BTGN Bitcoin Generation Inc (CE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

DECEMBER 31, 2013  

(UNAUDITED)

NOTE 1 - THE COMPANY

HISTORY

InoLife Technologies, Inc. (the “Company”) was incorporated under the laws of the State of New York on November 12, 1998 as Safe Harbour Health Care Properties, Ltd. During 1999, the Company ceased its operations. The Company remained dormant until 2004, when one of the Company’s shareholders purchased a controlling interest. In February 2004, the Company began its development stage as an internet based marketing company. The Company, as of December 2007 discontinued its internet marketing due to difficulties with service providers and subsequent cancellations by customers.

In August 2009, Gary Berthold purchased 35,013,540 shares of InoLife Technologies, Inc. representing a majority of the outstanding shares. In connection with the purchase, all of the directors and officers of the Company resigned from their positions, after first appointing Berthold as a director.

Effective September 17, 2009, the Board of Directors of the Company authorized the execution of a share exchange agreement (the “Share Exchange Agreement”) with InoVet, Ltd., a Delaware corporation (“InoVet”) and the shareholders of InoVet (the “InoVet Shareholders”). In accordance with the terms and provisions of the Share Exchange Agreement, the Company agreed to: (i) acquire all of the issued and outstanding shares of common stock of InoVet from the InoVet Shareholders; and (ii) issue an aggregate of 10,000,000 shares of its restricted common stock to the InoVet Shareholders.

On July 7, 2011, the Company acquired 100% of the issued and outstanding shares of Stemtide Inc. in exchange for 50,000,000 shares of common stock of the Company, the assumption of certain outstanding liabilities, and contingent residual payments of 10% of the gross profits derived from the sale of Stemtide Inc.’s Age-Reversing Products. The 50,000,000 shares of common stock were issued upon consummation of the agreement. The principal asset of Stemtide Inc. that was acquired was the manufacturing and marketing rights to the Stemtide Age-Reversing Products, throughout the United States, licensed from an affiliate of the principal shareholders of InoLife. These licensing rights were valued at $627,000 based on the Company assuming $572,000 of accounts payable and issuing 50,000,000 shares of common stock valued at $55,000. There were no other assets acquired. In addition, the Company issued 572 Series B PS as a securitization against the payment of the assumed accounts payable out of future revenues. The PS held as security will be reduced as the accounts payable are paid. The licensing rights were fully impaired at March 31, 2012.

On February 23, 2012 the Company effected a 1 for 500 reverse stock split, and on January 24, 2013, the Company effected a 1 for 50,000 reverse stock split, collectively referred to as the Stock Splits. Unless otherwise noted, all impacted amounts included in the financial statements and notes thereto have been retroactively adjusted for the Stock Splits. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share issuances and cancellations, shares underlying preferred stock, convertible notes, warrants and stock options, shares reserved, conversion prices of convertible securities, exercise prices of warrants and options, and loss per share.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Consolidated Financial Statements:

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S‑X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete consolidated financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals, unless otherwise indicated) considered necessary for a fair presentation of the interim financial data have been included. Operating results for the three and six months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014. Events occurring subsequent to December 31, 2013 have been evaluated for potential recognition or disclosure in the unaudited consolidated financial statements for the three and nine months ended December 31, 2013.

The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2013, which are included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2014, filed with the Securities and Exchange Commission (the “SEC”) on July 15, 2014.

The condensed consolidated balance sheet at March 31, 2013 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company 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.

Management believes that all adjustments necessary for a fair statement of the results of the three and nine months ended December 31, 2013 and 2012 have been made.

Significant Accounting Policies:

Basis of Presentation:

The Company prepares its consolidated financial statements on the accrual basis of accounting. All intercompany balances and transactions are eliminated.

Cash and Cash Equivalents:

All highly liquid investments with original maturities of three months or less are included in cash and cash equivalents. All deposits are maintained in FDIC insured depository accounts in local financial institutions and balances are insured up to $250,000.

Fair Value Measurements :

ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair value of financial instruments is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Corporation’s credit worthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.

The carrying amount of cash and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.

Earnings Per Share:

Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share include the effects of any outstanding options, warrants and other potentially dilutive securities. Basic and diluted earnings per share (“EPS”) are based on weighted-average common shares and exclude shares that would have an anti-dilutive effect. The Company did not consider any potential common shares in the computation of diluted EPS as of December 31, 2013 and 2012, due to the loss from operations, as they would have an anti-dilutive effect on EPS.

Share Based Payments:

The Company accounts for share based payments using a fair value based method whereby compensation cost is measured at the grant date based on the value of the services received and is recognized over the service period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued. In calculating this fair value, there are certain assumptions used such as the expected life of the option, risk-free interest rate, dividend yield, volatility and forfeiture rate. The use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense.

 Segment Reporting

 The Company has determined it has only one operating segment as of the periods presented.

Income Taxes

The Company accounts for income taxes under ASC 740 Income Taxes . Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. The Company has had significant operating losses and a valuation allowance is recorded for the entire amount of the deferred tax assets, resulting in no deferred tax assets or liabilities recognized as of December 31, 2013 and 2012.

The Company accounts for uncertain tax positions according to the provisions of ASC 740. ASC 740 contains a two-step approach for recognizing and measuring uncertain tax positions. Tax positions are evaluated for recognition by determining if the weight of available evidence indicates that it is probable that the position will be sustained on audit, including resolution of related appeals or litigation. Tax benefits are then measured as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

The Company’s open tax periods are 2009 through 2013.

Recently Issued Accounting Pronouncements :

On June 10, 2014 the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities. The Company has elected to early adopt this guidance, and therefore is no longer presenting the financial statements in accordance with ASU 915, with inception to date disclosures.

The Company is evaluating how to apply ASU 605, Revenues from Contracts with Customers, before its effective date, however, as the Company does not yet have revenue to recognize, it will not have an impact on current results of operations, financial position or cash flow.

The Company has evaluated their convertible notes for embedded derivative features and has determined that in several of the notes a derivative liability is necessary to recognize. These notes contain a conversion feature which includes a “reset” provision, whereby the conversion rate would be reset should there be future equity sales at a price less than the conversion rate in effect at the time. Therefore, the conversion feature is required to be bifurcated and accounted for under derivative accounting, and remeasured each period end, with any changes in the fair value of the derivative to be recognized in income. All the notes which contained the reset provision were entered into during the year ended March 31, 2012. The original fair value of the derivative liability at inception totaled $456,719. During the nine months ended December 31, 2013 and 2012, a change in fair value of $137,344 and $27,479, respectively, was recognized. There was no change in fair value in the three months ended December 31, 2013 and 2012. During the three months ended June 30, 2013 there was a reduction in the derivative liability of $137,344 due to the reduction of the related notes principal balances, which was recognized as a separate line item on the accompanying Statement of Operations . The fair value of the derivative liability as of both December 31, 2013 and March 31, 2013, has been determined to be $228,000. Derivative liabilities were valued using a probability based weighted-average Black-Scholes-Merton valuation with the following assumptions:

The conversion features were evaluated for any beneficial aspect and it was determined that several of the notes contained beneficial conversion features, whereby the conversion rate was calculated at a discount to the market price. The beneficial conversion features recognized at inception during the year ended March 31, 2012 amounted to $234,000. The discount related to the beneficial conversion features as well as the discount arising from the derivative liability was amortized over the term of the related convertible debentures using the effective interest method, resulting in amortization of approximately $10,000, $10,000, and $33,400 and $142,000 during the three and nine months ended December 31, 2013 and 2012, respectively. 

On July 23, 2013, the Company entered into a $40,000 convertible debenture with Just Marketing,Group, Inc., which bears interest at 10%. The note is due on demand 120 days after issuance. The note is convertible, beginning 60 days after issuance, at a 50% discount to market price on date of conversion, or mutually agreed upon terms. The Company determined the conversion feature was not required to be bifurcated, as although the conversion terms were not fixed, we do not know what mutually agreed upon terms will be and if will not still qualify as indexed to the Company’s own stock. Therefore, the Company recognized a beneficial conversion feature in the amount of $20,000. The related debt discount was amortized over the 120 day period until demand, which has been considered the maturity date.

 At December 31, 2013 and March 31, 2013 the accrued interest on all notes is $83,750 and $63,000, respectively.

During the three and nine months ended December 31, 2013, the Company issued an aggregate of 10,000,000 and 42,000,000, shares of its common stock, respectively, to issuers pursuant to the original terms of the Convertible Debentures, representing the conversion of $10,000 and $54,000, respectively in principal and accrued interest. 

NOTE 4 - RELATED PARTY TRANSACTIONS

On November 27, 2012, the Company issued 120,000 shares of its Preferred Class B stock with a fair value of $300,000 to the Officers for past services rendered and for the cancelation of the three billion shares of common stock which had been previously issued in July 2012 for services.

On November 29, 2013 Sharon Berthold resigned her position as Director, Executive Vice President and Secretary.

NOTE 5 - COMMON AND PREFERRED STOCK

Please see Note 3 for all share issuances upon conversions of convertible debentures.

Please see Note 4 for a discussion of common and Preferred Stock issued to related parties. As of December 31, 2013, all the Preferred Stock of the Company is held by the Officers.

On May 1, 2013, INOL entered into an Exclusive Licensing Agreement with Green Dolphin Corp, whose President has agreed to become VP of Business Development. In connection with the license agreement the Company issued to Green Dolphin 1,200,000 common shares, with a fair value based on the market price of the shares of $264,000 (amount included in disclosure above). As the shares were issued to a company controlled by a consultant of the Company, and it is not known if the Company will ever actually distribute the products offered under the license agreement, the shares have been treated as additional compensation to the consultant.

During the nine months ended December 31, 2013 the Company issued 18,040,000 shares of its common stock for services to various consultants with a fair value of $1,845,922. The fair value was determined using the market price of the Company’s stock on the date of issuance. There were no shares of common stock issued for services during the three months ended December 31, 2013.

NOTE 6 - FINANCIAL CONDITION AND GOING CONCERN

The Company has minimal operations and has negative working capital at December 31, 2013. Due to the limited operating history and limited operations, the Company will require additional working capital to survive. If the funds the Company has are not sufficient, it will also consider bank loans and additional shareholder loans. There are no assurances that the Company will be able to obtain any of these. No assurance can be given that additional financing will be available, or will be available, will be on terms acceptable to the Company. If adequate working capital cannot be generated, the Company may not be able to continue its operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be able to continue as a going concern.

NOTE 7 - RESTATEMENT

As noted previously, the Company filed the interim consolidated financial statements without review by an independent public accountant. Additionally the Company did not have a permanent CFO or accounting personnel. As the accompanying consolidated financial statements were prepared for review and this amended filing, it was noted that there were several clerical errors, and the financial statements as originally filed did not agree to the Company’s accounting records. Therefore, a portion of the restatement cannot be identified as due to certain transactions which were incorrectly recognized in the original financial statements. A majority of the difference between the financial statements as originally filed and included herein can be attributed to previous period’s restatements, as disclosed in the Form 10K for the years ended March 31, 2014 and 2013, and their impact going forward. These restatement entries have been identified below, with the remaining differences attributed to clerical error.

The Company identified errors are as follows:

Through March 31, 2013

Through December 31, 2013