UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q



QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016  

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


Commission File Number 000-54616

 


MICHAEL JAMES ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

(formerly BullsnBears.com, Inc.)





DELAWARE

45-2282672

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)



710 Route 10, Suite 203

Whippany, New Jersey

07901

(Address of principal executive offices)

(Zip Code)

 

(908) 204-0004

(Registrant's telephone number, including area code)

784 Morris Turnpike #334

Short Hills, New Jersey  07078

  (Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.   YES [X]     NO ¨


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   

YES [X]    NO


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  






Large Accelerated Filer

¨


Accelerated Filer

Non-accelerated Filer

¨


Smaller Reporting Company [X]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES    NO [X]


APPLICABLE ONLY TO CORPORATE ISSUERS:


As of September 13, 2016, there were 20,976,270 shares of the registrant s $0.0001 par value common stock issued and outstanding.



1


TABLE OF CONTENTS





 

 

Page

 

PART I.  FINANCIAL INFORMATION

 

                      

 

                      

ITEM 1.

FINANCIAL STATEMENTS (unaudited)

4

 

 

 

 

Condensed Consolidated Balance Sheets (Unaudited)

4

 

Condensed Consolidated Statements of Operations (Unaudited)

5

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

 

Notes to the Condensed Consolidated Unaudited Financial Statements

7

 

 

 

ITEM 2.

MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

11

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

14

ITEM 4.

CONTROLS AND PROCEDURES.

14

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS.

15

ITEM 1A.

RISK FACTORS.

15

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

15

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

16

ITEM 4.

MINE SAFETY DISCLOSURES.

16

ITEM 5.

OTHER INFORMATION.

16

ITEM 6.

EXHIBITS.

17




2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


Various statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived from utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to:

·

our recent exit from shell status, lack of profitable operations and risk we will ever generate revenues or profits,

·

need for additional capital, including our ability to repay $619,500 in notes to non-related parties, a substantial portion of which are presently past due,

·

our ability to continue as a going concern,

·

the limited operating history of our business,

·

our inability to manage our growth,

·

potential infringement of first party intellectual property rights,

·

our ability to effectively compete,

·

our ability to timely and effectively scale our technology,

·

the limited trading market for our common stock which is quoted on the OTC Markets,

·

anti-takeover aspects of our certificate of incorporation and bylaws and the ability of our Board to issue preferred stock without stockholder consent,

·

the application of penny stock rules to trading in our common stock, and

·

the dilutive impact of outstanding convertible notes and warrants.


You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in Part I. Item 1A. Risk Factors appearing elsewhere in this report. Other sections of this report include additional factors which could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.


OTHER PERTINENT INFORMATION


Unless specifically set forth to the contrary, when used in this report the terms Michael James Enterprises, Inc.. the Company, "we", "us", "our" and similar terms refer to Michael James Enterprises, Inc. (formerly BullsnBears.com, Inc.), a Delaware corporation formerly known as Spicy Gourmet Manufacturing, Inc. In addition, the second quarter of 2016 refers to the three months ended June 30, 2016, the second quarter of 2015 refers to the three months ended June 30, 2015.



3


PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS.


MICHAEL JAMES ENTERPRISES, INC.

(formerly BullsnBears.com, Inc.)

 Condensed Consolidated Balance Sheets

(Unaudited)





June 30, 2016

December 31, 2015

ASSETS

 

 

CURRENT ASSETS



Cash

$

$

300 

Due from related party

200,000 

Total Current Assets

200,000 

300 




Property and equipment, net

3,548 

4,850 

Intangible asset, net of accumulated amortization of $36,250 and $6,250

TOTAL ASSETS

$

203,548 

$

5,150 




LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)



CURRENT LIABILITIES



Bank Overdraft

641 

4,298 

Accounts payable and accrued expenses

260,271 

39,051 

Accounts payable related party

444,400 

444,400 

Note payable related party

238,667 

214,458 

Convertible notes payable - related party

21,716 

21,716 

Convertible notes payable

460,512 

377,500 

Derivative Liability (net)

491,336 

Accrued interest payable

95,843 

67,938 

Accrued interest payable - related party

32,707 

24,953 

Total Current Liabilities

2,046,093 

1,194,314 




Long-term Liabilities



Convertible notes payable, net


Total long-term liabilities







Total Liabilities

2,046,093 

1,194,314 




STOCKHOLDERS' EQUITY (DEFICIT)



Preferred stock; $0.0001 par value, 20,000,000 shares authorized, 4,000 shares issued or outstanding

Common stock; $0.0001 par value, 100,000,000 shares authorized, 14,658,270 issued and outstanding, respectively

1,466 

1,296 

Additional paid-in capital

1,670,295 

1,345,764 

Accumulated deficit

(3,514,307)

(2,536,225)

Total Stockholders' Equity (Deficit)

(1,842,545)

(1,189,164)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$

203,548 

$

5,150 


The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.

MICHAEL JAMES ENTERPRISES, INC.

(formerly BullsnBears.com, Inc.)

Condensed Consolidated Statements of Operations

(Unaudited)


For the
three months ended
June 30,

For the
six months ended
June 30,


2016

2015

2016

2015


 

 

 

 

REVENUES

$

$

10,000 

$

$

12,610 






OPERATING EXPENSES





Cost of Sales

Depreciation and amortization expense

651 

9,344 

1,302 

18,688 

Shares to be issued for financing fee

Shares to be issued for Consulting

324,700 

324,700 

General and administrative

93,247 

47,468 

122,072 

95,043 






Total Operating Expenses

418,598 

56,812 

448,074 

113,731 






OPERATING LOSS

(418,598)

(46,812)

(448,074)

(101,121)






OTHER INCOME (EXPENSE)





Gain on conversion of interest

12,160 

17,296 

Loss on derivative liability

175,711 


(326,336)


Interest expense

(80,442)

(12,265)

(203,673)

(29,922)






Total Other Income (Expense)

95,269 

(105)

(530,009)

(12,626)






NET LOSS

$

(323,329)

$

(46,917)

$

(978,083)

$

(113,747)






BASIC NET LOSS PER COMMON SHARE

$

(0.02)

$

(0.00)

$

(0.07)

$

(0.01)






BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

13,222,015 

12,500,007 

13,090,143 

12,384,165 



The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.





MICHAEL JAMES ENTERPRISES, INC.

(Formerly BullsnBears.com, Inc.)

Condensed Consolidated Statements of Cash Flows

(Unaudited)


For the
Six Months ended
June 30,


2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES



Net loss

$

(978,083)

$

(113,747)

Items to reconcile net loss to net cash used in operating activities:



Depreciation and amortization

1,302 

18,688 

Loss on derivative liability

326,336 

Amortization of debt discount

83,012 


Gain on conversion of Interest

(17,296)

Shares to be issued for financing fee

65,000 

Shares issued for consulting

324,700 


Changes in operating assets and liabilities



Increase in other assets


(3)

Increase in accounts payable and accrued liabilities

125,470 

29,365 

Increase in accounts payable and accrued liabilities - related party

7,754 

67,150 

Net Cash Used in Operating Activities

(44,509)

(15,843)




CASH FLOWS FROM FINANCING ACTIVITIES



Proceeds from bridge notes payable


17,500 

Proceeds (payments) from convertible bridge notes payable

220,000 


Proceeds (payments) from convertible notes payable, related party

(200,000)

2,015 

Proceeds from notes payable, related party

24,209 

4,455 

Payments on notes and convertible notes payable, related party

(6,086)

Net Cash Provided by Financing Activities

44,209 

15,869 




INCREASE IN CASH

(300)

26 




CASH AT BEGINNING OF PERIOD

300 




CASH AT END OF PERIOD

$

$

26 




Supplemental Information:



Interest Paid

$

$

Taxes

$

$




The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.



6


MICHAEL JAMES ENTERPRISES, INC.

(formerly BullsnBears.com, Inc.)
Notes to the Condensed Consolidated Unaudited Financial Statements


1.

Nature of Operations and Continuance of Business


The unaudited interim condensed consolidated financial statements included herein have been prepared by Michael James Enterprises, Inc. (formerly BullsnBears.com, Inc.) (the Company ) in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the SEC ). We suggest that these interim financial statements be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2015, as filed with the SEC. We believe that all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein and that the disclosures made are adequate to make the information not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-K have been omitted.


On December 31, 2015, the Company formed a new wholly-owned corporation, BullsnBears Holdings, Inc., for the purpose of holding the Company s intellectual property assets.


The financial statements presented are those of Michael James Enterprises, Inc. (formerly BullsnBears.com, Inc.) (the Company) (formerly Spicy Gourmet Manufacturing, Inc.), a Delaware corporation. The Company was incorporated on December 30, 2010, under the laws of the State of Delaware. During November 2012, The Company changed its name from Spicy Gourmet Manufacturing, Inc. to BullsnBears.com, Inc. and changed its name to Michael James Enterprises, Inc.


Going Concern


These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the period from inception through June 30, 2016, the Company has generated minimal revenues and has an accumulated deficit of $3,514,307. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, its ability to generate profits from the Company s future operations, identify future investment opportunities and obtain the necessary debt or equity financing. These factors raise substantial doubt regarding the Company s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.




7


Principles of Consolidation

The accompanying financial statements reflect the consolidation of the individual financial statements of Michael James Enterprises, Inc. and BullsnBears Holdings, Inc. All significant intercompany accounts and transactions have been eliminated.

Basic and Diluted Loss Per Share

The Company presents both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and warrants, using the treasury stock method, and convertible securities, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had net losses as of June 30, 2016 and 2015, so the diluted EPS excluded all dilutive potential shares in the diluted EPS because their effect is anti-dilutive. As of June 30, 2016 and June 30, 2015 the Company had outstanding warrants to purchase 5,000,000 shares of common stock. The Company also had outstanding convertible note that could be converted into 535,716 shares and 650,716 shares as of June 30, 2016 and 2015, respectively.  

Use of Estimates

The preparation of financial statements 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.

Fair Value of Financial Instruments

The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments. The fair value of the derivative liabilities have been valued using a Black Scholes valuation model.

Derivative Liabilities

Certain of the Company s convertible notes payable described in Note 3 contain conversion features that qualify for embedded derivative classification. The Company accounts for the embedded derivative features in its convertible debentures in accordance FASB ASC 815-10- Derivatives and Hedging, which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives. The recognition of derivative liabilities related to the issuance of the convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as a Loss on Derivative Liability in other expense. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.




New Accounting Pronouncements



8


 

In August 2014, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) 2014-15 Presentation of Financial Statements Going Concern, outlining management s responsibility to evaluate whether there is substantial doubt about an entity s ability to continue as a going concern, along with the required disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016 with early adoption permitted. The Company does not anticipate a material impact to our financial statements as a result of this change.

 

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs ( ASU 2015-03 ). ASU 2015-03 changes the presentation of debt issuance costs in financial statements, by requiring them to be presented in the balance sheet as a direct deduction from the related debt liability, rather than as an asset. Amortization of the costs is reported as interest expense. There is no change to the current guidance on the recognition and measurement of debt issuance costs. For public business entities, ASU 2015-03 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect ASU 2015-03 to have a material impact on its consolidated financial statements.

 

In January 2016, the FASB issued ASU 2016-01 Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which revises an entity s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted under certain circumstances. The Company is currently assessing the impact of ASU 2016-01 on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 with early adoption permitted. Under Accounting Standards Update 2016-02, lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee s right to use or control the use of a specified asset for the lease term.  The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including treatment of excess tax benefits and forfeitures, as well as consideration of minimum statutory tax withholding requirements. The ASU will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early application permitted in any interim or annual period. The Company is evaluating the future impact of this ASU on the consolidated financial statements.

 

Other relevant recently issued accounting updates are not expected to have a material impact on the Company s consolidated financial statements.





9


NOTE 2 - RELATED PARTY TRANSACTIONS

Notes and Convertible Notes Payable

On October 31, 2012, the Company and a then officer and director of the Company entered into a one year, 10% Senior Convertible Note for office equipment totaling $20,955 and supplies totaling $761, or a total of $21,716. The principal amount of the Senior Convertible Note can be convertible, at the sole option of the holder and in whole or in part, into shares of common stock of the Company at a conversion price to be determined by the Board of Directors of the Company at or prior to the maturity date. No conversion rate has been established by the Board of Directors.  The Senior Convertible Note and the payment of the principal thereof and interest thereon shall at all times and in all respects constitute the Senior Indebtedness of the Company and shall not be junior or subordinate in right of payment to any other indebtedness of the Company. Accrued interest on the Senior Convertible Note totaled $6,010 and $6,636 at December 31, 2015 and June 30, 2016 respectively.

From the year ended 2012 through the year ended December 31, 2015, the Company borrowed a total of $331,371 in unsecured short-term loans from a then officer and director of the Company and repaid a total of $116,913 with an interest rate of 6% per annum.  During the three months ended June 30, 2016 the Company borrowed an additional $22,276. The outstanding balance as of December 31, 2015 and June 30, 2016 was $214,458 and 236,736 with accrued interest of $18,943 and $21,888 respectively. The notes are due on demand.  

Consulting Expense

As of June 30, 2016 and December 31, 2015, the Company owed a former officer $444,440 and $444,440, respectively, for consulting expense which is included in accounts payable, related party.

The Company advanced $220,000 to a related party during the first quarter of 2016. $20,000 was paid thus bringing the balance due from related party to $200,000 at June 30, 2016.


NOTE 3 - CONVERTIBLE PROMISSORY NOTES PAYABLE

As of December 31, 2015 the Company had a total of nine convertible notes payable with an outstanding balance of $377,500. The interest rates varied from 10% to 20% and conversion rates ranging from $.20 to $1.00. The notes may be converted at any time and are all in default.


On February 4, 2016, the Company entered into a $121,000 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate.  The term is for one year, with an original issuance discount of $11,000 for due diligence and legal costs.  The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.


On March 23, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Vista Capital Investments, LLC. a non-affiliate.  The term is for two years, with an original issuance discount of $5,500 for due diligence and legal costs.  The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.



10


In connection with the note payable the Company is obligated to issue 200,000 that were valued at $120,000. Out of the full consideration $55,000 was recorded as debt discount and the remaining $65,000 was included in interest expense.


On March 24, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate.  The term is for one year, with an original issuance discount of $5,500 for due diligence and legal costs.  The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.


Accrued interest on all outstanding non-related-party Notes was $79,917 at June 30, 2016 and $67,938 as for December 31, 2015.

Debt Discount


Balance as of December 31, 2015

 $             -   

Initial recognition of additional derivative liability

242,000 

Amortization of Debt Discount

(22,678)

Balance as of March 31, 2016

219,322

Amortization of Debt Discount

$

(60,334)

Balance June 30, 2016

$

158,988 




Balance of 2015 and Prior notes payable at December 31, 2015

$

377,500 

Notes Payable recorded in 2016

242,000 

Total Notes payable at June 30, 2016

619,500 

Debt discount

(158,988)

Notes Payable, net

$

460,512 




NOTE 4 DERIVATIVE LIABILITY

The Company issued financial instruments in the form of convertible notes with embedded conversion features.  The convertible notes payable has conversion rates which are indexed to the market value of the Company s common stock price.


Price protection clauses of the conversion features of the 2016 convertible notes (see Note 3) triggered derivative accounting under GAAP.


During the three months ending June 30, 2016, the company issued three convertible promissory notes totaling $242,000.


Derivative Liability


Balance as of December 31, 2015

$

Initial recognition of additional derivative liability

667,046 

Balance as of March 31, 2016

667,046 

Change in derivative liability

(175,712)

Balance June 30, 2016

$

491,334 


The following table represents the Company s derivative liability and debt discount activity for the embedded conversion features discussed above:



During the three months ended June 30, 2016 and 2015, the aggregate gain/(loss) on the derivative liability was $175,711 and $0 respectively, consisting of initial derivative expense and the change in the fair value of the derivative.


NOTE 5 - COMMON STOCK AND COMMON STOCK WARRANTS

Common Stock Warrants

In December, 2010, the Company issued a total of 5,000,000 Common Stock Purchase Warrants. Pursuant to an extension approved by the Board of Directors in June, 2015, all Warrants are exercisable at any time prior to November 19, 2017.  

The following table summarizes the outstanding warrants and associated activity for the three months ended June 30, 2016:



Number of

Weighted

Weighted



Warrants

Average

Average



Outstanding

Price

Remaining





Contractual



 

 

Life

Balance, December 31, 2015

 

 

5,000,000

$

0.25

 

1.89

Granted





Exercised

 

 

 

 

Expired


 

 

 

Balance, June 30, 2016

 

 

5,000,000

$

0.25

 

1.39






12


NOTE 6 COMMITMENTS AND CONTINGENCIES


A lawsuit was filed against the Company on November 13, 2014, in the First Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida entitled Thinspace Technology, Inc. v. Michael James Enterprises, Inc. (formerly BullsnBears.com, Inc.) The complaint alleges that BullsnBears failed to provide certain services it was contractually committed to provide and seeks damages in excess of $15,000.  The Company believes that this claim is without merit and is vigorously defending this action.  


On September 1, 2015, the Company received notice of an Administrative Complaint filed by the State of Florida Office of Financial Regulation (OFR) concerning certain private placement investments received by the Company during the period from 2011 to 2013 and the applicability of the registration exemption provisions of the Florida Statutes to said investments.  The Company vigorously disputes the legal basis for this Administrative Complaint and is presently conducting mitigating discussions with the OFR.


Note 7 SUBSEQUENT EVENTS


On August 4, 2016 the Company entered into an asset purchase agreement with RP Capital Group, Ltd. acquiring all rights and ownership to, among other things, the proprietary and exclusive technology for the formulation of a therapeutic treatment for sleep apnea.









13


ITEM 2.

MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


FORWARD-LOOKING STATEMENTS


This Management s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.


RESULTS OF OPERATIONS


Working Capital



Unaudited



June 30, 2016

December 31, 2015

Current Assets

$

200,000 

$

300 

Current Liabilities

2,046,093 

1,194,314 

Working Capital Deficit

(1,846,093)

(1,194,014)



Cash Flows


Six months ended

June 30,

  

2016

2015



  

Cash Flows Used in Operating Activities

(44,509)

(15,843)

Cash Flows Provided by Financing Activities

44,209 

15,896 

Net Increase (Decrease) in Cash During Period

(300)

26 




14


Balance Sheet


At June 30, 2016, the Company had total assets of $203,548 compared with total assets of $5,150 as at December 31, 2015.  

 

The Company had total liabilities of $2,046,093 at June 30, 2016 compared with $1,194,314 at December 31, 2015. The increase was due to the issuance of convertible notes


Income Statement


Revenues


Revenue decreased by $10,000 during the three months ended June 30, 2016 compared to the three months ended June 30, 2015.  The Company had minimal revenues during both periods.


Revenue decreased by $12,610 during the six months ended June 30, 2016 compared to the six months ended June 30, 2015.  The Company had minimal revenues during both periods.


Operating Expenses


During the three months ended June 30, 2016, the Company incurred operating expenses totaling $418,598 compared with $56,812 for the three months ended June 30, 2015.


During the six months ended June 30, 2016, the Company incurred operating expenses totaling $448,074 compared with $113,731 for the six months ended June 30, 2015.


Total Other Income (Expense)


During the three months ended June 30, 2016 the company recorded a Gain on derivative liability of $175,711.


During the six months ended June 30, 2016 the company recorded a loss on derivative liability of $326,336.


Interest expense increased to $80,442 for the three months ended June 30, 2016 compared to $12,265 for the three months ended June 30, 2015 mainly due to the financing fees incurred on the convertible notes.


Interest expense increased to $203,673 for the six months ended June 30, 2016 compared to $29,922 for the six months ended June 30, 2015 mainly due to the financing fees incurred on the convertible notes.


Net Loss


During the three months ended June 30, 2016, the Company realized net loss of ($323,329) compared with a net loss of ($46,917) for the three months ended June 30, 2015.  The increase in net loss was primarily due to the shares issued for consulting of $324,700.

 

During the six months ended June 30, 2016, the Company realized net loss of ($978,083) compared with a net loss of ($113,747) for the six months ended June 30, 2015.  The increase in net loss was primarily due to the shares issued for consulting of $324,700.






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Liquidity and Capital Resources


As of June 30, 2016, the Company had a bank overdraft of $651 and a working capital deficit of $1,846,093, compared with a cash balance of $300 and working capital deficit of $1,194,014 at December 31, 2015. 

 

We do not have sufficient capital to pay our operating expenses.  In addition, as of June 30, 2016, there was $360,000 of notes which have matured and have not converted into common shares. In addition, there are an additional $17,500 principal amount of Bridge notes with a default interest rate of 20% which mature during the next 12 months and $242,000 in convertible notes which mature over the next 2 years.  These notes are unsecured.  We do not have sufficient working capital to repay these obligations.  In the absence of the note holders converting to common stock the Company will need to raise additional capital to satisfy these obligations. If we are unable to raise the additional capital necessary to pay our operating expenses and satisfy our obligations, we may be unable to continue as a going concern.  In that event, investors could lose their entire investment in our company.


Cash Flows from Operating Activities


During the six months ended June 30, 2016, the Company used ($44,509) of cash from operating activities compared with use of ($15,843) of cash flow during the six months ended June 30, 2015.  


Cash Flows from Financing Activities


During the six months ended June 30, 2016, the Company received $220,000 of which $200,000 was advanced to a related party, in addition we received $24,209 in advances from a related party for a net of $44,209 of cash flow from financing activities compared to $15,863 of cash flow from financing activities during the six months ended June 30, 2015.  


Off-Balance Sheet Arrangements


We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.


Future Financings


We will continue to rely on the issuance of debt and equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.





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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the Exchange Act ) and are not required to provide the information under this item.


ITEM 4.

CONTROLS AND PROCEDURES.


Evaluation of disclosure controls and procedures


Our management, with the participation of our chief executive who also serves as our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q.  In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


Based on that evaluation, our chief executive officer who also serves as our chief financial officer concluded that, as of June 30, 2016, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer who also serves as our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure as a result of continuing weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2015.



Changes in internal control over financial reporting


There were no changes in internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




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PART II - OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS.


A lawsuit was filed against the Company on November 13, 2014, in the First Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida entitled Thinspace Technology, Inc. v. Michael James Enterprises, Inc. (formerly BullsnBears.com, Inc.) The complaint alleges that BullsnBears failed to provide certain services it was contractually committed to provide and seeks damages in excess of $15,000.  The Company believes that this claim is without merit and is vigorously defending this action.  


On September 1, 2015, the Company received notice of an Administrative Complaint filed by the State of Florida Office of Financial Regulation (OFR) concerning certain private placement investments received by the Company during the period from 2011 to 2013 and the applicability of the registration exemption provisions of the Florida Statutes to said investments.  The Company vigorously disputes the legal basis for this Administrative Complaint and is presently conducting mitigating discussions with the OFR.


ITEM 1A.

RISK FACTORS.


We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.


ITEM 2.

As of December 31, 2015 the company had a total of nine convertible notes payable with an outstanding balance of $377,500. The interest rates varied from 10% to 20% and a conversion rates ranging from $.20 to $1.00. The accrued interest as of June 30, 2016 and December 31, 2015 was $95,843 and $67,938 respectively . The notes may be converted at any time and are all in default.


On February 4, 2016, the Company entered into a $121,000 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate.  The term is for one year, with an original issuance discount of $11,000 for due diligence and legal costs.  The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.


On March 23, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Vista Capital Investments, LLC. a non-affiliate.  The term is for two years, with an original issuance discount of $5,500 for due diligence and legal costs.  The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.


On March 24, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate.  The term is for one year, with an original issuance discount of $5,500 for due diligence and legal costs.  The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be



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equal to 55% of the lowest trading price of the Company s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.


Accrued interest on all outstanding non-related-party Notes was $95,843 at June 30, 2016 and $67,938 as for December 31, 2015.



ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4.

MINE SAFETY DISCLOSURES.


Not applicable to our company s operations.


ITEM 5.

OTHER INFORMATION.


On October 31, 2012, the Company and an officer and director of the Company entered into a one year, 10% Senior Convertible Note for office equipment totaling $20,955 and supplies totaling $761, or a total of $21,716. The principal amount of the Senior Convertible Note can be convertible, at the sole option of the holder and in whole or in part, into shares of common stock of the Company at a conversion price to be determined by the Board of Directors of the Company at or prior to the maturity date. No conversion rate has been established by the Board of Directors.  The Senior Convertible Note and the payment of the principal thereof and interest thereon shall at all times and in all respects constitute the Senior Indebtedness of the Company and shall not be junior or subordinate in right of payment to any other indebtedness of the Company. Accrued interest on the Senior Convertible Note totaled $6,010 and $6,662 at December 31, 2015 and June 30, 2016 respectively.

From the year ended 2012 through the year ended December 31, 2015, the Company borrowed a total of $331,371 in unsecured short-term loans from an officer and director of the Company and repaid a total of $116,913.  During the six months ended June 30, 2016 the Company borrowed an additional $24,209 The outstanding balance as of December 31, 2015 and June 30, 2016 was $214,458 and 238,667 with accrued interest of $18,943 and $25,434 respectively.   

As of June 30, 2016 and December 31, 2015, the Company owed a former officer $444,440 and $444,440, respectively, for consulting expense which is included in accounts payable, related party.

The company advanced $220,000 to a related party of the company during the first quarter of 2016. $20,000 was repaid thus bringing the balance due from related party to $200,000 at June 30, 2016.







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ITEM 6.

EXHIBITS.


The following exhibits are filed as part of this Quarterly Report:








Exhibit

Number

 

Description

31.1

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *

31.2

 

Rule 13a-14(a)/15d-14(a) Certification of principal financial and accounting officer*

32.1

 

Section 1350 Certification of Chief Executive Officer and principal financial and accounting officer*

101.INS

 

XBRL INSTANCE DOCUMENT **

101.SCH

 

XBRL TAXONOMY EXTENSION SCHEMA **

101.CAL

 

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE **

101.DEF

 

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE **

101.LAB

 

XBRL TAXONOMY EXTENSION LABEL LINKBASE **

101.PRE

 

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE **


* Filed herewith

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this report shall be deemed furnished and not filed.


SIGNATURES


Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 13th day of September 2016.








 

MICHAEL JAMES ENTERPRISES, INC. (formerly BullsnBears.com, Inc.)

  

(the Registrant )

  

 

 

 

BY:

/s/ James Farinella

 

 

James Farinella,

Chief Executive Officer,

Chief Financial Officer




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