Kiwibox.Com, Inc. - FORM 10-K

Attached files

file	filename
EX-32.02 - EXHIBIT 32_02 - Kiwibox.Com, Inc.	ex32_02.htm
EX-32.01 - EXHIBIT 32_01 - Kiwibox.Com, Inc.	ex32_01.htm
EX-31.2 - EXHIBIT 31_2 - Kiwibox.Com, Inc.	ex31_2.htm
EX-31.1 - EXHIBIT 31_1 - Kiwibox.Com, Inc.	ex31_1.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year ended December 31, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE OF 1934

For the Transition Period From to

Commission File No. 33-20432

KIWIBOX.COM, INC.

(formerly known as Magnitude Information Systems, Inc.)

Exact Name of Registrant as Specified in its Charter

DELAWARE 75-2228828

State or Other Jurisdiction of IRS Employer

Incorporation or Organization Identification Number

330 W. 42nd Street, #3210, New York, New York 10036

Address of Principal Executive Offices Zip Code

(347-836-4727

Registrants Telephone Number, Including Area Code

Securities Registered Pursuant to Section 12(b) of the Act:

NONE

Title of Each Class Name of Each Exchange on Which Registered

NONE NONE

Securities Registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, par value $0.0001

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

The Registrant’s revenues for the fiscal year ended December 31, 2016 were $11,817.

Common stock, par value $.0001 per share (“Common Stock”), was the only class of voting stock of the Registrant outstanding on April 14, 2017. Based on the closing price of the Common Stock on the OTC Electronic Bulletin Board as reported on June 30, 2016, the aggregate market value of the shares of the Common Stock held by persons other than officers, directors and persons known to the Registrant to be the beneficial owners (as the term is defined under the rules of the Securities and Exchange Commission) of more than five percent of the Common Stock on was approximately $541,333. By the foregoing statements, the Registrant does not intend to imply that any of the officers, directors, or beneficial owners are affiliates of the registrant or that the aggregate market value, as computed pursuant to rules of the Securities and Exchange Commission, is in any way indicative of the amount which could be obtained for such shares of Common Stock.

As of April 14, 2017 688,493,060 shares of Common Stock, $.0001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: SEE EXHIBIT INDEX

KIWIBOX.COM, INC.

CONTENTS


			Page
PART I.
	Item 1.	Business	3
	Item 1A.	Risk Factors	7
	Item 2.	Properties	9
	Item 3.	Legal Proceedings	9
	Item 4.	Submission of Matters to a Vote of Security Holders	9

PART II.
	Item 5.	Market for Registrant's Common Equity and Related Shareholder Matters	10
	Item 6.	Selected Financial Data	10
	Item 7.	Management’s' Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risks	14
	Item 8.	Financial Statements	14
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	14
	Item 9A.	Control and Procedures	14
	Item 9B.	Other Information	15

PART III.
	Item 10.	Directors and Executive Officers of the Registrant	16
	Item 11.	Executive Compensation	17
	Item 12.	Security Ownership of Certain Beneficial Owners and Management	19
	Item 13.	Certain Relationships and Related Transactions	20
	Item 14.	Principal Accountant Fees and Services	21

PART IV.
	Item 15.	Exhibits	22
		Signatures	23
		Exhibit Index	24

PART 1

ITEM 1: BUSINESS

Section 1.1 The Company

Kiwibox.Com, Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc. On November 18, 1998, the

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

On August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc., a social media network dedicated to young adults.

The Company, its subsidiary Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox Media, Inc. being a wholly owned subsidiary. The 1% of Magnitude, Inc. not owned by the Company constituted a minority interest which was valued at $0. On December 31, 2009, the two subsidiaries Magnitude, Inc. and Kiwibox Media, Inc. merged into the Company.

On September 30, 2011, Kiwibox.com acquired the German based social network Kwick! (see Note 1 of the Financial Statements). On December 18, 2013 the company sold 80% of its ownership interest in Kwick! (see Note 1 of the Financial Statements).

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

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

The Company is currently subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934. The Company has the authority to issue an aggregate of One Billion Four Hundred Million (1,400,000,000) Common Shares, par value $.0001, following an increase from 700,000,000 shares, authorized by the Company on January 29, 2009, with authorization to issue up to Three Million (3,000,000) “blank check” Preferred Shares, par value $.001, of which at December 31, 2011, Two Thousand Five Hundred (2,500) were designated as Cumulative Preferred Shares, par value $.001; Three Hundred Thousand (300,000) were designated as Series A Senior Convertible Preferred Stock, par value $0.001; Three Hundred Fifty Thousand (350,000) were designated as Series B Senior Convertible Preferred Stock, par value $0.001; One Hundred Twenty Thousand (120,000) were designated as Series C Senior Convertible Preferred Stock, par value $0.001; Five Hundred Thousand (500,000) were designated as Series D Senior Convertible Preferred Stock, par value $0.001; Five Hundred Thousand (500,000) were designated as Series E Senior Convertible Preferred Stock, par value $0.001, and Forty-Three Thousand Six Hundred Ten (43,610) were designated Series G Senior Convertible Preferred Stock

As of December 31, 2016, there were outstanding 688,493,060 Common Shares, 1 Cumulative Preferred Share, and 85,890 Convertible Preferred Shares.

Description of Business

Overview

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

We own and operate “Kiwibox.com”, a social networking website. Initially launched in 1999, Kiwibox.com is a social network.

Kiwibox Operations

Kiwibox.com is a social network for young adults all around the world for web and mobile usage, a community to find new friends and to meet new people online and in the real world. Unlike traditional social networking sites such as Facebook, Kiwibox combines its own "magazine" content and social networking technology in its website, creating attractive topics for its membership to peruse and enjoy.

Our operating expenses, not including stock-based compensation, are at a level of approximately $106,000 per month. (see sections “Loans and Notes Payable”).

Potential Revenue Streams and Marketing Strategy

Currently we generate all of our revenue from advertising/sponsorships. We anticipate revenue growth from increased membership activity and our revitalized website as we continue to implement new marketing strategies. Our software and networking technologies that we incorporated during the last 4 years now permit our mobile devices to accept and receive direct advertising. Our social networks permit us to work with potential advertisers to identify the right member groups for direct target advertising, a marketing channel that is readily accessible to our social media community.

Our continuing membership growth is fueled by infiltrating our users into local event venues where they participate and simultaneously communicate with our social network via the regular deployment of our cutting-edge App updates. As a result, the Kiwibox network enjoys continuing user sign-ups and continuing loyalty of users to our social network.

Community means social network – and thrives on membership networking. Our website is based on the latest web technology which makes it easier for users to stay connected and to interact with each other.

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

•

Active Members – Our Kiwibox.com website has 4.96 Million Active Members as of December 31, 2016, an increase of approximately 1.22 % over the third quarter, 2016. Active users are those which have logged in to Kiwibox.com during the last 90 days.

•

Unique Visitors – For the quarter ended December 31, 2016, we had 7.7 Million Unique Visitors to our Kiwibox.com website, a decrease of approximately 1.28% over the third quarter 2016 results. Unique Visitors refers to the number of distinct individuals requesting pages from our Kiwibox.com website during a specific period, regardless of how often they visit. Visits refer to the number of times our Kiwibox.com website is visited, no matter how many visitors make up those visits.

•

Page Impressions – We had 220.3 Million Page Impressions during the fourth quarter of 2016, a decrease of approximately 26.62 % over the prior quarter. Generally, Page Views refer to a number of pages which are viewed or clicked on our Kiwibox.com website during the quarter.

•

Guestbook Entries – For the quarter ended December 31, 2016, Kiwibox.com had 165.8 Million Guestbook Entries, an increase of approximately 3.24% from the previous quarter. A Guestbook is a logging system that permits visitors to our Kiwibox.com website to leave a public comment.

•

Blog Entries – Our Kiwibox.com website members and visitors entered 116.8 Million Blog Entries during the fourth quarter of 2016, an approximate 1.38% increase over the prior quarter. A Blog Entry is a message entered in our Kiwibox.com.

•

Unique Mobile Visitors – For the quarter ended December 31, 2016 Kiwibox.com had 1.01 million Unique Mobile Visitors, an increase of approximately 5.2% over the previous quarter.

Market Position

Our social media’s market penetration continues to rely upon our innovations where we strive to enhance our member’s experiences with our community. Our members enjoy our interactive platforms where we blog, play games, chat and share pictures.

The Kiwibox Network is in a unique position because it combines the excitement of a dating community with the benefits and accessibility of a real social network. This community behavior binds users to the platform and is the base for our viral marketing.

Market Position-What’s New

Kiwibox is using its growing community to establish its brand throughout social media outlets. We continue to expand our membership and community events, highlighting our active presence in the marketplace.

Kiwibox attracts more young adventurers who seek friendship and community involvement every day.

Safety

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

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

Competition

Our primary competitors are other online social networks, including Facebook, Instagram, Tinder and tumbler. Facebook is widely considered as the industry leaders, however, recently statistics and strategic announcements have indicated a shift in the target audience from teens and college students to a much broader and more adult demographic, because of their international focus. We plan to distinguish ourselves by targeting the US-market and by combining the social-network advantages with user generated content – from users to users, while stressing the community feeling.

Technology Development

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

The Kiwibox Network is focusing on the fast-growing mobile usage phenomenon, being online with friends’ all the time and everywhere. At present, more than 960,000 company Apps are installed worldwide.

During the third quarter of 2016 we focused further on mobile development and released an additional Mobile App for the Android 6 and 7 Platform- the Kiwibox Go! App.

New Kiwibox “Meet and Date” App

In addition to our free platform, Kiwibox introduced, and is to release; a membership based flirting /dating platform in the next few months. This development is now in its last steps. We are also integrating useful features for our users, like a regional based database for jobs and apartments.

Intellectual Property

The Kiwibox.com web and mobile software and other related intellectual property rights are important assets. Most of our software is unique and individual and developed internally.

Governmental Regulations

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

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

State and federal agencies are applying consumer protection laws to regulate the on-line use, collection and dissemination of personal information and website content. These laws require us to implement programs to notify our website users of our privacy and security programs. Consumer protection laws will require us to obtain the consent of our website users if we want to collect and use certain portions of their personal information.

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

Employees

Currently, we have 3 employees.

ITEM 1A: Risks Related to Our Business

Early Stage Company; Generation of Revenues

Kiwibox.Com, Inc. (“Kiwibox” or “the Company”) can be considered an early stage company and investors cannot reasonably assume that we will ever be profitable. As an early stage company, we are likely to continue to have financial difficulties for the foreseeable future. We may successfully re-develop our website operations and generate additional revenues but still be unable to achieve profitability. Kiwibox had devoted substantial funds to develop its website, but investors should be aware that there can be no assurance that Kiwibox will ever achieve revenues that exceed its operational costs. We may not obtain the funding necessary to provide Kiwibox with the working capital necessary to continue to develop and market its website. Moreover, the Kiwibox.com website may not receive sufficient internet traffic to increase revenues or achieve profitability.

Doubt Raised About our Ability to Continue as a Going Concern.

Our financial statements have been presented on the basis that we will remain a going concern and that our assets will increase and that we will satisfy our liabilities in the normal course of our business. Kiwibox has had minimal revenues and/or has incurred operating losses during the fiscal years ended December 31, 2012, 2013, 2014, 2015 and 2016. Our independent auditors have added an explanatory paragraph in their report regarding the fact that these factors create substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent, among other factors, on our continued success in raising capital.

Need for Additional Capital; Short-Term Viability of Company

Our operations require immediate investment of equity capital or loans to continue to operate. If we can not secure funds in the short-term, we will be required to close our entire business operations and our website. Assuming we can receive a current investment or loans to fund our immediate operational needs, our Kiwibox website business’s future capital requirements will depend on many factors, including the degree to which teenagers use the kiwibox.com Website and the degree to which Kiwibox is able to generate revenues from users of its site. We expect to require additional financing before we achieve a profitable level of operations; however, there is no assurance that such funding will be available on acceptable terms, or at all. If we elect to sell equity to raise additional funds, there is no assurance that additional equity can be sold on terms favorable to the Company and to its existing shareholders, with the result that existing shareholders may incur substantial dilution. Without the necessary funding, we may be required to delay, reduce or terminate some or all of our Kiwibox website business or our efforts to obtain additional funding.

No Formal Feasibility and Market Research Plan

We have collected data and statistics concerning the potential market for the Kiwibox.com website and the costs of marketing our services. We have relied principally on the judgment and conclusions of our management, based on their respective knowledge and experiences. We have not performed any formal marketing study that confirms any absolute demand for the services we are providing on our Kiwibox.com website.

Unpredictability of Future Revenues; Potential Downturns in Operating Results

Due to Kiwibox’s minimal revenues since inception and the uncertainty of revenues that may be generated through potential partners and alliances, we are currently unable to forecast our future revenues with accuracy. Our current and future operational costs are based primarily on our marketing and website development plans and our estimates of future revenues. Our potential advertising and joint marketing sales results are difficult to forecast at this stage. It will be difficult for us to realign our operational expenses should future revenue forecasts not materialize which would require that we curtail or cease certain aspects of our operations. Accordingly, if our future revenues are insufficient to fund our planned operations, such a shortfall could have an immediate adverse effect on our business, prospects, financial condition and results of operations.

We may experience cyclical downturns in our future operating results due to various factors, many of which are beyond our control. Some of the factors that could impact our operating results include: (a) our ability to attract and retain new members to our Kiwibox.com website; (b) new developments by our competitor websites; (c) advertising and product price competition; (d) our ability to develop enhancements to our website, upgrade its internet functionality and services; (e) our ability to attract and retain necessary personnel; (f) difficulties with our software or hardware equipment, including any interruptions in the development and maintenance of our internet equipment and related infrastructure systems related to our Kiwibox.com website; (g) the future impact of governmental rules, regulations and laws, and; (h) general economic conditions.

Website and Service Development Risks

The continuing development of our Kiwibox.com website is a highly complex technical process. We are continuing the process of designing and implementing a wide array of feature and contents enhancements in order to remain competitive in our teen marketplace. If we are unable to develop and introduce new services or enhancements to our website in a timely manner in response to changing market conditions or customer requirements, our business, prospects, operating results and financial condition could be materially adversely affected.

Limited Senior Management Team; Potential Problems with Expanding Personnel

We have a limited number of senior management personnel, planning, developing and managing our website business. We have expanded our website operations to accommodate potential growth in our membership and marketplace. We could experience significant pressure on our financial resources and management personnel as a result of the current expansion. In order to manage this expansion, we may be required to adopt new operating procedures, develop new advertising and marketing plans, financial controls and procedures and policies to supervise a growing employee population. We will also be required to attract, retain and properly administer the expansion of our employee population. Investors should be aware that we may not be able to adequately manage all of these new developments in our expansion, in which case our operations, business prospects, operating results and financial condition could be materially adversely affected.

Competition

Our website business in the young adult and teen marketplace is highly competitive. We can give no assurances that our website business will effectively compete with the more established teen websites currently operating in this marketplace.

Many of our competitors have significantly greater financial resources, established brand names and significantly larger membership and customer bases and we expect our competition to only intensify.

Dependence on Management

The Kiwibox.com website’s success will be substantially dependent on the continued services and on the performance of our current senior management. We will also be dependent upon our ability to retain and provide incentives for our management team. The loss of services of any one or more of our senior management team could have a material adverse affect on our operating results, business prospects and financial condition.

Our success will be dependent, in large part, on the services of our principal officers and employees. The loss of any of these individuals could have a material adverse effect on our business or results of operations. We do not maintain “key-man” life insurance policies on the lives of our officers to compensate us in the event of their deaths.

Except for issues that require shareholder approval, investors should be aware that they will have no vote on our operations, business developments or any management issues, including expansion, website enhancements or personnel decisions. You should not invest in our company unless you understand that all business and operational decisions are made by our management.

Creation of Brand Awareness

It will be crucial to the economic success of our Kiwibox.com website that we promote and establish brand awareness. A successful brand awareness campaign will tend to decrease our marketing expenses over time. If we are not able to adequately establish our brand in our marketplace, our operating results, market growth and financial condition could be materially adversely affected.

Potential for Defects in our Products and Services

Our Kiwibox.com website, its functionality, product offerings and services may contain defects or problems yet undetected. Such defects or problems could delay the launch of our new Kiwibox.com website, generate negative public comment and inhibit marketplace acceptance, any one or more of which could have a material adverse affect on our operating results and financial condition.

Penny Stock Regulation

Our common shares are subject to the “penny stock rules” that require broker-dealers who sell our shares to make specific disclosures before selling to certain persons. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risk associated therewith as well as the written consent of the purchaser of such security prior to engaging in a penny stock transaction. These penny stock restrictions will continue to apply as long as the Company’s common stock continues to trade at market prices below $5.00. Investors should be aware that the regulations on penny stocks may significantly restrict the ability of any purchaser of our common shares to sell his or her Company common shares in the market.

Absence of Dividends

We have not paid any dividends on our common stock and we are not likely to do so in the foreseeable future. We presently intend to retain earnings for use in growing our business. We may pay for some of our future expansion through debt financing, in which case lenders traditionally prohibit the payment of any such dividends. We also are prohibited from paying dividends on our common stock before we have paid all dividends accrued on our preferred stock, which accruals amounted to $838,182 at December 31, 2016. Investors should be aware, therefore, that the Company intends to re-invest any earnings back into our business for the foreseeable future and that they should have no expectations of receiving any dividends on the common shares they may purchase.

ITEM 2: Description of Properties

We maintain offices for our Kiwibox operations at 330 W. 42nd Street, New York, New York 10036, for approximately 990 square feet. The lease requires minimum monthly rentals of $4,189 plus tenants’ share of utility/cam/property tax charges which average approximately $291 per month.

ITEM 3: LEGAL PROCEEDINGS

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

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

(a) Market Information

The Company’s common stock currently trades on the Electronic Bulletin Board of the OTC market, under the symbol KIWB. The following table sets forth, for the calendar quarters indicated, and for the last three years, the high and low sales prices for the Company’s common stock.

	PTC-BB
	Low/Bid		High/Ask
2014
First Quarter	$	0.002	$	0.006
Second Quarter		0.002		0.005
Third Quarter		0.002		0.009
Fourth Quarter		0.001		0.004
2015
First Quarter	$	0.001	$	0.005
Second Quarter		0.001		0.002
Third Quarter		0.001		0.002
Fourth Quarter		0.001		0.001
2016
First Quarter	$	0.001	$	0.002
Second Quarter		0.000		0.002
Third Quarter		0.001		0.001
Fourth Quarter		0.000		0.001

(b) Shareholders

As of April 14, 2017, there were approximately 356 shareholders of record for the Company’s Common Stock. The number of record holders does not include shareholders whose securities are held in street names.

The Company has not declared or paid, nor has it any present intention to pay, cash dividends on its Common stock. The Company is obliged to pay cash dividends on its outstanding convertible preferred stock and, under certain circumstances, on its outstanding cumulative preferred stock. See "DESCRIPTION OF CAPITAL STOCK" - "The Series A Stock", "The Series B Stock", "The Series C Stock", "The Series D Stock", the “Series E Stock”, and "The Series G Stock", below.

ITEM 6: Selected Financial Data

Except for historical information, the Company's reports to the Securities and Exchange Commission on Form 10-K and Form 10-Q and periodic press releases, as well as other public documents and statements, contain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements. These risks and uncertainties include general economic and business conditions, development and market acceptance of the Company’s products, current dependence on the willingness of investors to continue to fund operations of the Company and other risks and uncertainties identified in the Company's reports to the Securities and Exchange Commission, periodic press releases, or other public documents or statements.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

The selected financial information presented below under the captions "Statement of Operations" and "Balance Sheet" for the years ended December 31, 2012 through 2016 is derived from the financial statements of the Company and should be read in conjunction with the financial statements and notes thereto.

The financial data are those of Kiwibox.Com, Inc. including the operations of Kwick through December 18, 2013, the date Kwick was deconsolidated. All inter-company accounts and transactions have been eliminated in consolidation through December 18, 2013.

Balance Sheet

	December 31,
	2016			2015			2014 (Restated)			2013			2012
Total assets	$	315,414		$	295,991		$	279,294		$	157,366		$	6,877,123
Current liabilities		40,483,117			35,531,047			31,032,178			26,017,383			25,910,042
Long-term debt		—			—			—			—			—
Working capital		(40,184,035	)		(35,250,109	)		(30,775,658	)		(25,887,308	)		(25,475,653	)
Stockholders’ equity (impairment)	$	(40,167,703	)		(35,235,056	)	$	(30,752,884	)		(25,860,017	)		(19,032,919	)

Statement of Operations

	For the Year Ended December 31,
	2016			2015			2014 (Restated)			2013			2012
Total revenues	$	11,817		$	23,752		$	36,755		$	934,219		$	1,469,705
Operating loss		(1,262,823	)		(1,132,351	)		(1,361,426	)		(7,404,934	)		(1,671,156	)
Net loss		(4,885,943	)		(4,443,790	)		(4,841,604	)		(6,953,532	)		(14,010,332	)
Net loss after dividends on Preferred Shares on preferred shares		(4,937,206	)		(4,485,053	)		(4,892,867	)		(7,004,795	)		(14,061,595	)
Net loss per common share	$	(0.007	)	$	(0.006	)	$	(0.007	)	$	(0.01	)	$	(0.022	)
Number of shares used in computing per share data		688,093,060			684,127,033			683,693,060			680,961,142			650,715,901

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

The following discussion and analysis should be read in conjunction with the consolidated financial statements of Kiwibox.Com, Inc., included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Description of Business

Overall, we have equipped our entire Kiwibox.com website with the newest state-of-the-art advertising features which enable sponsors to self-direct their message to specific target audiences based on gender, age, geographic region, education, and interests. Included in this array of features is our “search and be found” function, incorporating Search-Engine optimization with privacy options that improves search results.

During the third quarter of 2016 we focused further on mobile development and released an additional Mobile App for the Android 6 and 7 Platform- the Kiwibox Go! App.

New Kiwibox “Meet and Date” App

In addition to our free platform, Kiwibox introduced, and is to release; a membership based flirting /dating platform in the next few months. This development is in the last steps. We are also integrating useful features for our users, like a regional based database for jobs and apartments.

Community means social network – and Kiwibox thrives on its membership networking. Our new website is based on the latest web technology which makes it easier for users to stay connected and to interact with each other.

The operating expenses, not including stock-based compensation, remained at a level of approximately $106,000 per month. We are currently receiving funding at these levels from existing investors (see sections “Loans and Notes Payable”).

Results of Operations for the Twelve Months Ended December 31, 2016 Compared to the Twelve Months Ended December 31, 2015

Our website presence is not yet supported by a volume of active members-users that would provide a basis for significant growth in advertising revenues. For the year ended December 31, 2016, total revenues amounted to $11,817 compared to $23,752 in 2015.

Gross Profit amounted to $4,467 after considering $7,350 costs of revenue. After deducting selling, general and administrative expenses of $1,265,010 compared to the $1,137,704 recorded in 2015, the Company realized an operating loss of $1,262,823 compared to an operating loss of $1,132,351 in 2015. Development costs went up because of new app/dating app development and a lot of changes on the site to make it simpler. The services for outsourced support went up because we got more international customers (based on geo based services) and problems with spammers they had to filter away. Also, we decreased the operating activity in NYC and are more focusing on global and viral activity. Because of more members, we have more technical overhead on the server and frontend (different markets), because these countries try to flood our platform with spam. Therefore, more automatic filters have been developed.

The major item included in non-operating income and expenses was a charge of $2,419,744 accounting for the intrinsic value of the beneficial conversion feature associated with convertible debt. We also had a gain of $126,630 in connection with changes in the valuation of derivative liabilities, In 2015, included in non-operating income and expenses was a charge of $2,392,694 accounting for the intrinsic value of the beneficial conversion feature associated with convertible debt and a gain of $278,741 in connection with changes in the valuation of derivative liabilities. In 2016, the year concluded with a net loss of $4,885,943. After accounting for dividends accrued on outstanding preferred stock which totaled $51,263 the net loss applicable to common shareholders was $4,937,206 or $0.007 per share, compared to a loss of $4,485,053 or $0.006 per share for the previous year.

Liquidity and Capital Resources

We have financed our business with new debt and equity capital since our cash flow is insufficient to provide the working capital necessary to fund our parent operations. In addition, we received $1,323,319 from short-term loans for continuing operations. We have an urgent need for working capital to fund our operations. If we are unable to immediately receive new equity investments or obtain loans, we will not be able to fund our operations and we will be required to close our business.

Our deficit in working capital amounted to $40,184,035 at December 31, 2016, as compared to $35,250,110 at December 31, 2015. Stockholders’ equity showed an impairment of $40,167,703 at the end of the year, compared to an impairment of $35,235,057 at the beginning of the year. The cash flows used by operations totaled $(1,299,291) and was brought about primarily due to operating losses. We have $0 of bank indebtedness at December 31, 2016. Our other indebtedness, excluding the other current liabilities described below, consisted of certain notes and loans aggregating $14,1550,548, derivative conversion liabilities of $18,889,495 and advances from related parties of $111,215. The position “Obligations to be settled in stock” of $289,197 includes $143,198 for common shares and options accrued for certain officers and directors pursuant to their respective employment and remuneration agreements, and $146,000 for stock and warrants due under consulting agreements. Current liabilities also include $838,182 accrued unpaid dividends on outstanding preferred stock. Such dividends will be paid only if and when capital surplus and cash-flow from operations are sufficient to cover the outstanding amounts without thereby unduly impacting the Company’s ability to continue operating and growing its business.

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

Absent the receipt of immediate equity investment or loans, we will be compelled to close our business operations. Absent the receipt of sufficient funds, our website development, results of operations and financial condition could be subject to material adverse consequences. There can be no assurance that we will find alternative funding for the working capital required to finance on-going operations.

ITEM 7 A: Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to certain market risks, for changes in financial market conditions. The Company does not undertake any special actions to limit those exposures. We do not have a significant interest rate risk because the interest on all our debt obligations is based on fixed rates in accordance with the terms of such indebtedness.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's Financial Statements and Notes to Financial Statements are attached hereto as Exhibit A and incorporated herein by reference.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or disagreements with the Registrant’s independent auditors during the last two years.

ITEM 9A: MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Item 9A(T). Evaluation of Disclosure Controls and Procedures

In connection with the preparation of the Company’s Annual Report on Form 10-K, an evaluation was carried out by our management, with participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of December 31, 2015. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, included the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During our evaluation of disclosure controls and procedures as of December 31, 2016, conducted as part of the Company’s annual audit and preparation of our annual financial statements, several deficiencies were identified which viewed in the aggregate, represent a material weakness. As a result of this material weakness, described more fully below, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2016, the Company’s disclosure controls and procedures were ineffective.

The Company instituted and is continuing to implement corrective actions with respect to the deficiencies in our disclosure controls and procedures.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted, with the participation of the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. Management’s assessment of internal control over financial reporting was conducted using the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Based on management’s assessment over financial reporting, management believes as of December 31, 2016, the Company’s internal control over financial reporting was not effective due to the following deficiencies:

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

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

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

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Remediation of Material Weaknesses in Internal Control over Financial Reporting

The Company commenced efforts to address the material weakness in its internal control over financial reporting and its control environment through the following actions:

We will continue to seek qualified fulltime or part-time employees and third party consultants to supplement our financial personnel when and if additional resources become available;

We will continue to institute a more stringent approval process for financial transactions, and

We will continue to perform additional procedures and analysis for significant transactions as a mitigating control in the control environment due to segregation of duties issues.

Changes in Internal Control over Financial Reporting

Other than described above, there have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal year ended December 31, 2016, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

ITEM 9B: OTHER INFORMATION

None.

PART III

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The names of all directors and executive officers of the Company are as follows:

Name	Positions	Term Served (Expires)
Andre Scholz	Director	May 13, 2009 to present
	President, Chief Executive Officer	August 1, 2010 to present
	Chief Technology Officer	May 13, 2009 to present
	Chief Financial Officer	May 31, 2015 to present

Joseph J. Tomasek	Director	February 11, 1999 to July 31, 2016

Craig S. Cody	Chief Financial Officer	May 1, 2010 to May 31, 2015

Andre Scholz, Age 39 – Director, Chief Technology Officer, and Chief Financial Officer. Andre Scholz has more than 18 years business experience in Internet, telecommunication technology and IT security. He holds an advanced degree from the University of Stuttgart and Konstanz in electronic engineering. Mr. Scholz is a consultant and well known technical expert for numerous social networks, communities and high-traffic sites, active around the world. He brings a wealth of social network and internet knowledge to Kiwibox. Mr. Scholz was co-founder of various internet exchange points and manages them until now. Since 1996 he is Managing Director of a carrier and Internet Service Provider in Stuttgart, Germany and since 2002 he is CEO of the Interscholz company group, Leonberg, Germany, which places private investments in and is managing and operating various companies.

Craig S. Cody, Age 54 – Chief Financial Officer. Effective as of May 4, 2010, Registrant promoted Craig S. Cody to serve as its Chief Financial Officer. Mr. Cody, a licensed Certified Public Accountant, had previously served as the Comptroller for the Registrant. In addition to managing an independent accounting and financial services business in New York for a diverse group of clients, he brings extensive management experience derived in the public sector. Mr. Cody holds a B.S. Degree in Accounting from the State University of New York. Effective May 31, 2015

Craig S. Cody, the chief financial officer, resigned and the CEO Andre Scholz took over the position as chief financial officer while the comptroller that was assisting the previous part time chief financial officer assumed the day to day transactional activity.

Joseph J. Tomasek, Age 69 - Director. Mr. Tomasek was appointed a director in February 2000. Mr. Tomasek also serves as our General Counsel and coordinates our legal affairs in such role. In addition to serving in these Company positions, Mr. Tomasek represents U.S. and international clients in corporate and securities law matters. Mr. Tomasek received his Juris Doctor and Bachelor of Arts Degrees from Seton Hall University and a Certificate d'Etudes in European Studies from the University of Strasbourg, France. Mr. Tomasek is a member of the Bars of the States of New Jersey, and New York. Effective July 31, 2016, Mr. Tomasek resigned from his position as a director. Mr. Tomasek’s resignation was not the result of any disagreement with the company in relation to any of the company’s operations, policies or practices.

Family Relationships

There are no family relationships between any of the directors or executive officers.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

The Company knows of no person, who at any time during the period from the date at which it filed its annual report on Form 10-K for the year ended December 31, 2016 to the present, was a director, officer, beneficial owner of more than ten percent of any class of equity securities of the Company (a "Reporting Person"), that failed to file on a timely basis any reports required to be furnished pursuant to Section 16(a), except for the annual statements of beneficial ownership of securities on Form 5 for the officers and directors of the Company which were filed late.

ITEM 11: EXECUTIVE COMPENSATION

2016 SUMMARY COMPENSATION TABLE

The following table sets forth certain compensation information for: (i) the person who served as the Chief Executive Officer of the Company during the year ended December 31, 2016, regardless of the compensation level, and (ii) each of our other executive officers, serving as an executive officer at any time since 2014, as well as the most highly compensated employees who did not serve as executive officers since 2014. Compensation information is shown for the fiscal years ended December 31, 2016, 2015 and 2014:

Name and Principal Position (a)	Year (b)		Salary ($) (c)		Bonus ($) (d)		Stock Awards ($) (e)		Option Awards ($) (f)		Non-Equity Incentive Plan Compensation ($) (g)		Non-Qualified Deferred Compensation Earnings ($) (h)		All Other Compensation ($) (i)		Total ($)
Andre Scholz		2016		220,000		1,520		1,200		—		—		—		—		222,720
Chief Executive		2015		220,000		568		1,320		—		—		—		—		221,888
Officer, President,		2014		220,000		—		5,400		—		—		—		—		225,400
Director

Joseph J. Tomasek,		2016		5,913		760		—		4,950		—		—		18000		29,623
Esq., Director and		2015		12,375		284		—		11,880		—		—		36000		60,539
General Legal Counsel		2014		13,500		—		—		11,880		—		—		34288		59,668

Craig S Cody		2016		—		—		—		—		—		—		—		—
Chief Financial Officer		2015		12,500		284		—		—		—		—		15030		27,814
		2014		74,500		—		—		—		—		—		3500		78,000

All executive officers and named significant employees and directors as a group		2016		225,913		2,280		1,200		4,950		—		—		18000		252,343
		2015		244,875		1,136		1,320		11,880		—		—		51030		310,241
		2014		308,000		—		5,400		11,880		—		—		37788		363,068

Andre Scholz 2016-2014: Andre Scholz joined the Company in May 2009, as our Chief Technology Officer and as a director. On August 1, 2010 Mr. Scholz took over as President and Chief Executive Officer. Effective May 31, 2015 Craig S. Cody, the chief financial officer, resigned and Andre Scholz took over the position as chief financial officer. During 2016, we paid Mr. Scholz $220,000 as salary. He also has accrued 1,200,000 common shares, earning 100,000 common shares every month. These shares were accrued for and valued at $1,200. These shares had not been issued at December 31, 2016. During 2015, we paid Mr. Scholz $220,000 as salary. He also has accrued 1,200,000 common shares, earning 100,000 common shares every month. These shares were accrued for and valued at $1,320. These shares were issued on March 2, 2016. During 2014, we paid Mr. Scholtz $220,000 as salary. He also has accrued 1,200,000 common shares, earning 100,000 common shares every month. These shares were for and valued at $5,400. These shares were issued in October 2015. He also had accrued 500,000 common shares as a signing bonus and has been earning 100,000 common shares every month, beginning with May 15, 2009.

The terms of his consulting /employment agreement are included in our filing on Form 8-K of May 22, 2009 which is incorporated herein by reference to that filing. On November 1, 2016, the terms of his consulting agreement were extended through December 31, 2017. On December 1, 2015, the terms of his consulting agreement were extended through December 31, 2016. On November 21, 2014, the terms of his consulting agreement were extended through December 31, 2015. On January 1, 2014, the terms of his consulting agreement were extended through December 31, 2014, with no changes to the terms. In December 2013, the terms of his contract were updated to $220,000 annually.

Joseph J. Tomasek July 1, 2016-2014: During fiscal years 2016, 2015, and 2014, the Company incurred or paid in total $29,263, $60,539, and $59,668, respectively, to Mr. Tomasek for legal services rendered to the Company. Included in the totals that the company incurred or paid to Mr. Tomasek for each respective year are options for restricted shares. In 2016 Mr. Tomasek earned options for 500,000 restricted shares, valued at $4,950 pursuant to the Black-Scholes valuation formula. In 2015 Mr. Tomasek earned options for 1,200,000 restricted shares, valued at $11,880 pursuant to the Black-Scholes valuation formula. In 2014 Mr. Tomasek earned options for 1,200,000 restricted shares, valued at $11,880 pursuant to the Black-Scholes valuation formula. These options are earned at the rate of 100,000 options per month, beginning with April 2009.

Craig S Cody May 31, 2015- 2014: During the year 2015, Mr. Cody earned $27,814. During the year 2014, Mr. Cody earned $78,000.

Stock Options:

No stock options were granted during 2014, 2015 or 2016 pursuant to the Company’s 1997 Stock Option Plan and 2000 Stock Incentive Plan, to any executive officers, directors, employees or to any beneficial owners of more than 10 percent of any class of equity securities of the Company. In addition, there were no stock options or warrants exercised by any officer, director, employee or any beneficial owners of more than 10 percent of any class of equity securities of the Company during 2014, 2015 or 2016.

1997 Stock Option Plan:

The Company’s 1997 Stock Option Plan, as filed with Information Statement pursuant to Section 14(c) with the Commission on July 1, 1997, and with Registration Statement on Form S-8 with the Commission on September 8, 1997, is hereby incorporated by reference.

2000 Stock Incentive Plan:

The Company’s 2000 Stock Incentive Plan, as filed with the Commission as an exhibit to the quarterly report on Form 10-QSB for the period ended March 31, 2000, is hereby incorporated by reference.

Options Granted Outside of Stock Option Plans:

During 2016, one director who also serves as the Company’s general counsel earned 500,000 five-year stock options, exercisable at $0.05 per common share.

Outstanding Equity Awards at Fiscal Year-End Table

The following table provides certain information regarding unexercised options to purchase common stock, stock options that have not vested, and equity-incentive plan awards outstanding at December 31, 2016, for each of the persons covered under our Summary Compensation Table.

Name and

Principal

Position

Number of

Securities

Underlying

Unexercised

Options

Exercisable

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

Equity

Incentive

Plan Awards

No. of

Underlying

Unexercised

Unearned

Options

Option

Exercise

Price

Option

Expiration

Date

No. of

Shares or

Units of

Stock that

have not

vested

Market

Value of

Shares or

Units of

Stock that

have not

vested

Equity

Incentive

Awards,

Shares, Units

Or other

Rights that

have not

vested

Equity

Incentive Plan Awards:

Market or Payout value of Unearned Shares,Units or other rights that have not vested

Joseph J.

Tomasek,

former

Director and General

Legal

Counsel

3,800,000

—

0.05

03/31/17

3/31/20

—

Option Exercises and Stock Vested Table: None

Pension Benefits Table: None

Nonqualified Deferred Compensation Table: None

Option Exercises and Stock Vested Table: None

Pension Benefits Table: None

Nonqualified Deferred Compensation Table: None

Pre-requisites Table: None

Compensation of Directors:

We did not pay any compensation to any of our directors for services rendered as directors during fiscal years 2016, 2015 and 2014

During 2016, 2015 and 2014, one outside director of the Company who also serves as the Company’s general and securities counsel, incurred or was paid an aggregate of $29,623, $60,539 and $59,668 respectively, for legal services.

CORPORATE GOVERNANCE AND CODE OF ETHICS

The Company has always been committed to good corporate governance. In furtherance of this commitment, during 2002 the Board of Directors expanded the duties of the Company’s Audit Committee by increasing the Committee's duties specifically to include responsibility and oversight of corporate governance matters and adherence to the Company’s Code of Ethics. A copy of the Corporate Code of Ethics and Conduct had been included as an exhibit to the Company’s report on Form 10-KSB for the year ended December 31, 2002.

Board Committees

AUDIT COMMITTEE

The Company has appointed an Audit Committee in accordance with the provisions of the Sarbanes-Oxley Act of 2002. The Audit Committee is currently comprised of the entire board of directors.

COMPENSATION AND NOMINATING COMMITTEES

Our board of directors intends to appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by the national securities exchanges. Therefore, we intend that a majority of our directors will eventually be independent directors. Additionally, our board of directors is expected to appoint a nominating committee and a compensation committee, and to adopt charters relative to each such committee. Until further determination by the Board, the full Board of Directors will undertake the duties of the compensation committee and nominating committee.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information known to us with respect to the beneficial ownership of Common Stock held of record as of December 31, 2016, by (1) all persons who are owners of 5% or more of our Common Stock, (2) each of our named executive officers (see “Summary Compensation Table”), (3) each director, and (4) all of our executive officers and directors as a group. Each of the stockholders can be reached at our principal executive offices located at 330 West42nd Street, Suite 3210, New York, New York 10036.

Title of Class*	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)			Percent of Class
Directors and Executive Officers: Common Stock
	Andre Scholz Pres./CEO/Director/CFO		10,800,000	(2)		1.57	%
	Joseph Tomasek Director		9,930,500	(3)		1.44	%
	All Directors and Officers as a Group:		20,730,500			3.01	%

Beneficial owners of more than 5% of Common Stock (exclusive of officers and directors):
	Discovery Advisory Company c/o Horymor Trust Corp. Ltd. 50 Shirley Street / P.O. Box N-341 Nassau		68,780,457	(4)		9.99	%
	Cambridge Services Inc. c/o TSZ Treuhandgesellschaft Sauter & Co. Suedstr. 11, CH-034 Zurich, Switzerland		68,780,457	(5)		9.99	%
	Markus Winkler 330 West 42nd New York, NY 10036		68,780,457	(6)		9.99	%

* The Company also has issued and outstanding as of December 31, 2016, 85,890 shares of its Senior Convertible Preferred Stock, with concentrations in excess of 10% for one or more of the holders of such stock, however, none of such shares bear any voting rights.

	(1)	For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock which such person has the right to acquire within 60 days of March 1, 2017. For purposes of computing the percentage of outstanding shares of Common Stock held by each person or group of persons named above, any shares of Common Stock which such person has the right to acquire within such date, whether by exercise of stock options or warrants or conversions of other securities, are deemed to be outstanding and to be beneficially owned by the person holding such option, warrant or convertible security for purposes of computing such person’s percentage ownership but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnote to this table and pursuant to applicable community property laws, the Company believes based on information supplied by such persons, that the persons named in this table have sole voting and investment power with respect to all shares of Common Stock which they beneficially own.
	(2)	Consists of 9,600,000 shares outstanding, 1,200,000 shares accrued but not yet issued
	(3)	Includes 3,800,000 stock options.
	(4)	Includes 33,300,937 shares issuable upon conversion of convertible debt. Karen Buehler has investment and voting control of Discover Advisory Company.
	(5)	Includes 37,171,829 shares issuable upon conversion of convertible debt. Victor Sauter has investment control of Cambridge Services Inc.
	(6)	Includes 2,300,937 shares issuable upon conversion of convertible debt of Kreuzfeld, Ltd. and VGZ (Vermoegenssverwaltungsgesellschaft) both of which Markus Winkler has investment and voting control.

All Directors of the Company hold office until the next annual meeting of the shareholders and until successors have been elected and qualified. Executive Officers of the Company are appointed by the Board of Directors at meetings of the Company’s Directors and hold office until they resign or are removed from office.

Family Relationships

There are no family relationships between any of the directors or executive officers.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

The Company knows of no person, who at any time during the year ended December 31, 2016, was a director, officer, or beneficial owner of more than ten percent of any class of equity securities of the Company (a "Reporting Person"), that failed to file on a timely basis any reports required to be furnished pursuant to Section 16(a).

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the year ended December 31, 2016 and 2015 one outside director of the Company who also serves as the Company’s general and securities counsel, incurred an aggregate $24,673 and $48,659, respectively, for each period for legal services. The director also received 100,000 common stock options per month during the first five months for the year ended December 31, 2016, valued at $4,950. Effective July 31, 2016 Mr. Tomasek resigned from his position as a director. Mr. Tomasek’s resignation was not the result of any disagreement with the company in relation to any of the company’s operations, policies or practices. As part of Mr. Tomasek’s resignation as a director, he cancelled his rights to continue to receive common stock options effective June 1, 2016.

The director also received 100,000 common stock options per month during the year ended December 31, 2015, valued at $11,880. The balance due to this director at December 31, 2016 and 2015 was $583 and $10,552, respectively.

For the year ended December 31, 2016 and 2015 we incurred an aggregate $494,711 and $343,293, respectively, to companies controlled by the Chief Executive Officer of the Company, for website hosting, website development and technical advisory services, server farm installations and IT equipment purchases. The officer also earned 100,000 common shares per month during the year ended December 31, 2016 under a consulting agreement, valued at $1,200.During 2016, the officer received $220,000 for prepaid consulting fees towards 2017 under terms of a consulting agreement; the agreement calls for the total payment of $220,000 to be payable in advance and as soon as practicable. During 2015, the officer received $220,000 in December 2015 for prepaid consulting fees towards 2016 under the terms of a consulting agreement. The balance due to this officer and/or his affiliated companies at December 31, 2016 and 2015 was $91,335 and $72,876, respectively . The balance due from Kwick at December 31, 2016 and 2015 was $63,715 and $51,898, respectively, from sales to the affiliate and is shown on the balance sheet as Accounts receivable - affiliate. The balance due to Kwick at December 31, 2016 and 2015 was $19,030 and $21,524, respectively, and is included in the balance sheet as Due To Related Parties (see Note 27 to the Financial Statements).

During 2016 and 2015, approximately 10% of the Company’s voting stock was beneficially held by Discovery Advisory Company, located in the Bahamas, and Cambridge Services Inc., Kreuzfeld, Ltd., Vermoegensverwaltungs-Gesellschaft Zurich Ltd. (VGZ) of Switzerland, and Marcus Winkler. Discovery Advisory Company, Cambridge Services Inc., Kreuzfeld, Ltd., VGZ and Marcus Winkler are major creditors, having advanced operating capital against issuance by the Company of convertible promissory notes during 2015 and 2016. On November 25,2016 $340,000 of a demand note owed to Marcus Winkler was converted to a class A senior convertible revolving promissory note, to be computed on the outstanding principal balance at the rate of 10% per annum, due and payable on demand.

During the year ended December 31, 2016, Discovery Advisory Company advanced an additional $475,000, Kreuzfeld, Ltd advanced $550,000 and Mr. Winkler advanced $220,000. During the year ended December 31, 2015, Discovery Advisory Company advanced an additional $745,000 and Kreuzfeld, Ltd advanced $415,000 At December 31, 2016, $4,926,722 and $3,080,060 of such notes were outstanding and owed to Discovery Advisory Company and Cambridge Services Inc, respectively and $4,599,959, $771,958 and $638,320 owed to Kreuzfeld, Ltd., VGZ and Mr. Winkler, respectively.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Rosenberg Rich Baker Berman & Company ("Rosenberg") billed us in the aggregate amount of $40,000 and $35,000 for professional services rendered for their audit of our annual financial statements and their reviews of the financial statements included in our Forms 10-K and 10-Q for the years ended December 31, 2016, and December 31, 2015, respectively.

AUDIT-RELATED FEES

Rosenberg did not bill us for, nor perform professional services rendered for assurance and related services that were reasonably related to the performance of audit or review of the Company's financial statements for the fiscal years ended December 31, 2016, and December 31, 2015.

TAX FEES

Rosenberg billed us in the aggregate amount of $0, and $0 for professional services rendered for tax related services for the fiscal years ended December 31, 2016 and December 31, 2015, respectively.

ALL OTHER FEES

The aggregate fees billed by Rosenberg for services rendered to the Company during the last two fiscal years, other than as reported above, were $0 and $0, respectively.

TRANSFER AGENT

The transfer agent for the Company is Securities Transfer Corporation, located at 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034.

ANNUAL REPORT

The Company intends to continue its practice of furnishing annual reports to its shareholders containing financial statements audited by independent certified public accountants.

PART IV

ITEM 15: EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The Exhibits that are filed with this report or that are incorporated by reference are set forth in the Exhibit Index attached hereto.

(b) Reports on Form 8-K

During the first quarter in 2017, the Company has not filed reports on Form 8-K:

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		KIWIBOX.COM, INC.

Dated: April 14, 2017	By:	/s/ Andre Scholz
		Andre Scholz
		President and Chief Executive Officer (Principal Executive Officer), Director, Secretary, Chief Financial Officer (Principal Financial Officer)

In accordance with the requirements of the Securities Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

		KIWIBOX.COM, INC.

Dated: April 14, 2017	By:	/s/ Andre Scholz
		Andre Scholz
		Director

EXHIBIT INDEX

(A) Financial Statements and Notes to Financial Statements

(3) (i) Articles of Incorporation and Amendments thereto, incorporated herein by reference to Exhibits of previous filings with the Commission.

(3) (ii) Bylaws of the Company, incorporated herein by reference to Exhibits of previous filings with the Commission.

10.25* Copy of Agreement and Plan of Reorganization, Dated February 19, 2007, between the Company, Kiwibox Media, Inc. and the Kiwibox Shareholders, and Form of Employment Agreement for the Three Kiwibox Shareholders,

10.27* Amendment No. 3 to Agreement and Plan of Reorganization, dated July 31, 2007 and Effective August 2, 2007.

10.28* Preliminary Employment Agreement with Paul Farris, Dated September 19, 2007

10.29*Amendment No. 4 to Agreement and Plan of Reorganization, dated as of December 3, 2007.

10.30* Amendment No. 5 to Agreement and Plan of Reorganization, dated as of December 31, 2007.

10.31* Standstill Letter Agreement, dated as of January 30, 2008.

10.32* Standstill Letter Agreement, dated as of February 11, 2008.

10.33* Amendment No. 6 to Agreement and Plan of Reorganization, dated as of February 28, 2008.

10.34* Engagement Agreement, Dated June 27, 2008, between Tell Capital AG and the Company.

10.35* Resignation Agreement, Dated August 19, 2008, between Ivan Tumanov and the Company.

10.36* Form of Demand Notes issued by the Company to Lender, Discover Advisory Company.

10.36-1* Form of corrected Demand Notes issued by the Company to Lender, Discover Advisory Company.

10.36-2 Form of Registrant’s Master Corporate Promissory Note, dated June 4, 2009, delivered and accepted by Discover Advisory Company, attached as an exhibit to Registrant’s Form 8-K filed with the Commission on June 12, 2009.

10.37 Copy of Stock Pledge Agreement, dated June 4, 2009, by and between Registrant and Discover Advisory Company- attached as an exhibit to Registrant’s Form 8-K filed with the Commission on June 12, 2009.

10.38 Copy of Consulting Agreement, dated June 1, 2009, between the Registrant, Kiwibox Media, Inc. and Andre Scholz attached as an exhibit to Registrant’s Form 8-K filed with the Commission on June 12, 2009.

10.39 Form of Registrant’s Securities Purchase Agreement, with Warrant as an Exhibit: attached as an exhibit to Registrant’s Form 8-K filed with the Commission on December 31, 2009.

10.40 Certificate of Ownership and Merger of Kiwibox Media, Inc. with and into Magnitude Information Systems, Inc., including Corporate Name Change, dated December 15, 2009 and as filed with the Secretary of State of Delaware on December 17, 2009. attached as an exhibit to Registrant’s Form 8-K filed with the Commission on December 31, 2009

10.41 Form of Class AA Senior Secured Convertible Revolving Promissory Note issued to Discover Advisory Company, Cambridge Services, Inc., VGZ and Kreuzfeld Ltd. On August 1, 2012.

31.01A. Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 14, 2017.

31.02A. Certification of Acting Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 14, 2017.

32.01A. Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 14, 2017.

32.02A. Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 14, 2017.

* Documents filed as exhibits to Registrant’s current reports, quarterly reports, annual reports and registration

statements and amendments thereto with the U.S. Securities and Exchange Commission.

OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE

(a) The Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2016, June 30, 2016, and September 30, 2016.

(b) All other reports filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the Company’s fiscal year ended December 31, 2010

Kiwibox.Com, Inc.

Financial Statements

December 31, 2016 and 2015

Kiwibox.Com, Inc.

Index to the Financial Statements

December 31, 2016 and 2015

	Page
Report of Independent Registered Public Accounting Firm	F-1
Financial Statements
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Stockholders Equity (Impairment)	F-4
Statements of Cash Flows	F-6
Notes to the Financial Statements	F-8

F-1

Kiwibox.Com, Inc.

Balance Sheets

	December 31, 2016			December 31, 2015
Assets
Current Assets
Cash and cash equivalents	$	15,185		$	—
Accounts receivable - affiliate, net of allowance for Doubtful accounts of $0		63,715			51,898
Prepaid expenses and other current assets		220,182			229,038
Total Current Assets		299,082			280,936
Property and equipment, net of accumulated Depreciation of $116,530 and $114,224		4,325			3,046
Website development costs, net of accumulated Amortization of $254,264 and $254,264		—			—
Other assets		12,007			12,007
Total Assets		315,414			295,989

Liabilities and Stockholders’ Equity (Impairment)
Current Liabilities
Accounts payable		274,750			284,912
Accrued expenses		5,929,729			4,634,763
Due to related parties		111,215			116,474
Obligations to be settled in stock		289,198			284,368
Dividends payable		838,182			786,919
Loans and notes payable - other		100,000			100,000
Loans and notes payable – related parties		—			340,000
Convertible notes payable – related parties		14,017,019			12,353,700
Current maturities of long-term debt		33,529			33,529
Liability for derivative conversion feature –related parties		18,889,495			16,596,381
Total Current Liabilities		40,483,117			35,531,046

Stockholders’ Equity (Impairment)
Preferred Stock, $0.001 par value, non-voting, 3,000,000 shares authorized; 85,890 shares issued and outstanding		86			86
Common Stock, $0.0001 par value, 1,400,000,000 shares authorized; issued and outstanding 688,493,060 and 686,093,060 shares respectively.		68,847			68,607
Additional paid-in capital		52,733,065			52,728,745
Accumulated deficit		(92,969,701	)		(88,032,495	)
Total Stockholders’ Equity (Impairment)		(40,167,703	)		(35,235,057	)
Total Liabilities and Equity (Impairment)	$	315,414		$	295,989

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

F-2

Kiwibox.Com, Inc.

Statements of Operations

	Year Ended December 31,
	2016			2015
Net Sales
Advertising - affiliate		11,817			23,752
Total Net Sales		11,817			23,752
Cost of Goods Sold
Website hosting expenses		7,950			18,399
Total Cost of Goods Sold		7,950			18,399
Gross Profit		3,867			5,353
Selling expenses		630,393			442,182
Stock-based compensation		2,280			1,704
General and administrative expenses		634,017			693,818
Loss From Operations		(1,262,823	)		(1,132,351	)
Other Income (Expense)
Miscellaneous income (expense)		(960	)		4,224
Gain/(Loss) on foreign currency exchange		—			14,054
Interest expense		(1,329,046	)		(1,205,764	)
Interest expense-derivative conversion features		(2,419,744	)		(2,392,694	)
Change in fair value – derivative liabilities		126,630			278,741
Total Other Income (Expense)		(3,623,120	)		(3,301,439	)
Loss Before Benefit (Provision) for Income Taxes		(4,885,943	)		(4,433,790	)
Benefit (Provision) for Income Taxes		—			—
Net Loss		(4,885,943	)		(4,433,790	)
Dividends on Preferred Shares		(51,263	)		(51,263	)
Net Loss Applicable to Common Shareholders, basic and diluted		(4,937,206	)		(4,485,053	)
Net Loss Per Common Share, basic and diluted		(0.007	)		(0.006	)
Weighted Average of Common Shares Outstanding		688,093,060			684,127,033

The accompanying notes are an integral part of the financial statements

F-3

Kiwibox.Com, Inc.

Statement of Stockholders’ Equity (Deficit)

Year Ended December 31, 2015


	Convertible Preferred Shares				Cumulative Preferred Shares				Common Stock
	Shares		Amount		Shares		Amount		Shares		Amount		Additional Paid in Capital		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
Balances, January 1, 2015		85,890	$	86		1	$	—		683,693,060		68,367		52,726,105		(83,547,442	)		(30,752,884	)
Shares issued for services		—		—		—				1,200,000		120		1,320					1,440
Settlements of obligation to be settled in stock		—		—		—		—		1,200,000		120		1,320		—			1,440
Dividends on conv. preferred stock		—		—		—		—		—		—		—		(51,263	)		(51,263	)
Net loss, year ended December 31, 2015																(4,433,790	)		(4,433,790	)
Balances, December 31, 2015		85,890	$	86		1	$	—		686,093,060	$	68,607		52,728,745		(88,032,495	)	$	(35,235,057	)

The accompanying notes are an integral part of the financial statements

F-4

Kiwibox.Com, Inc.

Statement of Stockholders’ Equity (Deficit)

Year Ended December 31, 2016

	Convertible Preferred Shares				Cumulative Preferred Shares				Common Stock
	Shares		Amount		Shares		Amount		Shares		Amount		Additional Paid in Capital		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
Balances, January 1, 2015		85,890	$	86		1	$	—		686,093,060		68,607		52,728,745		(88,032,495	)	(35,235,057)
Dividends on conv. preferred stock		—		—		—		—								(51,263	)	(51,263)
Settlements of obligation to be settled in stock										1,200,000		120		2,160				2,280
Stock issued for services										1,200,000		120		2,160				2,280
Net loss, year ended December 31, 2016																(4,885,943	)	(4,885,943)
Balances, December 31, 2016		85,890	$	86		1	$	—		688,493,060	$	68,847	$	52,733,065		(92,969,701	)	(40,167,703)

The accompanying notes are an int of the financial statements.

F-5

Kiwibox.Com, Inc.

Statements of Cash Flows

	Year Ended December 31,
	2016			2015
Cash Flows From Operating Activities
Net Loss	$	(4,885,943	)	$	(4,443,790	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operations:
Depreciation and amortization		2,305			3,642
Stock-based compensation		2,280			1,704 1, -
(Gain)/Loss on debt extinguishment		960			(4,224	)
Intrinsic value of beneficial conversion feature		2,419,744			2,392,694
Change in fair value – conversion features		(126,630	)		(278,741	)
Changes in operating assets and liabilities:
Accounts receivable - affiliates		(11,817	)		(23,752	)
Prepaid expenses		8,856			(963	)
Obligations to be settled in stock		6,150			13,200
Accounts payable		(10,162	)		26,965
Accrued expenses		1,294,966			1,225,899
Net Cash Used by Operating Activities		(1,299,291	)		(1,077,366	)
Cash Flows From Investing Activities
Cash refund– other assets		—			5,796
Purchases of property and equipment		(3,584	)		(1,717	)
Net Cash Used by Investing Activities		(3,584	)		4,079
Cash Flows From Financing Activities
Proceeds from convertible notes payable		1,323,319			1,160,000
Net proceeds from (repayments to) related parties		(5,259	)		(87,012	)
Net Cash Provided by Financing Activities		1,318,060			1,072,988

Net Increase (Decrease) in Cash		15,185			(299	)

Cash at beginning of period		—			299
Cash at end of period	$	15,185			—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes Paid	$	606		$	300

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

F-6

Kiwibox.Com, Inc.

Statements of Cash Flows

Year Ended December 31, 2016

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Year Ended December 31, 2016
Settlement of obligations with common stock	$	2,280
Year to date dividend accruals	$	51,263

Year Ended December 31, 2015
Settlement of obligations with common stock	$	2,880
Year to date dividend accruals	$	51,263

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

F-7

Kiwibox.Com, Inc.

Notes to Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

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

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

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

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

Cash and Cash Equivalents

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

F-8

Depreciation and Amortization

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

Advertising Costs

Advertising costs are charged to operations when incurred. Advertising expense was $7,200 and $5,500 for the years ended December 31, 2016 and 2015, respectively.

Evaluation of Long Lived Assets

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

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

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

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

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

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

Fair Value Measurements

The Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Under ASC 820, a framework was established for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Company accounted for certain convertible debentures modified in the years ended December 31, 2016 and 2015 as derivative liabilities required to be bifurcated from the host contract in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares (see Note 13).

F-9

Securities Issued for Services

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

Reclassification of Certain Securities Under ASC 815-15

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

Capitalization of Software /Website Development Costs

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

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

No costs were capitalized for web-site development work during the years ended December 31, 2016 and 2015.

Income Taxes

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

F-10

Net Loss Per Share

Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. Such common stock equivalents totaled 151,522,257 common shares at December 31, 2016, comprised of 4,000,000 shares issuable upon exercise of stock purchase warrants, 3,800,000 shares issuable upon exercise of stock options, 729,537 shares exercisable upon conversion of convertible preferred shares, and 142,992,720 shares potentially issuable upon conversion of convertible debt. Such debt and the related accrued interest, is presently convertible at the option of four holders at a conversion price of 50% of the ten-day trailing market price and one holder at a fixed conversion price of $0.001. The total principal due under these notes of $14,017,019 would yield in excess of 27 billion shares if fully converted, however, the respective notes, all of which were issued to these four investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion, may in the aggregate not exceed a number that would increase the total share holdings beneficially owned by such investor to a level above 9.99%. At the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the aforementioned conversions or exercises, as the case may be, are at the option of the holders.

Revenue Recognition

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

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. GOING CONCERN

The ability of the Company to continue its operations is dependent on increasing sales and obtaining additional capital and financing. Our revenues during the foreseeable future are insufficient to finance our business and we are entirely dependent on the willingness of existing investors to continue supporting the Company with working capital loans and equity investments, and our ability to find new investors should the financial support from existing investors prove to be insufficient. If we were unable to obtain a steady flow of new debt or equity-based working capital we would be forced to cease operations. Management has concluded that due to the conditions described above, there is substantial doubt about the entity’s ability to continue as a going concern through April 17, 2018. We have evaluated the significance of the conditions in relation to our ability to meet our obligations and believe that our current cash balance and our operations will not provide sufficient capital to continue operations through 2017. Management’s plans are to continue seeking equity and debt capital until cash flow from operations cover funding needs. We cannot assure you that financing will be available on favorable terms or at all.

3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK

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

F-11

4. PREPAID EXPENSES

Prepaid expenses consist of the following at:

		December 31, 2016		December 31, 2015
Rent	$	-	$	-
Business insurance		182		9,040
Consulting		220,000		220,000
Other		—		—
		220,182		229,040

5. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

	December 31, 2016		December 31, 2015
Furniture	$	15,040	$	15,040
Leasehold Improvements		24,130		24,130
Office Equipment		81,685		78,101
		120,855		117,271
Less accumulated depreciation		116,530		114,225
Total	$	4,325	$	3,046

Depreciation expense charged to operations was $2,305 and $3,642 for the years ended December 31, 2016 and 2015, respectively.

6. INTANGIBLE ASSETS

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

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

Amortization expense for the years ended December 31, 2016 and 2015 was $0 and $0, respectively.

7. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

On December 10, 2013, the company signed an equity purchase agreement with Marcus Winkler to sell to him eighty (80%) percent of the equity of its German subsidiary, Kwick. Pursuant to the terms of the agreement, the purchaser paid 36,000 Euros as the purchase price and the company was required to obtain shareholder approval of the sale as required under applicable Delaware Law. The majority shareholder approval was obtained on December 18, 2013. In addition, the Company and Mr. Winkler signed a Lock-Up and Standstill Agreement pursuant to the general terms of which the Company agreed not to participate in the management, operations or finances of Kwick, which shall be exclusively managed and under control of the purchaser. Accordingly, the Company’s minority ownership position shall be subject, in all respects, to the exclusive control of the purchaser. Mr. Winkler also has investment and voting control over Kreuzfeld Ltd., a major creditor of the company, which holds a Class AA convertible promissory note with an outstanding balance (including accrued interest) of $6,473,665 as of December 31, 2016. Mr. Winkler also personally holds a class AA convertible promissory note which was converted to a class A senior convertible revolving promissory note on November 25, 2016 with an outstanding balance (including accrued interest) of $306,045 on December 31, 2016. On June 22, 2015, a Class A Senior Revolving Promissory Note with a principal amount of $340,000 was assigned from Ulrich Schuerch to Mr. Winkler. On November 25, 2016, this note was converted to a class A senior convertible revolving promissory note (see NOTE 13)

F-12

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

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

8. ACCRUED EXPENSES

Accrued expenses consisted of the following at:

	December 31, 2016		December 31, 2015
Accrued interest		5,772,224	$	4,443,178
Accrued payroll, payroll taxes and commissions		25,586		41,541
Accrued professional fees		99,197		114,900
Accrued rent / deferred rental obligation		8,787		11,209
Miscellaneous accruals		23,935		23,935
Total	$	5,929,729	$	4,634,763

9. OBLIGATIONS TO BE SETTLED IN STOCK

Obligations to be settled in stock consisted of the following at

	December 31, 2016		December 31, 2015
Obligation for warrants granted for compensation	$	100,000	$	100,000
600,000 common shares issuable to a consultant who was a director of the company, for services rendered.		36,000		36,000
1,200,000 (2016) and 1,200,000 (2015) common shares, and 2,900,000 (2015) and 2,900,000 (2014) stock options issuable to two officers of the Company pursuant to their respective employment Agreements		58,057		58,178
8,600,000 (2016) and 8,100,000 (2015) stock options issuable to one director who also serves as the Company’s general counsel		85,140		80,190
1,000,000 warrants granted on the Pixunity.de asset purchase		10,000		10,000
	$	289,198	$	284,368

F-13

10. LOANS PAYABLE

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

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

75,000

Total

75,000

11. NOTES PAYABLE

	December 31,		December 31,
	2016		2015
Balance of non-converted notes outstanding. Attempts to locate the holder of this note, to settle this liability, have been unsuccessful.	$	25,000	$	25,000
From September 2008 through December 2016 six creditors loaned the Company funds under the terms of the convertible notes issued, as modified in March 2009 and July 2010 and April 2011 and August 2012 (see Note 13). On November 25, 2016, the Company issued a Class A Senior Convertible Revolving Promissory Note (“Class A Note”) to Marcus Winkler in the amount of $638,320 consolidating the series of loans (and related accrued interest) made to the company since February 2011 and including all advances made during the current year. Each of these promissory notes are due on demand, and accrue interest at the rate of 10%, per annum. The conversion feature applicable to the other creditors’ notes do not apply to Mr. Winkler’s notes as his notes have a fixed conversion price of $0.001		14,017,019		12,353,700
In January 2011 and again in February 2011, a shareholder loaned the Company $50,000 under a demand note at 10%. In 2010, this shareholder loaned the Company $240,000 under a demand note at 10 %. On June 22, 2015 this shareholder assigned all of his right, title and interest in this note to Mr. Marcus Winkler. Mr. Winkler has an investment and voting control over two of the company’s lenders. As of November 25, 2016 this $340,000 note is now part of convertible notes		—		340,000
Total	$	14,042,019	$	12,718,700

12. LONG-TERM DEBT

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

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

F-14

13. DERIVATIVE CONVERSION FEATURES

On July 27, 2010, the Company issued two Class A Senior Convertible Revolving Promissory Notes (“Class A Notes”), one to Cambridge Services, Inc., in the principal amount of $683,996, consolidating the series of loans (and related accrued interest) made to the Company since June 26, 2009, and one to Discover Advisory Company, in the principal amount of $1,160,984, consolidating the series of loans (and related accrued interest) made to the Company since September 19, 2008 and including advances through September 30, 2010. On November 25, 2016, the Company issued a Class A Senior Convertible Revolving Promissory Note (“Class A Note”) to Marcus Winkler in the amount of $638,320 consolidating the series of loans (and related accrued interest) made to the company since February 2011 and including all advances made during the current year. Each of these promissory notes are due on demand, accrue interest at the rate of 10%, per annum. All promissory notes contain conversion caps, limiting conversions under these notes to a maximum beneficial ownership position of Company common stock to 9.99% for each lender. Each of these notes contains Company covenants, requiring the lenders’ prior written consent in order for the Company to merge, issue any common or preferred stock or any convertible debt instruments, declare a stock split or dividends, increase any compensation to its officers or directors by more than five (5%) during any calendar year. During the years ended December 31, 2016 and 2015, there were no note conversions.

The Company renegotiated certain outstanding promissory notes with its four major creditors, Discover Advisory Company of the Bahamas (“DAC”), Kreuzfeld Ltd. of Switzerland (“Kreuzfeld”), Cambridge Services, Inc. of Panama (“CSI”) and Vermoegensverwaltungs-Gesellschaft Zurich LTD of Switzerland (“VGZ”). As of August 1, 2012, the Company authorized the issue of a new series of corporate notes, the Class AA Senior Secured Convertible Revolving Promissory Notes, dated as of August 1, 2012 (the New Note(s)”) and issued New Notes: (1) to DAC, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated July 27, 2010, in the original principal amount of $1,080,984, now cancelled, which has an outstanding balance due (including accrued interest) of $6,860,911 as of December 31, 2016; (2) to Kreuzfeld, with a maximum credit facility of $5,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 16, 2011, in the original principal amount of $2,000,000, now cancelled, which has an outstanding balance due (including accrued interest) of $6,473,665 as of December 31, 2016; (3) to CSI, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated August 1, 2011, in the original principal amount of $1,303,996, now cancelled, with an outstanding balance due (including accrued interest) of $4,347,340 as of December 31, 2016, and; (4) to VGZ, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated September 30, 2010, in the original principal amount of $2,000,000, now cancelled, with an outstanding balance due (including accrued interest) of $1,186,746 as of December 31, 2016. The Company also converted a private loan and a demand note with Mr. Winkler into a Class AA Senior Convertible Revolving Promissory, dated November 25, 2016 , with an outstanding balance due (including accrued interest) of $854,557. All of the New Notes accrue interest at the rate of 10%, are convertible into common shares at the conversion rate equal to 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event less than $0.001, and are due on demand. The above conversation feature does not apply to Mr. Winkler’s notes as his notes have a fixed conversion price of $0.001. Pursuant to an Equity and Stock Pledge Agreement, also negotiated and executed as of August 1, 2012, the repayment of the outstanding indebtedness of the New Notes is secured by all of the limited partnership interests of the Company’s partly-owned (now deconsolidated) German subsidiary, KWICK! Community GmbH & Co. KG, a private German limited partnership (“KG”), and all of its shares of the sole general partner of KG, KWICK! Community Beteiligungs GmbH.

F-15

The Company accounted for the conversion features underlying these convertible debentures in accordance with ASC 815-40, Contract in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares. The Company determined the value of the derivate conversion features of the new advances under these debentures under these terms at the relevant commitment dates to be $2,419,744 and $2,392,694 for the years ending December 31, 2016 and 2015 respectively utilizing a Black-Scholes valuation model. The fair value of the derivative conversion features was determined to be $18,889,495 and $16,596,381 at December 31, 2016 and 2015 respectively. The change in fair value of the liability for the conversion feature resulted in income of $126,630 and $278,741 for the years ended December 31, 2016 and 2015 respectively, which is included in Other Income (Expense) in the accompanying financial statements.

14. COMMITMENTS AND CONTINGENCIES

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

2017	50,768
2018	47,847

In May 2010, the Company negotiated a lease of an apartment in New York City for the CEO in order to reduce travel costs. In December 2013 the lease was extended through May 31, 2015 at a monthly rate of $2,943. In March of 2015 the lease was again extended to May 31, 2016 at the same terms. In April 2016 the lease was extended through May 31, 2017 at a monthly rate of $3,154.

Our total rent expenses were $86,131 and $88,679 during the year ended December 31, 2016 and 2015, respectively.

The Company is party to a consulting agreement with its Chief Executive Officer for monthly cash compensation of $18,333, or $220,000 per year. This agreement was extended thru December 31, 2017. Payment for the period January 1, 2016 through December 31, 2016 was made on December 1, 2015 in accordance with the terms of the agreement. During 2016, the officer received $220,000 fees towards 2017 under terms of a consulting agreement; the agreement calls for the total payment of $220,000 to be payable in advance and as soon as practicable. There were no changes to the stock compensation portion of any earlier agreement.

In the years ended December 31, 2016 and December 31, 2015 this officer was granted 1,200,000 shares. The value of these shares are $1,200 and $1,320 for December 31, 2016 and December 31, 2015 respectively

15. FAIR VALUE

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

F-16

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

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

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

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

Level 3 — unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3

inputs include infrequently- traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models. The company values the conversion liabilities using the Black-Scholes model and the assumptions are updated using independent data such as the risk free rate, volatility and expected life for each valuation date based on changes over time.

For 2015, the fair value of the embedded conversion liabilities was determined using the Black-Scholes model calculating fair value based on the conversion discount as well as the term and short-term bond rate. During the year ended December 31, 2015 the following assumptions were used: (1) conversion discounts of 50%; (2) a look back period of 10 days (3) bond rates of 0.01% to 0.23% and (4) volatility range of 0% to 351%.

For 2016, the fair value of the embedded conversion liabilities was determined using the Black-Scholes model calculating fair value based on the conversion discount as well as the term and short-term bond rate. During the year ended December 31, 2015 the following assumptions were used: (1) conversion discounts of 50%; (2) a look back period of 10 days (3) bond rates of 0.16% to 0.50% and (4) volatility range of 55% to 441%.

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

F-17

The following table reconciles, for the years ended December 31, 2015 and 2016, the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements:

Conversion Liability at January 1, 2015	$	14,482,427
Value of beneficial conversion features of new debentures		2,392,694
Change in value of beneficial conversion features during period		(278,741	)

Conversion Liability at December 31, 2015		16,596,380
Value of beneficial conversion features of new debentures		2,419,744
Change in value of beneficial conversion features during period		(126,630	)

Conversion Liability at December 31, 2016	$	18,889,495

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

16. PREFERRED STOCK

Preferred stock is non-voting, $.001 par value per share with 3,000,000 shares authorized.

Cumulative Preferred Stock has 2,500 shares designated of which 1 share is issued and outstanding. The total Cumulative Preferred Stock at December 31, 2006 is $0 with a liquidation price of $100,000. As of December 31, 2016, there was $9,000 of cumulative preferred dividends in arrears representing $9,000 per cumulative preferred share.

Series A of the Senior Convertible Preferred Stock series which was issued in 2000 has 300,000 shares designated, 22,000 shares issued and outstanding. The total outstanding Series A Senior Convertible Preferred Stock at December 31, 2016 is $22 with a liquidation price of $120,000. The following is a description of the Series A convertible preferred stock:

(1)

The holders of said shares of Series A Senior Preferred shall be entitled to receive cumulative dividends at the rate of seven percent (7%) per annum during the first annual period after issuance, increasing by increments of one half of one percent for every year thereafter until the rate reaches ten percent (10%) per annum at which time it will remain at 10% payable semi-annually when declared by the Board of Directors, before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company. The Dividend Rate shall accrue on the Liquidation Price of each share of the Series A Senior Preferred. The dividends on the Series A Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series A Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock.

(2)

The Series A Senior Preferred shall with respect to dividend rights and liquidation rights rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series B, C and D Senior Convertible Preferred Stock.

	(3)	In the event of any liquidation, of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series A Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, the amount of Five ($5.00) dollars for each share of Series A Senior Preferred (the "Liquidation Price") held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series B and C Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis.

F-18

	(4)	The Company shall have the right to redeem pro rata any or all of its Series A Senior Preferred issued and outstanding at any time, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been issued and outstanding for a minimum of three (3) years at the time of notice of redemption to the holders of such shares, by paying to the holders thereof the Liquidation Price for each share of Series A Senior Preferred held by such holder plus a "call premium" of 15% of the Liquidation Price, together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price").

(5)

Each share of Series A Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into such number (the "Conversion Ratio") of shares of the Common Stock of the Company as arrived at by dividing the Liquidation Price by one hundred fifty (150) percent of the market price of the Common Stock of the Corporation ("Market Price") on the earlier of the dates such share of Series A Senior Preferred is subscribed for or issued (the "Effective Date").

As of December 31, 2016, there were $176,664 Series A Senior Convertible Preferred share dividends accrued and unpaid representing $7.53 per share.

Series B of the Senior Convertible Preferred Stock series which was issued in 2000 has 350,000 shares designated, no shares issued and outstanding. The total outstanding Series B Senior Convertible Preferred Stock at December 31, 2016 is $0. The following is a description of the Series B Senior Convertible Stock:

(1)

The holders of said shares of Series B Senior Preferred shall be entitled to receive cumulative dividends thereon at the rate of seven percent (7%) per annum, payable semi-annually when declared by the Board of Directors, before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company. The Dividend Rate shall accrue on the Liquidation Price of each share of the Series B Senior Preferred. The dividends on the Series B Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series B Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock.

(2)

The Series B Senior Preferred shall, with respect to dividend rights and liquidation rights, rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series A, C and D Senior Convertible Preferred Stock.

	(3)	In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or providing for payment of the debts and other liabilities of the Company, the holders of the Series B Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, the amount of nine ($9.00) dollars for each share of Series B Senior Preferred (the "Liquidation Price") held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A and C Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis.

(4)

The Company shall have the right to redeem pro rata any or all of its Series B Senior Preferred issued and outstanding at any time, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been issued and outstanding for a minimum of three (3) years at the time of notice of redemption of the holders of such shares, by paying to the holders thereof the Liquidation Price for each share of Series B Senior Preferred held by such holder plus a "call premium" of 10% of the Liquidation Price, together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price").

(5)

Each share of Series B Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into shares of Common Stock of the Company on the basis of ten (10) shares of Common Stock for 1 share of Series B Senior Preferred.

F-19

As of December 31, 2016, there were no Series B Senior Convertible Preferred share dividends accrued and unpaid.

Series C of the Senior Convertible Preferred Stock series which was issued in 2000 has 120,000 shares designated. There were no shares of Series C Senior Convertible Preferred Stock outstanding at December 31, 2016. The following is a description of the Series C Senior Convertible Stock:

(1)

The holders of said shares of Series C Senior Preferred shall be entitled to receive cumulative dividends thereon at the rate of seven percent (7%) per annum, payable monthly, before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company. The Dividend Rate shall accrue on the Liquidation Price (as hereinafter defined) of each share of the Series C Senior Preferred. The dividends on the Series C Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series C Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock.

	(2)	The Series C Senior Preferred shall with respect to dividend rights and liquidation rights rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series A, B and D Senior Convertible Preferred Stock.

	(3)	In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series C Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, the amount of nine ($9.00) dollars for each share of Series C Senior Preferred (the "Liquidation Price") held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A and B Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis.

(4)

The Company shall have the right to redeem pro rata any or all of its Series C Senior Preferred issued and outstanding at any time, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been issued and outstanding for a minimum of three (3) years at the time of notice of redemption to the holders of such shares, by paying to the holders thereof the Liquidation Price for each share of Series C Senior Preferred held by such holder plus a "call premium" of 10% of the Liquidation Price together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price").

(5)

Each share of Series C Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into shares of Common Stock of the Company on the basis of ten (10) shares of Common Stock for 1 share of Series C Senior Preferred.

F-20

As of December 31, 2016, there were no Series C Senior Convertible Preferred share dividends accrued and unpaid.

Series D of the Senior Convertible Preferred Stock series which was issued in 2000 has 500,000 shares designated, 63,890 shares issued and outstanding. The total outstanding Series D Senior Convertible Preferred Stock at December 31, 2016 is $64 with a liquidation price of $575,010. The following is a description of the Series D Senior Convertible Stock:

(1)

The holders of said shares of Series D Senior Preferred shall be entitled to receive cumulative dividends thereon at the rate of seven percent (7%) per annum, payable semi-annually when declared by the Board of Directors before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company. The Dividend Rate shall accrue on the Stated Value (the "Stated Value"), which Stated Value shall be noted on the certificate issued to the holder, of each share of the Series D Senior Preferred. The dividends on the Series D Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series D Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock.

(2)

The Series D Senior Preferred shall with respect to dividend rights and liquidation rights rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series A, B and C Senior Convertible Preferred Stock.

(3)

In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series D Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, an amount equal to the Stated Value of each share of Series D Senior Preferred held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A, B and C Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis.

(4)

The Company shall have the right to redeem pro rata any or all of its Series D Senior Preferred issued and outstanding at anytime, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been outstanding for a minimum of three (3) years at the time of notice of redemption to the holders of such shares, by paying to the holders thereof the Stated Value for each share of Series D Senior Preferred held by such holder plus a "call premium" of 10% of the Stated Value, together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price").

(5)

Each share of Series D Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into shares of Common Stock of the corporation on the basis of ten (10) shares of Common Stock for 1 share of Series D Senior Preferred.

F-21

As of December 31, 2016, there were $652,519 Series D Senior Convertible Preferred share dividends accrued and unpaid representing $9.58 per share.

Series E of the Senior Convertible Preferred Stock series which was issued in 2005 has 500,000 shares designated, with no shares issued and outstanding.

(1)

The holders of said shares of Series E Senior Preferred shall be entitled to receive cumulative dividends at the rate of six percent (6%) per annum, payable at the time said shares are converted into shares of common stock of the Company and when declared by the board of Directors, before any dividend shall be declared, set apart for, or paid upon the Common Stock and any other Preferred Stock of the Company. The Dividend Rate shall accrue on the Stated Value, which Stated Value shall be noted on the certificate issued to the holder of each share of the Series E Senior Preferred. The dividends on the Series E Senior Preferred, payable in cash, shall be cumulative, so that if the company fails in any fiscal year to pay such dividends on all the issued and outstanding Series E Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for any other class of Preferred Stock or the Common Stock. The holders of the currently outstanding shares of Series E Senior Convertible Stock have waived their right for dividends, consequently, no dividends have been accrued on this stock.

(2)

The Series E Senior Preferred shall with respect to dividend rights rank prior to all classes and series of Common Stock, Cumulative Preferred Stock, and the Series A, B, C, and D Senior Convertible Preferred Stock and, with respect to liquidation rights rank prior to all classes and series of Common Stock, the Cumulative Preferred Stock, and be on a par with the Series A, B, C and D Senior Convertible Preferred Stock.

(3)

sufficient to cover all the before mentioned payments and also like payments to holders of Series A, B, C and D Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C, D and E Senior Preferred, the holders of these series shall receive payments on a pro rata basis.

(4)

The holders of said shares of Series E Senior Preferred shall not be entitled to any voting rights.

(5)

Shares of Series E Senior Preferred which have been issued and reacquired in any manner, including shares purchased or converted into Common Stock exchanged or redeemed, shall be canceled on the books of the Company and shall not be considered outstanding for any purpose.

(6)

During such time as there exist unpaid cumulative dividends due on the Series E Senior Preferred, no reclassification of the shares of the Company or capital reorganization of the Company in any manner provided by law shall be valid unless (a) the holders of a majority of all the Series E Senior Preferred approve, and (b) provision is made for the payment of the aggregate unpaid cumulative dividends then in arrears.

(7)

Each share of Series E Senior Preferred shall automatically convert, on the date six months after the date of issuance (the “Conversion Date”) which Conversion Date shall be noted on the certificate issued to the holder of each share of the Series E Senior Preferred, into shares of Common Stock of the Company on the basis of one hundred (100) shares of Common Stock for 1 share of Series E Senior Preferred. The holder of any shares of Series E Senior Preferred shall surrender, as soon as practicable on or after the Conversion Date, at the principal office of the Company or at such other office or agency maintained by the Company for that purpose, the certificate or certificates representing the shares of Series E Senior Preferred due for conversion. As promptly as practicable, and in any event within ten business days after surrender of such certificates, the Company shall deliver or cause to be delivered certificates representing the number of validly issued, fully paid and non-assessable shares of Common Stock of the Company to which such holder of Series E Senior Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the Conversion Date, so that the rights of the holders of the Series E Senior Preferred shall thereafter cease except for the right to receive Common Stock of the Company in accordance herewith, and such converting holder of Series E Senior Preferred shall be treated for all purposes as having become the record holder of such Common Stock of the Company at such time.

(8)

In the event that, prior to the conversion of the Series E Senior Preferred Stock by the holder thereof into Common Stock of the company, there shall occur any change in the outstanding shares of Common Stock of the Company by reason of the declaration of stock dividends, or through a re-capitalization resulting from stock splits or combinations, without the receipt by the Company of fair consideration therefore in the form of cash, services or property, the conversion ratio of the Series E Senior Preferred Stock into Common Stock of the Company shall be adjusted such that any holder of Series E Senior Preferred Stock converting such stock into Common Stock subsequent to such change in the outstanding shares of Common Stock of the Company be entitled to receive, upon such conversion, a number of shares of Common Stock of the Company representing the same percentage of common shares outstanding as presented by the shares that he would have received had he converted his Series E Senior Preferred Stock to Common Stock prior to such change in the outstanding shares of Common Stock of the Company.

As of December 31, 2016, there were no Series E Senior Convertible Preferred share dividends accrued.

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Series G of the Senior Convertible Preferred Stock series which was issued in 2007 has 43,610 shares designated. All such shares were issued and outstanding at December 31, 2008. In February 2009, these shares automatically converted into 17,857,142 common shares, leaving no Series G preferred shares outstanding at December 31, 2016.

(1)

The holders of said shares of Series G Senior Convertible Preferred shall not be entitled to receive dividends.

(2)

The Series G Senior Preferred shall with respect to dividend rights rank junior to all classes and series of Common Stock, Cumulative Preferred Stock, and the Series A, B, C, D, E and F Senior Convertible Preferred Stock and, with respect to liquidation rights rank prior to all classes and series of Common Stock, the Cumulative Preferred Stock, and be on a par with the Series A, B, C, D, E and F Senior Convertible Preferred Stock.

(3)

In the event of any liquidation, dissolution, or winding up of the affairs of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series E Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, an amount equal to the Stated Value of $11.46526 for each share of Series G Senior Preferred held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A, B, C, D, E and F Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company. In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C, D, E and F Senior Preferred, the holders of these series shall receive payments on a pro rata basis.

(4)

The holders of said shares of Series G Senior Preferred shall not be entitled to any voting rights.

(5)

Shares of Series G Senior Preferred which have been issued and reacquired in any manner, including shares purchased or converted into Common Stock exchanged or redeemed, shall be canceled on the books of the Company and shall not be considered outstanding for any purpose.

(6)

No cumulative dividends shall be payable on Series G Senior Preferred.

(7)

Upon the second anniversary of the Agreement and Plan of Reorganization, dated February 19, 2007, all the issued and outstanding shares of Series G Senior Preferred automatically converted into shares of common stock based on the “Market Price”, which was determined by dividing the conversion value of $500,000 by the average sales price of a common share for the twenty successive trading days preceding the second anniversary date of the agreement, subject to a minimum of 10 million common shares. The outstanding 43,610 preferred shares converted into 17,857,142 common shares on February 19, 2009: based on the average sales price for our common shares during the twenty trading days period immediately preceding February 19, 2009, of $.028. Stock certificates for the new common shares would have been issued upon surrender of the original preferred stock certificates.

(8)

In the event that, prior to the conversion of the Series G Senior Preferred Stock by the holder thereof into Common Stock of the company, there shall occur any change in the outstanding shares of Common Stock of the Company by reason of the declaration of stock dividends, or through a re-capitalization resulting from stock splits or combinations, without the receipt by the Company of fair consideration therefore in the form of cash, services or property, the conversion ratio of the Series G Senior Preferred Stock into Common Stock of the Company shall be adjusted such that any holder of Series G Senior Preferred Stock converting such stock into Common Stock subsequent to such change in the outstanding shares of Common Stock of the Company be entitled to receive, upon such conversion, a number of shares of Common Stock of the Company representing the same percentage of common shares outstanding as presented by the shares that he would have received had he converted his Series G Senior Preferred Stock to Common Stock prior to such change in the outstanding shares of Common Stock of the Company.

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17. INCOME TAXES

The income tax provision (benefit) is comprised of the following:

	Year Ended December 31,
	2016		2015
State current provision (benefit)	$	0	$	0
	$	0	$	0

The Company’s total deferred tax asset and valuation allowance are as follows:

	December 31,
	2016			2015
Total deferred tax asset, noncurrent	$	19,000,000		$	18,000,000
Less valuation allowance		(19,000,000	)		(18,000,000	)
Net deferred tax asset, noncurrent	$	0		$	0

The differences between income tax benefits in the financial statements and the tax benefit computed at the combined state and U.S. Federal statutory rate of 40% are as follows:

	Year Ended December 31,
	2016			2015
Tax benefit		40	%		40	%
Valuation allowance		(40	%)		(40	%)
Effective tax rate		—			—

At December 31, 2016, the Company has available approximately $47,800,000 of net operating losses to carry-forward and which may be used to reduce future federal taxable income and expire between December 31, 2016 and 2036.

At December 31, 2016, the Company has available approximately $17,000,000 of net operating losses to carry-forward and which may be used to reduce future state taxable income which expire between December 31, 2016 and 2036.

The Company believes that all of its positions taken in tax filings are more likely than not to be sustained upon examination by tax authorities. The Company is subject to examination by the tax authorities for the period January 1, 2013 and forward.

18. STOCK BASED COMPENSATION

During 2016 and 2015 the Company issued the following securities to officers, directors, and non-employees as part of their compensation.

Andre Scholz (president and Chief Executive Officer and Chief Financial Officer): During 2016 and 2015 earned 1,200,000 restricted shares (100,000 per month) valued at $1,200 and $1,320, respectively, based on the commitment date fair value of the shares granted. 0 and 1,200,000 of these shares were issued in 2017 and 2016, respectively.

Joseph J. Tomasek (Former Director): In each of the years ended December 31, 2016 and 2015 Mr. Tomasek received 100,000 common stock options per month, ending in May 2016, as this outside director is no longer a director of the company effective July 31, 2016 and, as part of his resignation as director, he cancelled his rights to continue to receive options effective June 1, 2016. Therefore, in each of the years ended December 31, 2016 and 2015 Mr. Tomasek earned options for 500,000 restricted shares, valued at $4,950 and, 1,200,000 restricted shares valued at $11,880, respectively. This resignation was not prompted by any disagreement with the company with regard to any of its policies, operations or practices.

At January 1, 2015, we granted 1,200,000 of restricted common stock to five individuals (employees and consultants) valued at $0.0142 per restricted common share, the public market price of the Company’s common shares traded in the over-the-counter market on January 1, 2015. These shares were issued in October 2015.

19. STOCK OPTION PLANS

In April 1996, Magnitude, Inc. adopted its 1996 Stock Incentive Plan (“the 1996 Plan”). The 1996 Plan provides that certain options granted thereunder are intended to qualify as “incentive stock options” (ISO) within the meaning of Section 422A of the United States Internal Revenue Code of 1986, while non-qualified options may also be granted under the Plan. The initial plan and subsequent amendments provided for authorization of up to 480,000 shares. Pursuant to the above described stock exchange offer on July 2, 1997, all options under the 1996 Plan were converted into shares of the Company at a rate of 3.4676 shares of Magnitude, Inc. to 1 share of the Company.

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In September 1997, the Company adopted its 1997 Stock Incentive Plan (“the 1997 Plan”). The 1997 Plan provides that certain options granted thereunder are intended to qualify as “incentive stock options” (ISO) within the meaning of Section 422A of the United States Internal Revenue Code of 1986, while non-qualified options may also be granted under the Plan. The initial plan and subsequent amendments provided for the grant of options for up to 1,000,000 shares. The purchase price per share of common stock deliverable upon exercise of each ISO shall not be less than 100% of the fair market value of the common stock on the date such option is granted. If an ISO is issued to an individual who owns, at the time of grant, more than 10% of the total combined voting power of all classes of the Company’s common stock, the exercise price of such option shall be at least 110% of the fair market value of the common stock on the date of grant and the term of the option shall not exceed five years from the date of grant. The purchase price of shares subject to non-qualified stock options shall be determined by a committee established by the Board of Directors with the condition that such prices shall not be less than 85% of the fair market value of the common stock at the time of grant.

In May 2000 the Company adopted its 2000 Stock Incentive Plan (“the 2000 Plan”). The 2000 Plan provides that certain options granted thereunder are intended to qualify as “incentive stock options” (ISO) within the meaning of Section 422A of the United States Internal Revenue Code of 1986, while nonqualified options may also be granted under the Plan. The initial Plan provides for the grant of options for up to 5,000,000 shares. The purchase price per share of common stock deliverable upon exercise of each ISO shall not be less than 100% of the fair market value of the common stock on the date such option is granted. If an ISO is issued to an individual who owns, at the time of grant, more than 10% of the total combined voting power of all classes of the Company’s common stock, the exercise price of such option shall be at least 110% of the fair market value of the common stock on the date of the grant, and the term of the option shall not exceed five years from the date of grant. The purchase price of shares subject to non-qualified stock options shall be determined by a compensation committee established by the Board of Directors.

	Qualified and Non-Qualified Shares Under Option Pursuant to the 1997 Plan December 31,
	2016	2015
Outstanding, beginning of year	—	—
Granted during the year	—	—
Expired during the year	—	—
Surrendered during the year	—	—
Outstanding, end of year	—	—
Eligible, end of year for exercise	—	—

At December 31, 2016 and 2015, no options were outstanding.

At December 31, 2016, there were 1,000,000 shares reserved for future option grants.

	Qualified and Non-Qualified Shares Under Option Pursuant to the 2000 Plan December 31,
		2016	2015
Outstanding, beginning of year		—	—
Granted during the year		—	—
Exercised during the year		—	—
Surrendered during the year		—	—
Expired during the year		—	—
Outstanding, end of year		—	—
Eligible, end of year for exercise		—	—

At December 31, 2016 and 2015, no options were outstanding.

At December 31, 2016, there were 5,000,000 shares reserved for future option grants.

At December 31, 2016 the company has two stock-based employee compensation plans, which are described more fully above. The company accounts for those plans under the recognition and measurement principles of the Financial Accounting Standards Board Accounting Standards Codification (ASC) 718, Compensation-Stock Compensation. The Company has not granted any options under these plans to employees during 2016 or 2015.

The Company also issues options outside of the Stock Incentive Plans which are comprised as follows:

	December 31,
	2016			2015
Outstanding, beginning of year		4,500,000			4,500,000
Granted during the year		500,000			1,200,000
Exercised during the year		—			—
Surrendered or cancelled during the year		—
Expired during the year		(1,200,000	)		(1,600,000	)
Outstanding, end of year (at $0.05)		3,800,000			4,500,000

Eligible for exercise, end of year (at $0.05)		3,800,000			4,500,000

At December 31, 2016 and 2015 the weighted average exercise price and weighted average remaining contractual life were $0.05 and $0.05 per share, and 1 year 9 months and 2 years 10 months, respectively.

The weighted average exercise price for options granted during the years ended December 31, 2016 and 2015 were $0.05 and $0.05, respectively. The weighted average exercise price for options expired during the years ended December 31, 2016 and 2015 were $0.05 and $0.05, respectively. The weighted average grant date fair value of options granted during the years ended December 31, 2016 and 2015 was $0.05 and $0.05, respectively.

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20. WARRANTS

The Company’s warrant activity between January 1, 2015 and December 31, 2016 is as follows:

	December 31,
	2016			2015
Outstanding, beginning of year		6,000,000			12,750,000
Granted during the year		—			—
Exercised during the year		—			—
Surrendered /cancelled during the year		—			—
Expired during the year		(2,000,000	)		(6,750,000	)
Outstanding, end of year (at prices ranging from $.075 to $.075)		4,000,000			6,000,000

Eligible, end of year (at prices ranging from $.050 to $.075)		4,000,000			6,000,000

At December 31, 2016 and 2015, the weighted average exercise price and weighted average remaining contractual life is $0.08 and $0.06 per share and 9 months and 1 year 4 months, respectively.

21. RELATED PARTY TRANSACTIONS

During the twelve months ended December 31, 2016, the Company sold advertising space on its Kiwibox.com website to Kwick totaling $11,817. The balance due from Kwick at December 31, 2016 for these transactions is $63,715. The Company also has outstanding loans due to Kwick of $19,030 at December 31, 2016. Kwick is majority-owned by Mr. Winkler, who in turn is a related party of the Company (see Note 7).

During the year ended December 31, 2016 and 2015 one outside director of the Company who also serves as the Company’s general and securities counsel, incurred an aggregate $18,000 and $36,000, respectively, for each period for legal services. The director also received 100,000 common stock options per month, ending in May 2016, as this outside director is no longer a director of the company effective July 31,2016 and, as part of his resignation as director, he cancelled his rights to continue to receive options effective June 1, 2016. The director received 500,000 common stock options during the year ended December 31, 2016, valued at $4,950. The director also received 100,000 common stock options per month during the year ended December 31, 2015, valued at $11,880. This resignation was not prompted by any disagreement with the company with regard to any of its policies, operations or practices.

The balance due from Kwick at December 31, 2016 and 2015 was $63,715 and $51,898, respectively, and is shown on the balance sheet as Accounts Receivable - affiliate. The balance due to Kwick at December 31, 2016 and 2015 was $19,030 and $21,524 and is included in the balance sheet as Due To Related Parties (see Note 27).

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

During the year ended December 31, 2016, Discovery Advisory Company advanced an additional $475,000, Kreuzfeld, Ltd advanced an additional $550,000 and Mr. Winkler advanced $220,000; during the year ended December 31, 2015, Discovery Advisory Company advanced an additional $745,000 and Kreuzfeld, Ltd advanced an additional $415,000. At December 31, 2016, $4,926,722 and $3,080,060 of such notes were outstanding and owed to Discovery Advisory Company and Cambridge Services Inc, respectively and $4,599,959 , $771,958 and $638,320 owed to Kreuzfeld, Ltd., VGZ and Mr. Winkler, respectively.

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22. FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash, accounts receivable, accounts payable, accrued expenses, notes payable, long-term debt and capitalized lease obligations: The carrying amount approximates fair value because of the short term maturity of these instruments.

Limitations

Fair value estimates are made at a specific point in time, based on relevant information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates

23. FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

On August 2014, FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to continue as a Going Concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This was adopted by the company for the current period of December 31,2016. The adoption of ASU 2014-15 does not have a material impact on our financial position or results of operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern.

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

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

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

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments – a consensus of the FASB Emerging Issues Task Force, (“ASU 2016-15”). The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. A retrospective transition method should be used in the application of the amendments within ASU 2016-15. If retrospective application is considered impracticable, retrospective application may be used as of the earliest date practicable. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-15 on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, or ASU No. 2015-03. The amendments of ASU No. 2015-03 were issued to reduce complexity in the balance sheet presentation of debt issuance costs. ASU No. 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this standard. Additionally, in August 2015, the FASB issued ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, or ASU No. 2015-15, as ASU No. 2015-03 did not specifically address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU No. 2015-15 allows an entity to continue to defer and present debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The guidance in ASU No. 2015-03 and ASU No. 2015-15 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company adopted this standard for the year ended December 31, 2016, which did not have a material effect on the Company’s consolidated financial statements.

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

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

24. LITIGATION

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

25. BUSINESS SEGMENTS

The Company operates in only one business segment - youth targeted online social networks - through its dedicated proprietary internet website.

26. SUBSEQUENT EVENTS

During January through April 2017 we received an aggregate $195,000 working capital loans from two accredited investors, which are both covered by convertible promissory notes carrying interest at 10% per year.

At February 27, 2017, a Class AA Senior Secured Convertible Revolving Promissory Note from a loan dated July 31, 2012 from Cambridge Services, Inc in the principal amount of $1,130,398 plus accrued interest of $168,425 was assigned to Tanja Greilinger.

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Attached files

Kiwibox.Com, Inc. Reports

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