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EX-32.1 - CERTIFICATION - Wisdom Homes of America, Inc.srer_ex321.htm
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EX-32.2 - CERTIFICATION - Wisdom Homes of America, Inc.srer_ex322.htm
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EXCEL - IDEA: XBRL DOCUMENT - Wisdom Homes of America, Inc.Financial_Report.xls


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

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

For the transition period from _______________ to _______________.

Commission file number: 000-51225
 
SearchCore, Inc.
(Exact name of registrant as specified in its charter)
 
Nevada
 
43-2041643
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
26497 Rancho Parkway South
Lake Forest, CA
 
 
92630
(Address of principal executive offices)    (Zip Code)

Registrant’s telephone number, including area code: (855) 266-4663
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
(Do not check if a 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 o   No x

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 12, 2014, there were 50,168,772 shares of common stock, par value $0.001, issued and outstanding.
 


 
 

 
 
SEARCHCORE, INC.
 
TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION     4  
           
ITEM 1
Financial Statements
    5  
           
ITEM 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    26  
           
ITEM 3
Quantitative and Qualitative Disclosures About Market Risk
    30  
           
ITEM 4
Controls and Procedures
    30  
           
PART II – OTHER INFORMATION     31  
           
ITEM 1
Legal Proceedings
    31  
           
ITEM 1A
Risk Factors
    31  
           
ITEM 2
Unregistered Sales of Equity Securities and Use of Proceeds
    31  
           
ITEM 3
Defaults Upon Senior Securities
    32  
           
ITEM 4
Mine Safety Disclosures
    32  
           
ITEM 5
Other Information
    32  
           
ITEM 6
Exhibits
    33  
 
 
2

 
 
PART I – FINANCIAL INFORMATION

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
 
 
3

 
 
ITEM 1  Financial Statements
 
SEARCHCORE, INC.
Condensed Consolidated Balance Sheets
 
   
March 31,
   
December 31,
 
   
2014
   
2013
 
   
Unaudited
   
Audited
 
ASSETS
CURRENT ASSETS
           
Cash and cash equivalents
  $ 25,649     $ 93,152  
Accounts receivable
    84,963       81,497  
Other current assets
    1,262,689       1,237,365  
TOTAL CURRENT ASSETS
  $ 1,373,301     $ 1,412,014  
                 
Property and equipment, net
    22,138       26,155  
Intangible assets:
               
Domain names
    420,862       420,862  
Other assets
    232,483       567,554  
Other assets - discontinued operations
    956,436       956,436  
TOTAL ASSETS
  $ 3,005,220     $ 3,383,021  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
               
Accounts payable
  $ 168,398     $ 201,472  
Accrued liabilities
    1,507,930       2,030,680  
Notes payable
    278,138       196,087  
Notes payable - related party
    89,758       -  
Current liabilities - discontinued operations
    166,503       161,226  
                 
TOTAL CURRENT LIABILITIES
  $ 2,210,727     $ 2,589,465  
                 
LONG TERM LIABILITIES
               
                 
Other accrued liabilities
    118,750       118,750  
Notes payable
    83,350       95,519  
Notes payable - related party
    112,989       161,250  
Noncurrent liabilities - discontinued operations
    400,000       400,000  
                 
TOTAL LONG TERM LIABILITIES
    715,089       775,519  
                 
TOTAL LIABILITIES
  $ 2,925,816     $ 3,364,984  
                 
STOCKHOLDERS' EQUITY
               
                 
Preferred stock, $0.001 par value: 20,000,000 shares authorized;
               
zero shares issued and outstanding at March 31, 2014;
               
zero shares issued and outstanding at December 31, 2013;
    -       -  
Common stock, $0.001 par value: 200,000,000 shares authorized;
               
44,868,772 shares issued and outstanding at March 31, 2014,
               
39,368,772 shares issued and outstanding at December 31, 2013,
    44,869       39,369  
Paid-in capital
   
(10,282,836
)    
(10,717,336
)
Retained earnings
    10,317,371       10,696,004  
                 
TOTAL STOCKHOLDERS' EQUITY
    79,404       18,037  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 3,005,220     $ 3,383,021  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4

 
 
SEARCHCORE, INC.
Condensed Consolidated Statements of Operations (Unaudited)
 
   
Three Months Ended
 
   
March 31,
   
March 31,
 
   
2014
   
2013
 
             
             
REVENUE
           
Sales
  $ 104,395     $ 26,891  
                 
Total revenue
    104,395       26,891  
                 
OPERATING EXPENSES
               
Cost of sales
    4,863       228  
Selling, general and administrative expenses
    552,659       664,518  
Total operating expenses
    557,522       664,746  
                 
Operating loss
    (453,127 )     (637,855 )
                 
Other Income (Expense)
               
Interest income
    3,929       6,506  
Interest expense
    (37,158 )     (152 )
Total other income (expense)
    (33,229 )     6,354  
                 
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    (486,356 )     (631,501 )
                 
Provision for Income Taxes
    (112,000 )     -  
LOSS FROM CONTINUING OPERATIONS
    (374,356 )     (631,501 )
                 
Loss from discontinued operations, net of $1,000 and zero tax benefit for the periods ended March 31, 2014 and 2013, respectively.
    (4,277 )     (7,777 )
                 
NET LOSS
  $ (378,633 )   $ (639,278 )
                 
Income (loss) per share, Basic and Diluted
               
Income (loss) from continuing operations
  $ (0.01 )   $ (0.01 )
Income (loss) from discontinued operations
    0.00       0.00  
Total income (loss) per share
  $ (0.01 )   $ (0.01 )
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
    41,018,772       54,529,477  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
5

 
 
SEARCHCORE, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
   
Three Months Ended
 
   
March 31,
   
March 31,
 
   
2014
   
2013
 
Cash flows from operating activities:
           
Net loss
  $ (378,633 )   $ (639,278 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation
    3,039       1,184  
Amortization
          35,792  
Stock-based compensation
    440,000        
Changes in operating assets and liabilities:
               
Accounts receivable
    (3,466 )      
Prepaid expenses and deposits
    (25,324 )     212,588  
Other assets
    336,049       293,494  
Accounts payable and accrued liabilities
    (551,064 )     (1,125 )
                 
Net cash used in operating activities
    (179,399 )     (97,345 )
                 
Cash flows used in investing activities:
               
Purchases of property and equipment
          (10,561 )
Purchases of intangible assets
          (85,260 )
                 
Net cash used in investing activities
          (95,821 )
                 
Cash flows provided by financing activities:
               
Payments on note payable
    (95,601 )     (22,500 )
Proceeds from note payable
    166,000        
Proceeds from note payable - related party
    41,497        
                 
Net cash provided by (used in) financing activities
    111,896       (22,500 )
                 
Net decrease in cash and cash equivalents
    (67,503 )     (215,666 )
                 
Cash and cash equivalents at beginning of period
    93,152       514,382  
                 
Cash and cash equivalents at end of period
  $ 25,649     $ 298,716  
                 
Non-cash investing and financing activity:
               
                 
Shares issued pursuant to MMJMenu acquisition
  $     $ 27,000  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
Note 1. General

Nature of Business

We, together with our wholly owned subsidiaries, are engaged in developing, operating and monetizing websites that focus on specific industries, also known as vertical finder websites or finder sites. We currently are either developing finder sites, or providing marketing services on our existing finder sites, in the prefabricated home industry. We provide finder site services in three different sectors: media, technology, and marketing. All of our operations are conducted through our wholly-owned subsidiaries, each of which is incorporated or qualified to do business in the states in which it does so.

SearchCore, Inc. was formed on July 14, 2003 in the State of Nevada as Tora Technologies, Inc. On November 21, 2006, we changed our name to Makeup.com Limited, on January 29, 1010, we changed our name to LC Luxuries Limited, and on November 5, 2010, we changed our name to General Cannabis, Inc. On January 6, 2012, we changed our name to SearchCore, Inc.

Principal Services

Our business service is to connect consumers with brands, products and services via our finder sites. We specialize in creating, operating and monetizing vertical finder sites. We identify niche, fragmented and/or disjoined markets, and attempt to capitalize on those markets by incorporating our existing platform as it relates to technology, marketing, advertising and sales. We only pursue markets in which we anticipate we will be among the top finder sites in any respective industry. This includes marketing and services in both the business-to-business and the business-to-consumer marketplaces. When a consumer or business utilizes one of our finder sites, they are searching primarily for specific products, related items, social engagement, and/or reviews. Initially, we may waive all or a portion of advertising or marketing fees to clients who subscribe with us and market their brand, product or service on our finder sites. Once a client has subscribed with us then we offer various marketing packages that serve to increase the exposure of their business and thus increase the likelihood of connecting more consumers with their brand, product or service. We charge a fee for these various services. The fee varies depending on the service we provide. We believe that the previous success of our first finder site will enable us to continue and expand into other markets that we believe have high growth potential.

Our principal services are offered through the following wholly owned subsidiaries:

Sportify, Inc.
VerticalCore Management, Inc.
VerticalCore Merchant, Inc.
VerticalCore Media, Inc.
VerticalCore Technologies, Inc.
Wisdom Homes of America, Inc.
Wisdom Home Loans of America, Inc.

Other Subsidiaries

We have three (3) additional wholly-owned subsidiaries which have no operations and are dormant. These are General Marketing Solutions, Inc.General Processing Corporation, and LV Luxuries Incorporated (which operated as makeup.com). Currently, we have no imminent or specific plans for any of these entities and they are held as corporations in good standing.
 
 
7

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
Recent Developments

Expanding Our Focus on Manufactured Homes

We have expanded our focus in an attempt to create additional income streams from industries, such as the manufactured housing industry, for whom we have created, or are creating, search engine finder sites. Our expansion in this direction to create additional revenue is the result of several developments over the past year. First, the number of competitors in the finder site space has increased, and the internet presence and capital that some of those companies have far exceeds our capabilities. For example, Google has more prominently entered into the finder site space by displaying colored photographs and locations of business search results at the top of the page. As a result of the increase in competition, and some of the competition such as Google owning the search engines, we believe it has and will continue to become more challenging to generate revenue in the finder site environment. The second reason we decided to expand our focus is that we believe we are uniquely qualified to leverage our technology and retail expertise, specifically in the manufactured housing industry, and to a lesser extent, the travel trailer industry. Our staff currently has over 125 years of combined manufactured home industry experience. We believe this experience will assist us in negotiating favorable terms with factories, hiring top tier talent, and identifying retail center locations.

ManufacturedHomes.com Finder Site

Our vertical finder site, www.ManufacturedHomes.com, acts as an information marketplace which provides detailed, focused and relevant information specific to the manufactured home product or service that a consumer is searching. We focus on becoming a top ranked website on all major search engines within the manufactured housing industry. We acquire premium domains, develop relevant content and resources as it relates to the manufactured housing industry, and execute campaigns within search engines to capture traffic.

For consumers, www.ManufacturedHomes.com is designed to provide the technological means necessary to quickly search information in order to get their desired results. Our finder site aggregates detailed data and information about specific businesses and products, along with reviews by other consumers, all of which when taken together create content in a value-added, engaging experience.

For manufactured home factories and retail centers, www.ManufacturedHomes.com provides a simple means to outsource their internet traffic aggregation and online marketing advertising. Our finder site manages various internet marketing tactics on behalf of our clients including Search Engine Optimization (SEO) and Search Engine Management (SEM). This process helps to increase the ranking of the finder site which makes the site easily accessible to prospective consumers. In short, we assist business owners in the manufactured housing industry to focus on their core product or service while alleviating the technological challenges associated with search engine optimization. www.ManufacturedHomes.com helps to narrow down the target market to those individuals that are highly targeted for the manufactured home factory or retail center.

Manufactured Homes Retail Centers

We are currently expanding our focus in the manufactured housing industry and looking to leverage ancillary opportunities that we have discovered within that industry. Specifically, we are currently concentrating on the manufactured home retail center sector of the industry. In February 2014 we opened our first retail center in Rhome, Texas. We anticipate opening additional retail centers in the midwest, southeast and southwest regions of the country. The retail centers are operated by our wholly owned subsidiary, Wisdom Homes Of America, Inc.
 
 
8

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

The strategic reasons for concentrating in a specific industry such as the manufactured housing industry include our management’s experience in both technology and retail center management, our ability to utilize technology in an industry where technology has, for the most part, been either absent or lagged behind other comparable industries, and our portfolio of premium domains specific to the industry. In addition, our staff is regularly in communication with manufactured home factories and retail centers across the country in order to introduce them to our proprietary CRM system and the features offered on our geo-targeted website www.ManufacturedHomes.com. As a result of our regular communication with nationwide retailers, we believe we will be able to target regional trends developing in the manufactured housing industry.

Note 2. Basis Of Presentation And Significant Accounting Policies

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q, which requires the Company to make estimates and assumptions that affect amounts reported. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. It is the opinion of management that the unaudited condensed consolidated financial statements include all adjustments consisting of normal recurring accruals considered necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated.

Operating results for the three-month period ended March 31, 2014 is not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The accompanying consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as filed with the SEC.

Reclassifications

Certain prior year amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no effect on the consolidated results of operations or financial position for any years presented.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on knowledge of current events and anticipated future events and accordingly, actual results may differ from those estimates.
 
 
9

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Risks related to cash

The Company maintains cash in bank and deposit accounts, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Cash and Cash equivalents

The Company considers only highly liquid investments such as money market funds and commercial paper with maturities of 90 days or less at the date of their acquisition as cash and cash equivalents.

Fair Value of Financial Instruments

The accounting standards regarding disclosures about fair value of financial instruments defines financial instruments and required fair value disclosure of those instruments. This accounting standard defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. Receivables, investments, payables, short and long term debt and warrant liabilities qualified as financial instruments. Management believes the carrying amounts of receivables, payables and debt are a reasonable estimate of fair value because of the short period of time between the origination of such instruments, their expected realization, and if applicable, their stated interest rate is equivalent to interest rates currently available. The three levels are defined as follows:

Level 1
Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2
Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value.

The Company analyzes all financial instruments with features of both liabilities and equity under the accounting standards regarding accounting for certain financial instruments with characteristics of both liabilities and equity, accounting for derivative instruments and hedging activities, accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and the accounting standard regarding determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The accounting standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. This standard provides a two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for this accounting standard scope exception. All warrants issued by the Company are denominated in U.S. dollars.
 
 
10

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Accounts Receivable

Accounts receivable are recorded at the invoice amount and do not bear interest.

Advertising Cost

The Company expenses advertising costs when incurred. Advertising expense for the three months ended March 31, 2014 and 2013 was $15,000 and $28,000, respectively.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is defined as a company's estimate of the amount of probable credit losses in the company's existing accounts receivable. The Company does not maintain an allowance for doubtful accounts based upon management’s review of the Company’s revenue structure whereby substantially all receivables are confirmed before they are booked as revenue. The Company reviews its allowance for doubtful accounts policy periodically. The Company does not have any off-balance-sheet exposure related to its customers.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from three to seven years. Property and equipment at March 31, 2014 and December 31, 2013 are presented net of accumulated depreciation of $19,000 and $16,000, respectively.

Goodwill

In accordance with Goodwill and Other Intangible Assets, goodwill is defined as the excess of the purchase price over the fair value assigned to individual assets acquired and liabilities assumed and is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis in the Company's fourth fiscal quarter or more frequently if indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair value of the Company's reporting units with each respective reporting unit's carrying amount, including goodwill. The fair value of reporting units is generally determined using the income approach. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the second step of the goodwill impairment test is performed to determine the amount of any impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. No amortization is recorded for goodwill with indefinite useful life. No goodwill impairment was recognized during the three months ended March 31, 2014 or twelve ended December 31, 2013.

Intangible Assets

In accordance with Goodwill and Other Intangible Assets, intangible assets that are determined not to have an indefinite useful life are subject to amortization. The Company amortizes intangible assets using the straight-line method over their estimated useful lives.
 
 
11

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Impairment of Long-Lived and Intangible Assets

In accordance with Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses the recoverability of the long-lived and intangible assets by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. No impairment of intangible assets was recognized during the three months ended March 31, 2014 or twelve ended December 31, 2013.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of Share-Based Payment, which addresses the accounting for equity-based compensation and which requires that the cost of all equity-based compensation arrangements, be reflected in the financial statements over the vesting period based on the estimated fair value of the awards. During the three and twelve months ended March 31, 2014 and December 31, 2013, the Company had $440,000 and $230,000, respectively, in stock-based compensation expense related to issuances of shares of the Company’s common stock to consultants.

Revenue Recognition

We recognize revenue in accordance with ASC 605, “Revenue Recognition,” by recognizing as revenue the fees we charge customers as referenced below because persuasive evidence of an arrangement exists, the fees we charge are substantially fixed or determinable during the period that we provide the services, we and our customers understand the specific nature and terms of the agreed upon transactions, collectability is reasonable assured and services have been rendered. 

The Company and its wholly owned subsidiaries recognize revenue as follows:

We generate revenue through attracting internet and mobile searchers to our internet properties. The users then frequent our clients who pay us a fee to list on our site.

Our Internet properties generate revenues from merchants and advertisers within the industry verticals served. This is the revenue model we employed with our previously owned finder site weedmaps.com and is the same revenue model we employ with our current finder sites. The revenue model follows a subscription-based approach, generating recurring monthly revenue from a variety of different package listings, lead generation and advertising.

Advertising Package Tiers - For our finder sites we typically create advertising package tiers in order to more easily distinguish the different services we offer at different price points. The different advertising package tiers also makes it easy for our clients to distinguish which package tiers are premium and thus likely to generate more traffic to their brand, product or service. The range of prices we charge for each advertising package tier differs per each finder site, per region, and per each tier package. Each region is internally created by us based on geographic location, industry density and demographics.

Listing Revenue - We generate revenues from fees we charge clients to advertise or list their location, products, and services on one or more of our finder websites. We recognize as revenue the fees we charge customers that advertise or list their related company on our websites.
 
 
12

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

For example, our listing packages typically are made up of two groups, Premium Listings and Standard Listings. The most important distinction between Premium Listings and Standard Listing packages is typically positioning on our finder websites. This distinction is important because the business that appears first in an internet search results list has an increased likelihood of a website visitor clicking on that business and thus “converting” the website visitor to a potential customer for our client. In general, being in the top section of the search results on any of our finder websites for a given geographical region is deemed preferable because of the increased conversion rates (or click-through rates). As a result, we charge a premium dollar amount for a Premium Listing so that the client is placed in the top section of search results for a given region.

Standard Listing Packages are basic packages which typically allow a customer to list their brand, product, or service on one or more of our finder sites with the capability to edit their listing. A Standard Listing also typically allows a customer to add photos, create a menu, and respond to customer reviews, for example.

Advertising Revenue - We generate revenues from fees we charge customers for placing ads for their related companies on our websites (i.e. Advertising Packages). Our Advertising Packages can include banner ads placed on our finder sites, emails, texts, special promotions, and events. All of our Advertising Packages are considered Ad Revenue pursuant to our revenue recognition policy.

Content Production Revenue - We generate revenues from photo and video production of content which is displayed on our finder websites (i.e. Content Production). Typically, Content Production that we create on behalf of our clients is considered an add-on or ancillary service. We typically create video “virtual” tours of our client’s establishments and products, which are then displayed on our finder websites. We recognize as revenue the fees we charge customers for photo and video production services. All of our Content Production services are considered Content Production Revenue pursuant to our revenue recognition policy.

Manufactured Home Retail Centers - we anticipate generating revenues through our manufactured home retail center Wisdom Homes Of America, Inc., which we started in January 2014. We anticipate opening and/or acquiring additional retail centers in 2014 and branding them under the name Wisdom Homes Of America, Inc. Our first center was opened in Rhome, Texas in February, 2014. We will purchase factory built houses and sell them to the end user. We also anticipate structuring the sale of used manufactured homes.

Income Taxes

The Company follows Accounting for Income Taxes which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

The charge for taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect to temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
 
 
13

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also recorded in equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Uncertain tax positions

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax-related interest and penalties as interest expense and SGA expense, respectively, on the Consolidated Statement of Operations.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board, or FASB, issued an accounting standards update to require disclosure of information about the effect of rights of offset with certain financial instruments on an entity’s financial position. In January 2013, the FASB issued an accounting standards update that clarifies the aforementioned offsetting disclosure requirements. The disclosure requirements are only applicable to rights of offset of certain derivative instruments, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with standards set forth by the FASB Codification subject to master netting arrangements or similar agreements. Adoption of this standard had no significant impact on the Company’s consolidated financial statements.

In February 2013, the FASB issued an accounting standards update that requires presentation for reclassification adjustments from accumulated other comprehensive income into net income in a single note or on the face of the financial statements. The Company has adopted the amendments in this standard effective in the first quarter of 2013. The adoption of this standard had an immaterial effect on the Company’s consolidated financial statements and as such, the required presentation is not included herein.

In July 2013, the FASB issued an accounting standards update that specifies that unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. When a net operating loss carryforward, a similar tax loss or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes or the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this accounting standards update is not expected to have significant impact on the Company’s consolidated financial statements.
 
 
14

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

FASB issued an accounting standards update amending ASC 220 to improve the comparability, consistency and transparency of reporting of comprehensive income. It amends existing guidance by allowing only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement, statement of comprehensive income or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of other comprehensive income. Also, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements. ASU No. 2011-05 requires retrospective application, and it is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. In December 2011, FASB issued ASU 2011-12. ASU 2011-12 indefinitely deferred the provisions of ASU 2011-05 requiring the presentation of reclassification adjustments on the face of the financial statements for items reclassified from other comprehensive income to net income. The adoption of this standard did not have a material impact on our financial statements.

FASB issued an accounting standards update amending ASC 820, which is effective for interim and annual periods beginning after December 31, 2011, to achieve common fair value measurement and disclosure requirements between GAAP and IFRS. This amendment changes the wording used to describe fair value and requires additional disclosures. The adoption of this amendment did not have a material impact on our financial statements.

In September 2011, the FASB issued an amendment to an existing accounting standard, which provides an option to perform a qualitative assessment to determine whether further impairment testing on goodwill is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this standard did not have a material impact on our financial statements.

During May 2009 and February 2010, the FASB issued a new authoritative pronouncement regarding recognized and non-recognized subsequent events. This guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The adoption of this guidance had no impact on our results of operations or financial position.

Other Recently Issued, but Not Yet Effective Accounting Pronouncements

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Note 3. Equity Transactions

At March 31, 2014 the total number of shares of our common stock that were issued and outstanding was 44,868,772.
 
 
15

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Stock-based Compensation

On February 28, 2014, we issued a total of five million five hundred thousand (5,500,000) shares of our common stock, restricted in accordance with Rule 144, to a total of five (5) individuals and entities who had rendered services to us prior to December 31, 2013. These shares were used to satisfy an aggregate debt of Four Hundred and Forty Thousand Dollars ($440,000) owed to service providers.

Note 4. Other Current Assets

At December 31, 2013, the Company had recorded a $1,200,000 note receivable which represented the current portion of a $3,000,000 note receivable pursuant to the sale of our finder site weedmaps.com. On December 11, 2012, we entered into an Agreement and Plan of Reorganization, pursuant to which we sold our finder site weedmaps.com. Pursuant to the terms of the sale and as partial consideration we received a Secured Promissory Note in the original principal amount of Three Million Dollars ($3,000,000). Pursuant to the Note we will receive (1) Two Hundred Fifty Thousand Dollars ($250,000) on January 15, 2013 (which payment date was extended to January 31, 2013), which payment we did receive; One Hundred Thousand Dollars ($100,000) each month beginning on February 25, 2013 and continuing on the twenty fifth (25th) of each month thereafter for a total of twenty eight (28) months, which payments for February through March 2014 we did receive; and Sixteen Thousand Five Hundred Dollars ($16,500) on July 25, 2015.

At March 31, 2014, the Company had recorded $46,000 in prepaid insurance, $11,000 in prepaid filing fees, and $5,000 in deposits.

Note 5. Property And Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from three to seven years. Property and equipment at March 31, 2014 and December 31, 2013 consist of the following:

 
March 31,
 
December 31,
 
Property and Equipment
2014
 
2013
 
Furniture and Computer Equipment
  $ 41,000     $ 42,000  
Less: Accumulated Depreciation
    (19,000 )     (16,000 )
Property and Equipment, net
  $ 22,000     $ 26,000  

For the three months ended March 31, 2014 depreciation expense was $3,000. For the twelve months ended December 31, 2013 depreciation expense was $10,000.

Note 6. Intangible Assets

Intangible assets consist of a suite of domain names. The domain names have been determined to have an indefinite useful life based primarily on the renewability of the domain name. Intangible assets with an indefinite life are not subject to amortization, but will be subject to periodic evaluation for impairment.
 
 
16

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
Intangible asset amounts at March 31, 2014 and December 31, 2013 are as follows:

   
March 31,
   
December 31,
 
Intangible Assets
 
2014
   
2013
 
             
Domain names
  $ 421,000     $ 421,000  
Subtotal
  $ 421,000     $ 421,000  
Accumulated amortization
           
Total intangible Assets
  $ 421,000     $ 421,000  

See Note 8. Discontinued Operations for a discussion regarding the web software, trademarks and goodwill related to Sportify.com.

Summary of our premium and non-premium domain names
 
Amount
 
ToyHaulers.com*
  $ 31,000  
TravelTrailer.com*
    51,000  
ModularHomes.com*
    141,000  
ManufacturedHome.com and ManufacturedHouse.com*
    50,000  
ManufacturedHomes.com*
    130,000  
ManufacturedHomes.net*
    14,000  
Various other non-premium domain names
    4,000  
         
Total premium and non-premium domain names
  $ 421,000  
_____________
* These domain names have been pledged as collateral in connection with a financing sale-leaseback with Domain Capital.
 
Note 7. Other Assets

At December 31, 2013, the Company had recorded a $177,000 note receivable which represented the noncurrent portion of a $3,000,000 note receivable we received pursuant to the sale of our finder site weedmaps.com. See Note 4. Other Current Assets for more information on the sale of our finder site weedmaps.com.

The balance of other assets at March 31, 2014 included $11,000 in rent deposits and $45,000 in deferred tax assets.

Note 8. Discontinued Operations

Sportify, Inc.

On March 5, 2014, Sports Asylum, Inc. changed its name to Sportify, Inc.

During the quarter ended December 31, 2013, we entered into a definitive plan to sell the assets related to Sportify.com which includes the web software, trademarks, non-premium sports-related domain names and goodwill associated with our acquisition of Sportify, Inc. Sportify, Inc. owns and operates the intellectual property associated with www.sportify.com. We entered into a definitive plan to sell the assets related to Sportify because during the quarter ended December 31, 2013, management decided to focus the Company’s efforts and resources to expanding our operations in the manufactured housing industry through our highly specific search-driven internet marketing finder site called ManufacturedHomes.com. At December 31, 2013 we reclassed the assets, which had a net book value of $456,000 which amount comprised of $100,000 in sports related non-premium domain names, $10,000 in Sportify.com premium domain name, $1,000 in trademarks, $59,000 in goodwill, $430,000 in web software and $143,000 in accumulated amortization, to discontinued operations.
 
 
17

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
At March 31, 2014, the $456,000 in net assets is recorded as Other assets - discontinued operations. The Sportify assets are being held for sale and as of the filing of this report, a buyer has been identified and we are currently in negotiations.

Karate.com and Rodeo.com

During the quarter ended December 31, 2013, we entered into a definitive plan to sell the premium domain names Karate.com and Rodeo.com. We entered into a definitive plan to sell the Karate.com and Rodeo.com because during the quarter ended December 31, 2013, management decided to focus the Company’s efforts and resources to expanding our operations in the manufactured housing industry through our highly specific search-driven internet marketing finder site called ManufacturedHomes.com. At December 31, 2013 we reclassed Karate.com and Rodeo.com, which had a net book value of $100,000 which amount comprised of $500,000 in domain names and $400,000 in debt, to discontinued operations.

At March 31, 2014, the $500,000 in domain names is recorded as Other assets - discontinued operations and the $400,000 in debt is recorded as Noncurrent liabilities - discontinued operations. Karate.com and Rodeo.com are being held for sale and as of the filing of this report, a buyer has been identified and we are currently in negotiations.

General Health Solutions, Inc.

We discontinued the operations of General Health Solutions, Inc., which constituted our entire Medical Clinic Management segment. We discontinued the operations of General Health Solutions because of increasing costs associated with managing the clinics and the recent increased competition in the medicinal cannabis clinic industry. A major factor in the success of managing the medicinal cannabis clinics is running successful online Pay Per Click (“PPC”) advertising campaigns. In PPC campaigns targeting is key, and factors that determine the pricing pertaining to certain key words depend heavily on the number of advertisers bidding on those certain key words. Taken together, i) our increasing success with our technology in our Marketing and Media Segment and ii) the increasing costs of PPC campaigns coupled with the increasing number of sole-practitioner doctors now offering medicinal cannabis recommendation letters as part of their medical practice offerings, which places downward pressure on pricing, led us to decide to discontinue the operations of General Health Solutions, which composes our entire Medical Clinic Management Segment and focus our efforts instead on our technology in our Marketing and Media Segment.

During February 2012, we committed to a definitive plan to terminate the Management Agreement (“Agreement”) and services associated with the Agreement, which resulted in General Health Solutions, Inc., our Medical Clinic Management segment being reported as discontinued operations. For comparative purposes, all prior periods presented have been restated to reflect the reclassification of this segment to discontinued operations on a consistent basis. Following the closure of the clinics during the first quarter 2012, we do not expect any continuing cash flows from discontinued operations.

The assets and liabilities of our discontinued operations related to General Health Solutions at March 31, 2014 consists of $10,000 in accounts payable and $107,000 in notes payable, plus $50,000 in accrued interest recorded as Current liabilities - discontinued operations.
 
 
18

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
Note 9. Accounts Payable

Accounts payable at March 31, 2014 included amounts owed to certain vendors related to the ongoing normal course of the Company’s operations.

Note 10. Accrued Liabilities

Accrued liabilities at March 31, 2014 and December 31, 2013 are comprised of the following:

   
March 31,
   
December 31,
 
Accrued liabilities
 
2014
   
2013
 
Tax payable
  $ 1,098,000     $ 1,196,000  
Deferred tax liability short term
    92,000       146,000  
Obligations on stock based compensation
          440,000  
Obligations on marketing agreements
    27,000       27,000  
Payroll liabilities
    145,000       118,000  
Other
    146,000       104,000  
Total accrued liabilities
  $ 1,508,000     $ 2,031,000  

At March 31, 2014 we had $1,098,000 in federal and state taxes payable which represent amounts due and payable for the years ended December 31, 2011 and 2012.
 
Note 11. Notes Payable

On August 9, 2013, we entered into a sale-leaseback agreement with Domain Capital, LLC, pursuant to which we transferred our interest in the following domains to Domain Capital in exchange for One Hundred and Fifty-Thousand Dollars ($150,000.00): www.ManufacturedHome.com, www.ManufacturedHomes.com, www.ManufacturedHouse.com, www.ManufacturedHomes.net, www.ModularHomes.com, www.TravelTrailer.com, and www.ToyHaulers.com (the Domains). That same day, we entered into a Lease Agreement with Domain Capital, pursuant to which we are leasing the Domains at a cost of Five Thousand One Hundred and Ninety-Nine Dollars and Eighty Cents ($5,199.80) per month. The initial term of the Lease Agreement is thirty-six (36) months, and the sum of the lease payments due over the initial term are equal to the consideration we received for the Domains (i.e., $150,000.00) plus interest of 15%. The transactions closed on August 15, 2013, the date that the purchase price was delivered to us. At the termination of the Lease Agreement, pursuant to the terms of a Buyback Agreement, we can exercise an option to re-purchase the Domains for a total purchase price of one dollar ($1.00), assuming we are not in default under the Lease Agreement at that time. The proceeds we received from Domain Capital were used to satisfy outstanding debts related to our acquisition of the following three domains, with the balance allocated to working capital: www.ModularHomes.com, www.TravelTrailer.com, and www.ToyHaulers.com.
 
 
19

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
On December 12, 2013, January 6, 2014 and February 24, 2014, we entered into Securities Purchase Agreements with Asher Enterprises, Inc., pursuant to which we sold to Asher 8% Convertible Promissory Notes in the original principal amounts of $63,000, $63,000 and $53,000, respectively (the “Notes”). The Notes have maturity dates of September 16, 2014, October 8, 2014 and November 26, 2014, respectively, and are convertible after one hundred and eighty (180) days into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means the closing bid price on the applicable day. The “Fixed Conversion Price” shall mean $0.00005. The shares of common stock issuable upon conversion of the Notes will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Notes can be prepaid by us at a premium as follows: (a) between 31 and 60 days after issuance - 114% of the principal amount; (b) between 61 and 90 days after issuance - 120% of the principal amount; (c) between 91 and 120 days after issuance - 124% of the principal amount; (d) between 121 and 180 days after issuance - 130% of the principal amount. The issuance of the Notes was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
 
On January 3, 2014, we repaid the promissory note to Asher Enterprises, Inc. that, on July 11, 2013, we entered into in connection with a Securities Purchase Agreement, pursuant to which we sold to Asher a 8% Convertible Promissory Note in the original principal amount of $53,000 (the “Note”). We repaid the entire principal balance of the Note, plus accrued interest and a prepayment premium, in the amount of $70,840.

On February 19, 2014, we repaid the promissory note to Asher Enterprises, Inc. that, on August 22, 2014, we entered into in connection with a Securities Purchase Agreement, pursuant to which we sold to Asher a 8% Convertible Promissory Note in the original principal amount of $35,500 (the “Note”). We repaid the entire principal balance of the Note, plus accrued interest and a prepayment premium, in the amount of $43,897.

On March 28, 2014, we entered into, with a third party investor, a 20% convertible secured promissory note with a maturity date of April 28, 2015 and in the principal amount of $100,000 (the “Note”), which is convertible into the Company’s common stock at $0.08 per share and which is collateralized by up to $15,000 on a monthly basis by the $100,000 in monthly payments which we receive pursuant to our sale of WeedMaps Media, Inc. if not paid in full within six months of the date of the Note. Furthermore, as further collateral, we have placed 2,500,000 shares of our common stock into escrow. As of March 31, 2014, the Company had not yet received the principal amount of which $50,000 was received during April 2014. The Company as of the date of this report has not yet requested the remaining $50,000 principal amount and intends to do so as needed.
 
On March 28, 2014, we entered into, with a third party investor, a 20% convertible secured promissory note with a maturity date of April 26, 2015 and in the principal amount of $100,000 (the “Convertible Note”), which is convertible into the Company’s common stock at $0.08 per share and which is collateralized by up to $15,000 on a monthly basis by the $100,000 in monthly payments which we receive pursuant to our sale of WeedMaps Media, Inc. if not paid in full within six months of the date of the Note. Furthermore, as further collateral, we have placed 2,500,000 shares of our common stock into escrow. Finally, as an incentive to the third party investor to enter into the Note, we issue 300,000 shares of the Company’s common stock. As of March 31, 2014, the Company had received $50,000 of the principal amount. The Company as of the date of this report has not yet requested the remaining $50,000 principal amount and intends to do so as needed. The Company accounts for debt discount according to ASC 470-20 Debt With Conversion And Other Options. No debt discount associated with the Convertible Note was recorded because the fair value of the common stock at the commitment date ($0.05) was less than the effective conversion price of the conversion feature ($0.07). As such, there was no intrinsic value associated with the conversion feature and thus no debt discount was recognized.
 
 
20

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Below is a summary of our note payable amounts:

Notes payable - current portion
 
March 31,
2014
   
December 31,
2013
 
Domain Capital
  $ 46,000     $ 44,000  
Convertible Note
    50,000       -  
Asher Enterprises
    182,000       152,000  
    $ 278,000     $ 196,000  

Notes payable - noncurrent portion
 
March 31,
2014
   
December 31,
2013
 
Domain Capital
    83,000       96,000  
    $ 83,000     $ 96,000  

Summary of notes payable:
 
March 31,
2014
   
December 31,
2013
 
Domain Capital
  $ 129,000     $ 140,000  
Convertible Note
    50,000       -  
Asher Enterprises
    182,000       152,000  
                 
    $ 361,000     $ 292,000  

Note 12. Notes Payable- Related Party

Sportify Note

On December 31, 2012, we entered into a Securities Purchase Agreement by and among us, on the one hand, and Sportify, Inc., a Nevada corporation, and its shareholders, Sabas Carrillo (“Carrillo”), an individual, and James Pakulis (“Pakulis”), an individual and one of our officers and directors, on the other hand. Pursuant to the agreement, upon the closing of the transaction, we purchased 100% of the issued and outstanding equity interests of Sportify in exchange for (a) the cancellation of a previous Secured Promissory Note issued to Sportify, entered into on or about August 22, 2012 and with an outstanding principal balance of Two Hundred Eighty Five Thousand Dollars ($285,000) and (b) Two Hundred Fifteen Thousand Dollars ($215,000) represented by promissory notes in the original principal amount of One Hundred Sixty One Thousand Two Hundred Fifty Dollars ($161,250) to Pakulis and Fifty Three Thousand Seven Hundred Fifty Dollars ($53,750) to Carrillo. The closing of the purchase took place on December 31, 2012. On July 11, 2013, we entered into a First Amendment to Promissory Note with each of Pakulis and Carrillo to extend the date that we will begin making payments thereunder from June 30, 2013 to September 30, 2013, and extended the maturity date of the notes by a corresponding three months. On November 8, 2013, effective as of September 30, 2013, we entered into a Second Amendment to Promissory Note with each of Pakulis and Carrillo to extend the date that we will begin making payments thereunder from September 30, 2013 to December 31, 2013, and extended the maturity date of the notes by a corresponding three months. On March 19, 2014, effective as of December 31, 2013, we entered into a Third Amendment to Promissory Note with Pakulis to extend the date that we will begin making payments thereunder from December 31, 2013 to January 1, 2015, and extended the maturity date of the notes by a corresponding twelve months.
 
 
21

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Pakulis Demand Note

During the quarter ended March 31, 2014, James Pakulis, one of our officers and directors, loaned the Company $41,497, which represents the principal amount of an unsecured demand note with nominal interest of 1.10%.

Below is a summary of our note payable - related party amounts:

Notes payable - related party
 
March 31,
2014
   
December 31,
2013
 
Current portion
  $ 90,000     $ -  
Noncurrent portion
    113,000       161,000  
    $ 203,000     $ 161,000  

Note 13. Other Long Term Accrued Liabilities

At March 31, 2014, we had a balance of $119,000 in noncurrent tax payable.

Note 14. Income Per Common Share

Income per common share is based on the weighted average number of common shares outstanding. The Company complies with Earnings Per Share, which requires dual presentation of basic and diluted earnings per share on the face of the statements of operations. Basic per share earnings or loss excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average common shares outstanding for the period. Diluted per share earnings or loss reflect the potential dilution that could occur if convertible preferred stock or debentures, options and warrants were to be exercised or converted or otherwise result in the issuance of common stock that is then shared in the earnings of the entity.

As of March 31, 2014, there were 250,000 common stock purchase warrants outstanding that were not included in the computation of diluted EPS because to do so would have been antidilutive for the period presented.

Note 15. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Significant components of the Company's tax provisions and deferred tax assets as of March 31, 2014 and December 31, 2013 are as follows:

The components of tax provision:

   
March 31,
2014
   
December 31,
2013
 
Current
           
Federal
  $ (98,000 )   $ (475,000 )
State
    -       70,750  
      (98,000 )     (404,250 )
Deferred
               
Federal
    (66,000 )     (651,000 )
State
    (28,000 )     (268,000 )
      (94,000 )     (919,000 )
                 
Change in valuation allowance
    79,000       (77,000 )
                 
Total provision
  $ (113,000 )   $ (1,400,250 )
 
 
22

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
The total tax provision is $112,000 of which $113,000 corresponds to current operations and $1,000 (tax benefit) corresponds to discontinued operations.

The components of deferred tax asset:
 
   
March 31,
2014
   
December 31,
2013
 
Deferred income tax assets:
           
State taxes
  $ 129,000     $ 129,000  
Net operating losses
    374,000       357,000  
Depreciation
    137,000       137,000  
Accruals and other
    -       -  
      640,000       623,000  
                 
Deferred income tax liabilities:
               
Installment gain
    (313,000 )     (390,000 )
      327,000       233,000  
                 
Valuation allowance
    (374,000 )     (295,000 )
                 
Net deferred tax assets/(liabilities)
  $ (47,000 )   $ (62,000 )

The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. The amount of deferred tax assets considered realizable could change if future taxable income is realized. At both March 31, 2014 and December 31, 2013, the Company had U.S. federal tax net operating loss carryforwards (“NOLs”) of approximately $664,000, which begin to expire in 2021. At March 31, 2014 and December 31, 2013, the Company had State NOLs of $2.54 million and $2.25, respectively. The NOLs are subject to limitations under IRC Section 382 of the Internal Revenue Code (“Section 382”).
 
 
23

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited

Note 16. Related Party Transactions

All material intercompany transactions have been eliminated upon consolidation of our entities. During the three months ended March 31, 2014, cash transfers, equity and accounts between the Company and its subsidiaries have been eliminated upon consolidation.

See Note 12. Notes Payable- Related Party for information regarding a Securities Purchase Agreement we entered into on December 31, 2012, with Sportify, Inc., a Nevada corporation, and its shareholders, Sabas Carrillo, an individual, and James Pakulis, an individual and one of our officers and directors.

See Note 12. Notes Payable- Related Party for information regarding an unsecured demand note whereby during the quarter ended March 31, 2014, James Pakulis, one of our officers and directors, loaned the Company $41,497.

Note 17. Commitments And Contingencies

Our executive offices are located in Lake Forest, California, at 26497 Rancho Parkway South, Lake Forest, CA 92630. Our office space is approximately 7,000 square feet and is shared with Miracle Housing, Inc., a business controlled by one of our employees, Brad Nelms. Our rent, pursuant to a verbal agreement with Miracle Housing, is $8,000 per month and covers exactly all of the obligations of Miracle Housing under its primary lease. The Company is confident that this commercial space will provide adequate space to meet our needs and provide for future growth.

During April 2013, we entered into a new lease at 3265 N Fort Apache Rd, Suite 110, Las Vegas, NV 89129. The office space is approximately 2,500 square feet. Pursuant to the terms of the lease, our rent is $2,500 per month for twelve (12) months. This lease expired on April 30, 2014 and we do not expect to renew.

During February 2014, we entered into a new lease at 4888 FM 2264, Rhome, TX. The parcel is approximately a 2-acre tract of land. Pursuant to the terms of the lease, our rent is $1,300 per month for 24 months.

Set forth below is a summary of our current obligations as of March 31, 2014 comprised exclusively of the rental lease obligations to make future payments due by the period indicated below:

Lake Forest Office
 
Minimum
 Payments
   
Monthly
Base Rent
 
2014
  $ 72,000     $ 8,000  
                 
Las Vegas Office
 
Minimum
 Payments
   
Monthly
Base Rent
 
2014
  $ 2,500     $ 2,500  
                 
Rhome, Texas Retail Center
 
Minimum
 Payments
   
Monthly
Base Rent
 
2014
  $ 11,700     $ 1,300  
2015
  $ 15,600     $ 1,300  
2016
  $ 1,300     $ 1,300  
 
 
24

 
 
SEARCHCORE, INC.
Notes to the Consolidated Financial Statements
March 31, 2014
Unaudited
 
Note 18. Warrants

As of March 31, 2014, there were 250,000 common stock purchase warrants outstanding. The following table summarizes information about common stock warrants outstanding at March 31, 2014.

Outstanding
    Exercisable  
Exercise 
Price
   
Number
Outstanding
   
Weighted Average Remaining Contractual Life (years)
   
Weighted Exercise Price Average
   
Number Exercisable
   
Weighted Average Exercise Price
 
                                             
$ 4       250,000       0.62     $ 4       250,000     $ 4  
 
Note 19. Subsequent Events

The Company evaluated its March 31, 2014 financial statements for subsequent events through May 14, 2014, the date the financial statements were available to be issued.

On May 7, 2014, we signed a Memorandum of Understanding pursuant to which we would agree to take over Heritage Mobile Homes, a manufactured home retail center located in Jacksboro, Texas. Pursuant to the Memorandum of Understanding, we will assume the office and lot lease for $1,108 per month. The lot is currently leased on a month-to-month basis. The seller will continue to operate and manage the facility.

On May 1, 2014, we entered into a new lease at 500 N Northeast Loop 323, Tyler, TX. The parcel is approximately a 1.8-acre tract of land. Pursuant to the terms of the lease, our rent is $2,500 per month for 37 months.

On April 3, 2014, we entered into an Assignment Agreement with a third party entity (the “Assignee”) pursuant to which we assigned and transferred to the Assignee the premium domain names Karate.com and Rodeo.com along with the associated $400,000 in debt.

On March 28, 2014, we entered into, with a third party investor, a 20% convertible secured promissory note with a maturity date of April 28, 2015 and in the principal amount of $100,000 (the “Note”). Furthermore, as further collateral, we placed 2,500,000 shares of our common stock into escrow on April 4, 2014.

On March 28, 2014, we entered into, with a third party investor, a 20% convertible secured promissory note with a maturity date of April 26, 2015 and in the principal amount of $100,000 (the “Convertible Note”). Furthermore, as further collateral, we placed 2,500,000 shares of our common stock into escrow on April 4, 2014. Finally, as an incentive to the third party investor to enter into the Note, we agreed to issue 300,000 shares of the Company’s common stock which we did on April 4, 2014.
 
 
25

 

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

Quarter Ended March 31, 2014 compared to the Quarter Ended March 31, 2013

Results of Operations

Revenue

Our sales, total revenue, total operating expenses and operating income for the three months ended March 31, 2014, compared to the three months ended March 31, 2013, were as follows:

   
Quarters Ended
 
 
 
March 31,
2013
   
March 31,
2012
 
 
           
Sales
  $ 104,000     $ 27,000  
Total revenue
    104,000       27,000  
Total operating expenses
    558,000       665,000  
 
               
Operating loss
  $ (454,000 )   $ (638,000 )

The increase in sales from $27,000 for the three months ended March 31, 2013, to $104,000 for the three months ended March 31, 2014, an increase of 288%, is due to an increase in the number of clients from the prior year.

Although we have experienced an increase in revenue for the quarter ended March 31, 2014 as compared to the quarter ended March 31, 2013, the growth in our subscribers has not been as strong as we had hoped, and as a result, our revenue growth has not been at the pace we anticipated. Furthermore, we have begun to expand into the manufactured home retail industry and we expect to begin generating revenues from the manufactured home retail centers that we have opened or taken over during the quarter ending June 30, 2014.

Operating Expenses

Operating Expenses – Our operating expenses decreased slightly during the three months ended March 31, 2014, as compared to the three months ended March 31, 2013, in general because we decreased amounts spent on salaries, consulting and professional fees like legal and accounting following the sale of our finder site weedmaps.com.

The decrease in operating expenses from $665,000 for the three months ended March 31, 2013, to $558,000 for the three months ended March 31, 2014, a decrease of 16%, was because we decreased the number of technology specialists, including the number of programmers and engineers whose responsibilities included, but were not limited to, developing software and additional finder sites. This was accompanied by decreases in professional fees which included fees for legal and accounting work as well as expenses related to our Securities and Exchange Commission filings and for fees paid to consultants related to business development, investor relations and sales contract work all of which was due to our efforts to have our operating expenses in line with our cash inflows both from the $100,000 per month we receive pursuant to the sale of our finder site weedmaps.com and from cash generated from our ongoing operations.
 
 
26

 

Salaries And Employee Benefits – During the three months ended March 31, 2014 and 2013, salaries and employee benefits were $257,000 and $252,000, respectively.

Professional Fees – During the three months ended March 31, 2014 and 2013, professional fees were $192,000 and $256,000, respectively. The decrease during the three months ended March 31, 2014 as compared to 2013 was as a result of less spending on accounting and legal fees related to our SEC filings, which was slightly offset by our efforts to expand our operations serving the manufactured home industry as well as other industries in which we expect to operate in during the year ending 2014.

General And Administrative Expenses – During the three months ended March 31, 2014 and 2013, general and administrative expenses were $96,000 and $94,000, respectively. The slight change in these expenses was primarily attributable to increases in spending on travel to support our efforts to expand into the manufactured home retail industry.

Liquidity and Capital Resources

Our cash, current assets, intangible assets, total assets, current liabilities, and total liabilities as of March 31, 2014 and March 31, 2013 were as follows:

   
March 31,
2014
   
December 31,
2013
   
Percentage
 
 
 
(unaudited)
   
(audited)
   
Change
 
 
                 
Cash
  $ 26,000     $ 93,000       (72.0 )%
Total current assets
    1,373,000       1,412,000       (2.8 )%
 
                       
Intangible assets:
                       
Domain names
    421,000       421,000       0.0 %
Total intangible assets
    421,000       421,000       0.0 %
 
                       
Total assets
    3,005,000       3,383,000       (11.2 )%
 
                       
Total current liabilities
    2,211,000       2,589,000       (14.6 )%
Total long term liabilities
    715,000       776,000       (7.9 )%
Total liabilities
  $ 2,926,000     $ 3,365,000       (13.0 )%
 
Our intangible assets at March 31, 2014 consisted of the domain names of www.ManufacturedHome.com, www.ManufacturedHomes.com,
www.ManufacturedHouse.com, www.ModularHomes.com, www.TravelTrailer.com and www.ToyHaulers.com.

Our current liabilities decreased by $378,000, from $2,589,000 at December 31, 2013 to $2,211,000 at March 31, 2014, primarily as a result of payments on notes payable related to the Asher Notes and our recent domain name acquisitions, $98,000 in reduction of our federal taxes payable as a result of utilizing our net operating losses, as well as for $440,000 that had been accrued during 2013 for consulting services that we paid in noncash stock based payments, which were partially offset by an increase in notes payable (the Pakulis Note, Convertible Note and Asher Notes).
 
 
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Our total long-term liabilities decreased by $61,000, from $776,000 at December 31, 2013 to $715,000 at March 31, 2014, which was a result in large part to a $50,000 noncash note payable reclassification from noncurrent to current and a decrease in notes payable (the Domain Capital noncurrent portion).

Cash Requirements

We had approximately $26,000 in cash and cash equivalents as of March 31, 2014. Our net loss for the quarter ended March 31, 2014 was $379,000. We had a working capital deficit of approximately $837,000 at March 31, 2014. During the quarter ended March 31, 2014, our principal source of liquidity was cash generated from our then-current operations as well as payments we received pursuant to the sale of the finder site weedmaps.com which during the quarter ended March 31, 2014 totaled $300,000 and will continue for $100,000 a month for a total of fourteen (14) more months ($900,000 for the remainder of the year ended December 31, 2014 and $515,500 for the year ended December 31, 2015), which are reflected in our statements of cash flows under the section changes in operating assets and liabilities: other assets). However, the growth in our subscribers from our finder sites has not been as strong as we had hoped, and as a result, our revenue growth has not been at the pace we anticipated. As a result of the foregoing, at our current burn rate, our current level of revenue generated from operations, our cash on hand, together with the $100,000 per month that we will receive pursuant to the sale of our finder site weedmaps.com, is insufficient to cover our monthly expenses. We have had to, and will continue to, seek financing in the form of debt or stock sales to finance our operations until we reach break-even.

Sources and Uses of Cash

Operations

We had net cash used in operating activities of $179,000 for the quarter ended March 31, 2014, as compared to net cash from operating activities of $97,000 for the quarter ended March 31, 2013. For the quarter ended March 31, 2014, the net cash used by operating activities consisted primarily of a net loss of $379,000 which included an $4,000 loss related to the discontinued operations of General Health Solutions, and a decrease in accounts payable and accrued liabilities of $551,000, a decrease in prepaid expenses and deposits of $25,000, plus non-cash depreciation expense of $3,000. For the three months ended March 31, 2013, the net cash used by operating activities consisted primarily of a net loss of $639,000 which included a $8,000 loss related to the discontinued operations of General Health Solutions, and a slight decrease in accounts payable and accrued liabilities of $1,100, an increase in prepaid expenses and deposits of $213,000, plus non-cash amortization and depreciation expense of $36,000 and $1,200, respectively. 

Investments

During the quarter ended March 31, 2014, we had zero cash flows from investing activities as compared to $96,000 for the quarter ended March 31, 2013. For the three months ended March 31, 2013, the net cash used in investing activities was primarily related to purchases of furniture and computers and other equipment of $11,000, plus purchases of intangible assets of $85,000. 
 
 
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Financing

We had net cash from financing activities of $112,000 for the quarter ended March 31, 2014, as compared to net cash used in financing activities of $23,000 for the quarter ended March 31, 2013. For the quarter ended March 31, 2014, our net cash used in financing activities consisted of payments on notes payable related to our recent domain name acquisitions and on the Asher Notes, offset by two new convertible notes from Asher, a new convertible note from a third party, in additional to a $42,000 demand note from James Pakulis, one of our officers and directors, in the aggregate amount of $208,000. For the three months ended March 31, 2013, our net cash used in financing activities consisted solely of payments on notes payable related to our recent domain name acquisitions.

Debt Instruments, Guarantees, and Related Covenants

We have no disclosure required by this Item.

Critical Accounting Estimates

Goodwill

In accordance with Goodwill and Other Intangible Assets, goodwill is defined as the excess of the purchase price over the fair value assigned to individual assets acquired and liabilities assumed and is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis in our fourth fiscal quarter or more frequently if indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair value of our reporting units with each respective reporting unit's carrying amount, including goodwill. The fair value of reporting units is generally determined using the income approach. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the second step of the goodwill impairment test is performed to determine the amount of any impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. No amortization is recorded for goodwill with indefinite useful life. No goodwill impairment was recognized during the three months ended March 31, 2014 and 2013, respectively.

Intangible Assets

In accordance with Goodwill and Other Intangible Assets, intangible assets that are determined not to have an indefinite useful life are subject to amortization. We amortize intangible assets using the straight-line method over their estimated useful lives.

Impairment of Long-Lived and Intangible Assets

In accordance with Accounting for the Impairment or Disposal of Long-Lived Assets, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. We assess the recoverability of the long-lived and intangible assets by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. No impairment of intangible assets was recognized during the three months ended March 31, 2014. No impairment of long-lived assets was recognized during the three months ended March 31, 2014. 
 
 
29

 

Net Loss

For the quarters ended March 31, 2014 and 2013, we had a net loss of $379,000 and $639,000, respectively. The net loss we experienced during the quarters ended March 31, 2014 and 2013 were as a result of our efforts to expand our operations serving the manufactured home industries.

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4 Controls and Procedures

(a) Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2014, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K.

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

(b) Changes in Internal Control over Financial Reporting
 
No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended March 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
30

 

PART II – OTHER INFORMATION

ITEM 1  Legal Proceedings

We are not a party to or otherwise involved in any legal proceedings.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

ITEM 1A  Risk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
 
On January 6, 2014, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher a 8% Convertible Promissory Note in the original principal amount of $63,000 (the “Note”). The Note has a maturity date of October 8, 2014, and is convertible after 180 days into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means the closing bid price on the applicable day. The “Fixed Conversion Price” shall mean $0.00005. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by us at a premium as follows: (a) between 31 and 60 days after issuance – 114% of the principal amount; (b) between 61 and 90 days after issuance – 120% of the principal amount; (c) between 91 and 120 days after issuance – 124% of the principal amount; (d) between 121 and 180 days after issuance – 130% of the principal amount. The purchase and sale of the Note closed on January 10, 2014, the date that the purchase price was delivered to us. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
 
On February 24, 2014, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher a 8% Convertible Promissory Note in the original principal amount of $53,000 (the “Note”). The Note has a maturity date of November 26, 2014, and is convertible after 180 days into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means the closing bid price on the applicable day. The “Fixed Conversion Price” shall mean $0.00005. The shares of common stock issuable upon conversion of the Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by us at a premium as follows: (a) between 0 and 30 days after issuance – 109% of the principal amount; (b) between 31 and 60 days after issuance – 114% of the principal amount; (c) between 61 and 90 days after issuance – 120% of the principal amount; (d) between 91 and 120 days after issuance – 124% of the principal amount; (e) between 121 and 180 days after issuance – 130% of the principal amount. The purchase and sale of the Note closed on February 28, 2014, the date that the purchase price was delivered to us. The issuance of the Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
 
 
31

 

On February 28, 2014, we issued a total of five million five hundred thousand (5,500,000) shares of our common stock, restricted in accordance with Rule 144, to a total of five (5) individuals and entities who had rendered services to us prior to December 31, 2013. These shares were used to satisfy an aggregate debt of Four Hundred and Forty Thousand Dollars ($440,000) owed to service providers. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 because the service providers were either accredited or sophisticated and familiar with our operations, and there was no solicitation.

On March 28, 2014, we entered into a Note and Stock Purchase Agreement with an investor whereby we issued a 20% Convertible Promissory Note in the face amount of $100,000, and 300,000 shares of our common stock, restricted in accordance with Rule 144, in exchange for $100,000. The Note is convertible into our common stock at the election of the holder at $0.08 per share, is collateralized by 1,250,000 shares of common stock which will be issued and held in escrow, and, if not paid in full in six (6) months, is additionally collateralized by up to $15,000 in monthly payments which we receive from the sale of WeedMaps Media, Inc. This issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was accredited and familiar with our operations, and there was no solicitation in connection with the offering.

On March 28, 2014, we entered into a Note Purchase Agreement with an investor whereby we issued a 20% Convertible Promissory Note in the face amount of $100,000, in exchange for $100,000. The Note is convertible into our common stock at the election of the holder at $0.08 per share, is collateralized by 1,250,000 shares of common stock which will be issued and held in escrow, and, if not paid in full in six (6) months, is additionally collateralized by up to $15,000 in monthly payments which we receive from the sale of WeedMaps Media, Inc. This issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was accredited and familiar with our operations, and there was no solicitation in connection with the offering.

ITEM 3  Defaults Upon Senior Securities

There have been no events which are required to be reported under this Item.

ITEM 4  Mine Safety Disclosures

Not applicable.
 
ITEM 5  Other Information

There have been no events which are required to be reported under this Item.
 
 
32

 

ITEM 6  Exhibits

(a)  Exhibits

2.1 (1)
 
Agreement and Plan of Reorganization dated December 11, 2012
     
2.2 (1)
 
Securities Purchase Agreement dated December 31, 2012
     
3.1 (1)
 
Amended and Restated Articles of Incorporation of General Cannabis, Inc.
     
3.2 (1)
 
Certificate of Amendment to Articles of Incorporation
     
3.3 (1)
 
Bylaws of General Cannabis, Inc.
     
10.1 (2)
 
Securities Purchase Agreement dated January 6, 2014
     
10.2 (2)
 
Convertible Promissory Note dated January 6, 2014
     
10.3 (3)
 
First Amendment to Management Agreement dated January 27, 2014
     
10.4 (4)
 
Securities Purchase Agreement dated February 24, 2014
     
10.5 (4)
 
Convertible Promissory Note dated February 24, 2014
     
10.6 (5)
 
Second Amendment to Promissory Note with James Pakulis dated March 19, 2014 and effective December 31, 2013
     
10.7 (5)
 
Form of Note and Stock Purchase Agreement dated March 26, 2014
     
10.8 (5)
 
Form of Note Purchase Agreement dated March 26, 2014
     
10.9 (5)
 
Form of Convertible Secured Promissory Note dated March 26, 2014
     
10.10 (5)
 
Form of Pledge and Security Agreement dated March 26, 2014
     
10.11 (5)
 
Form of Escrow Agreement dated March 26, 2014
     
31.1
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
32.1
 
Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2
 
Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
100.INS
  XBRL Instance Document
100.SCH
  XBRL Schema Document
100.CAL
  XBRL Calculation Linkbase Document
100.DEF
  XBRL Definition Linkbase Document
100.LAB
  XBRL Lables Linkbase Document
100.PRE
  XBRL Presentation Linkbase Document

(1)  
Incorporated by reference from our Registration Statement on Form 10 dated January 29, 2013 and filed with the Commission on January 30, 2013.

(2)  
Incorporated by reference from our Current Report on Form 8-K dated January 3, 2014, and filed with the Commission on January 10, 2014.

(3)  
Incorporated by reference from our Current Report on Form 8-K dated February 5, 2014, and filed with the Commission on February 7, 2014.

(4)  
Incorporated by reference from our Current Report on Form 8-K dated February 28, 2014, and filed with the Commission on March 3, 2014.

(5)  
Incorporated by reference from our Current Report on Form 8-K dated March 24, 2014, and filed with the Commission on April 2, 2014.

 
33

 
 
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.


  SearchCore, Inc.  
       
Dated: May 14, 2014
By:
/s/ James Pakulis
 
   
James Pakulis
 
  Its:
President and Chief Executive Officer
 
       
 

 
34