NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
Elite Books Inc. is a corporation registered in the State of Nevada on May 21, 2013. We are a company at its development stage. Our business intention is to sell books utilizing internet, and grow customer base by selling unique editions of books. Our revenue is earned by charging a fee to our customers who are interested in our product.
On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the Amended and Restated Articles) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Companys board of directors.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (GAAP accounting). The Company has adopted a calendar year end.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Companys promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk.
We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.
F-6
When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue will be recognized when it is realized or realizable and earned. Specifically, revenue will be recognized when all of the following criteria are met: (1) Persuasive evidence of an arrangement exists; (2) Service has occurred, customer acceptance has been achieved; (3) Our selling price to the buyer is fixed and determinable; and (4) Collection is reasonably assured. The Company recognizes revenue when services have been provided and collection is reasonably assured.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Companys net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Companys net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common share equivalents outstanding as of March 31, 2016.
Comprehensive Income
The Company has established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Shareholders Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.
F-7
Recent Accounting Pronouncements
In February 2016, FASB issued ASU-2016-02, "Leases (Topic 842)." The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for the Company beginning January 1, 2019, including interim periods within that fiscal year. We are currently evaluating the impact of adopting the new guidance of the consolidated financial statements.
In January 2016, the Financial Accounting Standards Board ("FASB"), issued Accounting Standards Update ("ASU") 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and are to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this standard.
In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The adoption of this standard will not have any impact on the Company's financial position, results of operations and disclosures.
NOTE 3 GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company currently has limited working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of managements efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
F-8
NOTE 4 CONVERTIBLE PROMISSORY NOTES PAYABLE
Convertible promissory notes, including accrued interest, at March 31, 2016 and 2015 are as follows:
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2016
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2015
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TCA Global Fund, Inc., including accrued interest of $23,833 as of March 31, 2016
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$
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523,833
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$
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-
|
Convertible promissory note payable, net
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$
|
523,833
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$
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-
|
On December 18, 2015, the Company issued the Convertible Note in favor of TCA Global Master Credit Fund, L.P. ("TCA"). The maturity date of the Convertible Note was June 18, 2016, six months from the effective date, and the Convertible Note bears interest at a rate of sixteen and one-half percent (16.5%) per annum. The Convertible Note is convertible, at TCA's option upon an event of default, into shares of the Companys common stock, par value $0.001 per share (the "Common Stock") at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note may be prepaid in whole or in part at the Companys option without penalty.
Furthermore, the Company shall pay a fee of $1,500 on the closing date and thereafter on the first day of each third month during the term. The fee shall increase by $500 for each subsequent line of credit increase with a cap of $2,500.
At any time and from time to time while this Convertible Note is outstanding, the principal and accrued interest may be, at the sole option of TCA upon an Event of Default, convertible into shares of the Company's common stock. The note is convertible into shares of common stock at a price equal to a variable conversion price of eighty-five percent (85%) of the volume-weighted averages the five (5) days preceding the date of conversion.
As of September 30, 2016, the six-month term of the agreement has expired and the obligations continues to be outstanding which is a nonpayment of the obligation of the Senior Secured Revolving Credit Facility dated December 18, 2015.
NOTE 5 RELATED PARTIES
Advances
From time to time, the Company has received advances from certain of its officers and shareholders to meet short-term working capital needs. For the years ended March 31, 2016 and 2015, a total of $4,894 and $4,100 advances from related parties is outstanding, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.
Officer Agreements
On January 28, 2016, the Company entered into an employment agreement, effective February 15, 2016, with the Company's Chief Executive Office whereby the Company provides for compensation of $10,000 per month. A total salary of $15,000 expensed during the year ended March 31, 2016. The total balance due to the Chief Executive Officer for accrued salaries at March 31, 2016 and 2015, was $15,000 and $0, respectively. Furthermore, the Company agreed to issued the Chief Executive Officer 20 million shares of common stock valued at $15,200,000 recorded as common stock payable and subsequently issued the shares on August 2, 2016 (see Note 9).
F-9
NOTE 6 EQUITY
Common shares
The Company had authorized 750,000,000 common shares as of March 31, 2016 and 2015 and the Company had 2,874,999 and 2,799,999 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of our company for a vote.
On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the Amended and Restated Articles) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Companys board of directors.
During the years ended March 31, 2016 and 2015, the Company issued the following equity instruments:
·
On October 29, 2014, the Company sold a total of 799,999 shares of common stock for gross proceeds in the amount of $23,400 at $0.03 per share.
·
On December 18, 2015, as a result of a private transaction, whereby 2,000,000 shares of the Company's common stock, has been cancelled by the former Chief Executive Officer and 2,020,000 shares of common stock have been issued to the current Chief Executive Officer. The transaction effectuated a change of control and the proceeds from a convertible debenture in the amount of $390,500 which has been recorded an offsetting discount of common stock to equity.
·
On December 18, 2015, the Company issued 139,750 shares of common stock in accordance with the TCA Advisory agreement (See note 7).
·
On February 16, 2016, the Company issued 75,000 at a fair market value of $93,750 for professional services.
NOTE 7 COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. An office space has been leased on a month by month basis.
The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
Consulting Agreements
On December 18, 2015, the Company entered into an advisory services agreement with TCA Global Master Fund (Consultants) for investment banking services. In consideration, the Company shall issue the Consultant $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of March 31, 2016, an additional issuance of 189,227 shares with a fair market value of $143,813 are required to satisfied the advisory agreement whereby an additional financing costs has been recorded to common stock payable. The Company recorded $393,813 of stock-based financing costs for the year ended March 31, 2016.
F-10
NOTE 8 INCOME TAXES
As of March 31, 2016 and 2015, the Company had net operating loss carry forwards of approximately $451,743 and $27,196, respectively, that may be available to reduce future years taxable income in varying amounts through 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following:
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March 31, 2016
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March 31, 2015
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Federal income tax benefit attributable to:
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Current Operations
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$
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5,370,489
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$
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9,247
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Less: valuation allowance
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(5,370,489)
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(9,247)
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Net provision for Federal income taxes
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$
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-
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$
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-
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The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
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March 31, 2016
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March 31, 2015
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Deferred tax asset attributable to:
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Net operating loss carryover
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$
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153,192
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$
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9,247
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Stock based compensation
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5,216,897
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-
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Less: valuation allowance
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(5,370,489)
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(9,247)
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Net deferred tax asset
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$
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-
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$
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-
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Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
NOTE 9 SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to March 31, 2016 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than those specified below.
LG Capital Funding, LLC.
On April 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $3,700 of original issuance discount and bears interest at a 8% per annum interest rate. The note matures on April 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion.
On June 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $3,700 of original issuance discount and bears interest at a 8% per annum interest rate. The note matures on June 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion.
F-11
TCA Convertible Debenture Agreement
As of September 30, 2016, the six-month term of the agreement has expired and the obligations continues to be outstanding which is a nonpayment of the obligation of the Senior Secured Revolving Credit Facility dated December 18, 2015 (see Note 4).
Settlement Agreement with Rockwell Capital Partners
On July 14, 2016, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Rockwell Capital Partners, Inc. (Rockwell), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $56,000 (the Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On July 14, 2016, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the Manatee Court), entered an order (the Rockwell Order) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the Securities Act), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Rockwell. The Company issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through September 30, 2016.
Restated Articles of Incorporation
On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the Amended and Restated Articles) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Companys board of directors.
Mammoth Corporation Convertible Debenture Agreement
On July 29, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $27,500 note payable includes $6,000 of original issuance discount. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the issuance of 300,000 shares of the Company common stock issued on August 2, 2016.
Share issuances
On August 2, 2016, the Company issued 20,000,000 shares of common stock to the Company's CEO in accordance with the employment agreement dated January 28, 2016.
F-12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
CURRENT BUSINESS OPERATIONS
The Company plans to concentrate its development efforts in the Eagle Ford Formation in South Texas. We believe such opportunities exist in the United States with the recent improvements in water disposal. We have only recently begun our planned business operations. To date our operations have primarily been devoted to forming the entity and developing our business plan. We have several properties under contract and have completed most of the financing for these acquisitions.
The following table provides selected financial data about us for the fiscal years ended March 31, 2016 and March 31, 2015. For detailed financial information, see the audited Financial Statements included in this report.
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Fiscal year ended March 31,
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2016
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2015
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Balance Sheet Data:
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Cash
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$
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17
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$
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2,888
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Total assets
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$
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85,874
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$
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2,888
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Total liabilities
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$
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585,988
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$
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4,100
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Shareholders equity (deficiency)
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$
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(500,114)
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$
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(1,212)
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Operating Data:
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Revenue
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$
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200
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$
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930
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Operating Expenses
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$
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15,342,056
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$
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28,126
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Net Income (Loss)
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|
$
|
(15,795,965)
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|
|
$
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(27,196)
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12
RESULTS OF OPERATIONS
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
FISCAL YEAR ENDED MARCH 31, 2016 COMPARED TO MARCH 31, 2015.
Our net loss for the year ended March 31, 2016 was $15,795,965 compared to a net loss of $27,196, during the year ended March 31, 2015. Our loss was attributable to financing and administrative costs and professional fees incurred compared to nominal business activity in the prior year.
This change in net loss was primarily the result of the following:
Revenue
We recognized $200 of revenue during the year ended March 31, 2016 compared to $930 of revenue during the year ended March 31, 2015. The decrease in revenue of $730 was attributable to limited resources to maintain revenue.
Operating expenses
We incurred operating expenses of $15,342,056 during the year ended March 31, 2016 compared to $28,126 of operating expenses during the year ended March 31, 2015. The primary expense in the year ended March 31, 2016 was $15,200,000 of employee stock based compensation attributable to 20 million shares due to our Chief Executive Officer in accordance with an employment agreement dated January 26, 2016. Our operating expenses also consisted of general and administrative fees of $45,206 compared to $28,126 in the year ended March 31, 2015 related to office, compliance and professional fees. Furthermore, we incurred expense of $93,750 for stock issuances for professional and advisory services during the year ended March 31, 2016.
Other Income (Expense)
We incurred interest expense of $23,833 and financing costs of $36,463 related to our convertible debenture in the year ended March 31, 2016. Furthermore, the Company into an advisory services agreement with TCA Global Master Fund for investment banking services. The Company shall issue $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of March 31, 2016, an additional issuance of 189,227 shares with a fair market value of $143,813 are required to satisfied the advisory agreement whereby an additional financing costs has been recorded to common stock payable. The Company recorded $393,813 of stock-based financing costs for the year ended March 31, 2016.
Net Losses
Our net loss for the fiscal year ended March 31, 2016
was $15,795,965 compared to a net loss of $27,196 during the year ended March 31, 2015 due to the factors discussed above.
13
Weighted average number of shares
The weighted average number of shares outstanding was 2,848,859 and 2,031,438 for the years ended March 31, 2016 and 2015, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported.
LIQUIDITY AND CAPITAL RESOURCES
Year Ended March 31, 2016 Compared with Year Ended March 31, 2015
As of March 31, 2016 and 2015, we had $17 and $2,888 of cash and cash equivalents.
We have experienced losses of $15,795,965 and $27,196 for the fiscal years ended March 31, 2016 and 2015, respectively, and have an accumulated deficit of $15,824,577 at March 31, 2016. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. There is no assurances that we will be able to obtain an adequate level of financing needed for our near term requirements or the long-term development and exploration of our leases. These conditions raise substantial doubt about our ability to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and, or, the private placement of convertible debt and/or issuance of common stock.
Because of the Companys history of losses, its independent auditors, in the reports on the financial statements for the year ended March 31, 2016 and March 31, 2015, expressed substantial doubt about the Companys ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of managements efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Cash Flows from Operating Activities
We have generated negative cash flows from operating activities. For the year ended March 31, 2016, net cash flows used in operating activities was $16,345 consisting of a net loss of $15,795,965, offset by non-cash stock compensation of $15,687,563 and amortization of financing costs of $34,963, an increase of $18,261 in accounts payables and accrued liabilities, an increase of $15,000 of accrued officer salary and an increase of $23,833 in accrued interest payable. For the year ended March 31, 2015, net cash flows used in operating activities was $27,196 consisting of a net loss of $27,196.
Cash Flows from Investing Activities
We neither used nor generated cash from investing activities.
14
Cash Flows from Financing Activities
We have financed our operations primarily from the issuance of convertible debt, sale of shares of our common stock or by way of loan from our shareholders. We generated cash from financing activities of $13,474 and $23,400 in the year ended March 31, 2016 and 2015, respectively. For the year ended March 31, 2016, net cash provided by financing activities consisted of $12,680 of net proceeds from the issuance of a $500,000 convertible debenture and $794 from advances from shareholders.
PLAN OF OPERATION AND FUNDING
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to the acquisition of assets. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
MATERIAL COMMITMENTS
As of the date of this Annual Report, we do not have any material commitments.
GOING CONCERN
The independent auditors' audit report accompanying our March 31, 2016 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
OFF-BALANCE SHEET ARANGEMENTS
As of the date of this Quarterly Report, we do not have any 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 investors.
SIGNIFCANT ACCOUNTING POLICIES
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
15
Recently Issued Accounting Pronouncements.
We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.
Item 9A. Controls and Procedures
Managements Report on Internal Controls over Financial Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of 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 to 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. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Companys internal control over financial reporting as of March 31, 2016 using the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
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 Companys annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of March 31, 2016, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
1.
We do not have an Audit Committee While not being legally obligated to have an audit committee, it is the managements view that such a committee, including a financial expert member, is an utmost important entity level control over the Companys financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over managements activities.
2.
We did not have appropriate policies and procedures in place to evaluate the proper accounting and disclosures of key documents and agreements.
3.
We did not maintain appropriate cash controls As of March 31, 2016, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Companys bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.
4.
We did not implement appropriate information technology controls As at March 31, 2016, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Companys data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.
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Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the companys internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2016 based on criteria established in Internal Control- Integrated Framework issued by COSO.
System of Internal Control over Financial Reporting
Although our Company is unable to meet the standards under COSO because of the limited funds available to a company of our size and stage of development, we are committed to improving our financial organization. As funds become available, we will undertake to: (1) create a position to segregate duties consistent with control objectives, (2) increase our personnel resources and technical accounting expertise within the accounting function (3) appoint one or more outside directors to our board of directors who shall be appointed to the audit committee of our Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and (4) prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of March 31, 2016, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only managements report in this annual report.