operations for the Nine Months Ended September 30, 2018		5
Notes to Unaudited Pro Forma Condensed Combined Financial Statements		6

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Effective November 30, 2018, Digital Locations, Inc., a Nevada public corporation (“Digital Locations”), entered into an Agreement and Plan of Merger with EllisLab, Inc., an Oregon S-Corporation, Rick Ellis (“Ellis”), and EllisLab Corp., a newly formed Nevada corporation and wholly owned subsidiary of Digital Locations pursuant to which the EllisLab merged with and into EllisLab Corp (the “Merger”). Pursuant to the terms of the Merger, Ellis received 36,000 shares of the Digital Location’s newly designated Series C Convertible Preferred Stock, with a stated value of $100 per share, in exchange for the cancellation of all common shares of EllisLab, Inc. owned by Ellis, which shares represented 100% of the issued and outstanding capital stock of EllisLab, Inc. The separate legal existence of EllisLab, Inc. ceased, and EllisLab Corp. became the surviving company.

The unaudited pro forma condensed combined balance sheet presents the historical balance sheets of Digital Locations and EllisLab, Inc. as of September 30, 2018 and accounts for the Merger as if it had occurred as of September 30, 2018. The Digital Locations balance sheet information was derived from its unaudited balance sheet as of September 30, 2018 included in its quarterly report on Form 10-Q that was filed with the Securities and Exchange Commission (“SEC”) on November 13, 2018. The EllisLab, Inc. balance sheet information was derived from its unaudited balance sheet as of September 30, 2018.

The unaudited pro forma condensed combined statements of operations are based on the historical statements of Digital Locations and EllisLab, Inc. and combine their results of operations for the year ended December 31, 2017 and the nine months ended September 30, 2018, giving effect to the transaction as if it occurred on January 1, 2017, and reflecting the pro forma adjustments expected to have a continuing impact on the combined results.

The historical results of operations for Digital Locations were derived from its unaudited statement of operations for the nine months ended September 30, 2018 included in its quarterly report on Form 10-Q that was filed with the SEC on November 13, 2018 and its audited statement of operations for the year ended December 31, 2017 included in its annual report on Form 10-K that was filed with the SEC on March 30, 2018. The historical results of operations of Ellis Lab, Inc. were derived from its unaudited statement of operations for the nine months ended September 30, 2018 and its audited statement of operations for the year ended December 31, 2017 that are included in this Form 8-KA.

The unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have actually been obtained had the Merger been completed on the assumed dates or for the periods presented, or that may be realized in the future. Furthermore, while the pro forma financial information reflects transaction costs incurred with the Merger on November 30, 2018, the pro forma financial information does not reflect the impact of any reorganization or restructuring expenses or operating efficiencies resulting from the transaction. The unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements referred to above.

2

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS

AS OF SEPTEMBER 30, 2018

	Digital Locations			EllisLab, Inc.			Pro Forma Adjustments			Pro Forma Combined
ASSETS

Current assets:
Cash	$	25,898		$	16,357		$	-		$	42,255
Prepaid expenses		8,696			8,654			-			17,350
Total current assets		34,594			25,011			-			59,605

Property and equipment, net		1,453			4,661			-			6,114
Intangible assets, net		-			-			217,000	{b}		217,000
Goodwill		-			-			4,771,506	{b}		4,771,506

Total assets	$	36,047		$	29,672		$	4,988,506		$	5,054,225

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	116,758		$	68,298		$	-		$	185,056
Accrued expenses and other current liabilities		2,102			-			-			2,102
Accrued interest payable, notes payable		290,622			-			-			290,622
Deferred revenue		-			4,016			-			4,016
Derivative liabilities		6,524,132			-			-			6,524,132
Convertible notes payable		29,500			-			-			29,500
Convertible notes payable, net of discount		1,731,524			-			-			1,731,524
Total current liabilities		8,694,638			72,314			-			8,766,952

Total liabilities		8,694,638			72,314			-			8,766,952

Stockholders’ equity (deficit):
Series B preferred stock, $0.001 par value		16			-			-			16
Series C preferred stock, $0.001 par value		-			-			36	{b}		36
Common stock, $0.001 par value		38,776			-			-			38,776
Common stock, no par value		-			115			(115	) {a}		-
Additional paid-in capital		20,537,951			-			4,945,828	{b}		25,483,779
Accumulated deficit		(29,235,334	)		(42,757	)		42,757	{a}		(29,235,334	)
Total stockholders’ equity (deficit)		(8,658,591	)		(42,642	)		4,988,506			(3,712,727	)

Total liabilities and stockholders’ equity (deficit)	$	36,047		$	29,672		$	4,988,506		$	5,054,225

See notes to the unaudited pro forma condensed combined financial statements

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

	Digital Locations			EllisLab, Inc.			Pro Forma Adjustments			Pro Forma Combined

Revenues:
Software sales	$	-		$	701,981		$	-		$	701,981
Commissions		-			121,887			-			121,887

Total revenues		-			823,868			-			823,868

Operating costs and expenses:
Selling, general and administrative		799,589			689,639			43,400	{c}		1,532,628
Research and development		65,009			-			-			65,009
Depreciation		675			2,181			-			2,856

Total operating costs and expenses		865,273			691,820			43,400			1,600,493

Income (loss) from operations		(865,273	)		132,048			(43,400	)		(702,790	)

Other income (expenses):
Other income		6,356			-			-			6,356
Gain on settlement of debt		11,643			-			-			11,643
Loss on change in derivative liabilities		(638,432	)		-			-			(638,432	)
Interest expense, net		(902,748	)		(4,515	)		-			(907,263	)

Total other income (expenses)		(1,523,181	)		(4,515	)		-			(1,527,696	)

Income (loss) before income taxes		(2,388,454	)		127,533			(43,400	)		(2,304,321	)
Provision for income taxes		-			-			-			-

Net income (loss)	$	(2,388,454	)	$	127,533		$	(43,400	)	$	(2,304,321	)

Weighted average number of common shares outstanding – basic and diluted		36,822,968			90,000			(90,000	) {d }		36,822,968

Income (loss) per common share – basic and diluted	$	(0.06	)	$	1.42					$	(0.06	)

See notes to the unaudited pro forma condensed combined financial statements

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

	Digital Locations			EllisLab, Inc.			Pro Forma Adjustments			Pro Forma Combined

Revenues:
Software sales	$	-		$	483,152		$	-		$	483,152
Commissions		-			53,014			-			53,014

Total revenues		-			536,166			-			536,166

Operating costs and expenses:
Selling, general and administrative		475,446			524,534			32,550	{c}		1,032,530
Depreciation		1,011			1,755			-			2,766

Total operating costs and expenses		476,457			526,289			32,550			1,035,296

Income (loss) from operations		(476,457	)		9,877			(32,500	)		(499,130	)

Other income (expenses):
Gain on change in derivative liabilities		2,029,272			-			-			2,029,272
Interest expense, net		(749,696	)		(2,885	)		-			(752,581	)

Total other income (expenses)		1,279,576			(2,885	)		-			1,276,691

Income before income taxes		803,119			6,992			(32,500	)		777,561
Provision for income taxes		-			-			-			-

Net income	$	803,119		$	6,992		$	(32,500	)	$	777,561

Weighted average number of common shares outstanding – basic and diluted		38,776,436			90,000			(90,000	) {d}		38,776,436

Income (loss) per common share – basic and diluted	$	0.02		$	0.08					$	0.02

See notes to the unaudited pro forma condensed combined financial statements

5

Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Effective November 30, 2018, Digital Locations, Inc., a Nevada public corporation (“Digital Locations”), entered into an Agreement and Plan of Merger with EllisLab, Inc., an Oregon S-Corporation, Rick Ellis (“Ellis”), and EllisLab Corp., a newly formed Nevada corporation and wholly owned subsidiary of Digital Locations, pursuant to which the EllisLab merged with and into EllisLab Corp (the “Merger”). Pursuant to the terms of the Merger, Ellis received 36,000 shares of the Digital Location’s newly designated Series C Convertible Preferred Stock, with a stated value of $100 per share, in exchange for the cancellation of all common shares of EllisLab, Inc. owned by Ellis, which shares represented 100% of the issued and outstanding capital stock of EllisLab, Inc. The separate legal existence of EllisLab, Inc. ceased, and EllisLab Corp. became the surviving company.

Pro forma adjustments to the attached condensed combined financial statements include the following:

a) To eliminate the equity accounts of EllisLab, Inc.

b) To record the issuance of 36,000 shares of Digital Location $0.001 par value Series C Preferred Stock to Ellis, valued at $4,345,866, and 100,000,000 options to purchase Digital Locations common stock to the CEO of EllisLab, Inc., valued at $599,998. The total value of the consideration paid of $4,945,864 has been allocated to the following assets based on the report of an independent valuation firm:


Net liabilities recorded by EllisLab, Inc. at September 30, 2018	$	(42,642	)
Identifiable intangible assets:
IP/Technology/Patents		80,000
Customer base		121,000
Tradenames and trademarks		15,000
Non-compete agreements		1,000
Total identifiable intangible assets		217,000

Goodwill		4,771,506

Total	$	4,945,864

The identifiable intangible assets are amortized using the straight-line method over an estimated life of 5 years. The goodwill is not amortized, but evaluated periodically for impairment.

c) To record amortization of identifiable intangible assets.

d) To eliminate EllisLab, Inc. weighted average shares outstanding.

	a)	To eliminate the equity accounts of EllisLab, Inc.

	b)	To record the issuance of 36,000 shares of Digital Location $0.001 par value Series C Preferred Stock to Ellis, valued at $4,345,866, and 100,000,000 options to purchase Digital Locations common stock to the CEO of EllisLab, Inc., valued at $599,998. The total value of the consideration paid of $4,945,864 has been allocated to the following assets based on the report of an independent valuation firm:

		The identifiable intangible assets are amortized using the straight-line method over an estimated life of 5 years. The goodwill is not amortized, but evaluated periodically for impairment.

	c)	To record amortization of identifiable intangible assets.

	d)	To eliminate EllisLab, Inc. weighted average shares outstanding.