ITEM 1. FINANCIAL STATEMENTS.
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MICHAEL JAMES ENTERPRISES, INC.
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(formerly
BullsnBears.com, Inc.)
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Condensed Consolidated Balance Sheets
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(un-audited)
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March 31, 2017
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December 31, 2016
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ASSETS
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CURRENT ASSETS
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Cash
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$
7,070
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$
26,767
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Accounts Receivable
|
1,000
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1,000
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Total Current Assets
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8,070
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27,767
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TOTAL ASSETS
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$
8,070
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$
27,767
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LIABILITIES AND STOCKHOLDERS
’
EQUITY (DEFICIT)
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CURRENT LIABILITIES
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Accounts payable and accrued expenses
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251,511
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247,749
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Accounts payable
–
related party
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90,377
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86,030
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Note payable
–
related party
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240
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240
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Convertible notes payable
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220,991
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173,597
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Derivative Liability (net)
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491,839
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467,491
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Total Current Liabilities
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1,054,958
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975,107
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Long-term Liabilities
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Convertible notes payable, net
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-
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-
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Total long-term liabilities
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-
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-
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Total Liabilities
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1,054,958
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975,107
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STOCKHOLDERS' EQUITY (DEFICIT)
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Preferred stock; $0.0001 par value, 20,000,000 shares authorized, 3,925,000 and 665,000 issued or outstanding respectively,
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3,326
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66
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Common stock; $0.0001 par value, 980,000,000 shares authorized, 22,463,424 and 22,315,946 issued and outstanding, respectively
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2,246
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2,231
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Additional paid-in capital
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18,163,705
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12,311,385
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Accumulated deficit
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(19,216,165)
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(13,261,022)
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Total Stockholders' Equity (Deficit)
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(1,046,888)
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(947,340)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$
8,070
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$
27,767
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The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.
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MICHAEL JAMES ENTERPRISES, INC.
|
(formerly
BullsnBears.com, Inc.)
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Condensed Consolidated Statements of Operations
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(un-audited)
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For the
three months ended
March 31,
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2017
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2016
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REVENUES
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$
-
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$
-
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OPERATING EXPENSES
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Depreciation and amortization expense
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-
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651
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Shares issued for Consulting
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5,542,000
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-
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General and administrative
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127,646
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28,825
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Total Operating Expenses
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5,669,646
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29,476
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OPERATING LOSS
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(5,669,646)
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(29,476)
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OTHER INCOME (EXPENSE)
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Loss on conversion of notes
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(127,340)
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-
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Gain (loss) on derivative liability
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96,653
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(502,047)
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Interest expense
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(126,789)
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(123,231)
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Total Other Income (Expense)
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(157,476)
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(625,278)
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NET LOSS
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$
(5,827,122)
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$
(654,754)
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BASIC NET LOSS PER COMMON SHARE
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$
(0.28)
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$
(0.05)
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BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
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20,583,540
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12,958,270
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The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.
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MICHAEL JAMES ENTERPRISES, INC.
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(Formerly BullsnBears.com, Inc.)
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Consolidated Statements of Cash Flows
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(un-audited)
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For the
three months ended
March 31, ,
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2017
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2016
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net loss
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$
(5,827,122)
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$
(654,754)
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Items to reconcile net loss to net cash used in operating activities:
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Depreciation and amortization
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-
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651
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Change in Debt discount
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9,567
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22,678
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Shares to be issued for financing fee
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113,278
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65,000
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Shares issued for consulting
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5,542,123
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-
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Changes in operating assets and liabilities
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Change in Derivative Liability
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24,348
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502,047
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Increase in accounts payable and accrued liabilities
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3,762
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19,418
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Increase in accounts payable and accrued liabilities - related party
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4,347
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3,571
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Net Cash Used in Operating Activities
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(129,697)
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(41,389)
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds (payments) from convertible notes payable
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110,000
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20,000
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Proceeds from notes payable, related party
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-
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22,276
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Net Cash Provided by Financing Activities
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110,000
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42,276
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INCREASE (DECREASE) IN CASH
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(19,697)
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887
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CASH AT BEGINNING OF PERIOD
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26,767
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300
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CASH AT END OF PERIOD
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$
7,070
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$
1,187
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Supplemental Information:
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Interest Paid
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$
-
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$
-
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Taxes
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$
-
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$
-
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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, 2016, 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.
We are a Company focused on developing intellectual property, contracting out the manufacturing of the products covered by the intellectual property and bringing to market these products through direct to consumer sales utilizing digital media, infomercials as well as distribution through third party vendors and retail outlets. Our first product LUNA is an alchemy of essential oils and peptide. The Company has begun to generate limited sales of LUNA at $20 per unit selling approximately 70 10 milliliter bottles. Currently the main product the Company is working toward manufacturing and developing a market for is VOLUPTAS, a female sexual arousal enhancer. A provisional patent for VOLUPTAS has been filed and the Company is currently engaged with a manufacturer in Texas to create 3D molds and will take the product through all of the necessary stability tests required over the next approximately 6 months in preparation to bring this product to market. Final pricing for the VOLUPTAS has not been decided upon, but the expected price is in the $39.95 range. The Company is also looking to partner with third party companies to collaborate with them on marking and distributing private label products under the MJTV brand.
Our goal is to create a well known brand and distribution network that will not only serve as a viable sales and distribution channel for the Company
’
s products, but also for third party vendors and their products. The Company is focused on branding its catch phrase
“
Beauty Backed By Science
”
. Meaning, science backed products that enhance the inner beauty as well as the outer beauty of all people, with an emphasis on women. The Company has also launched a new marketing campaign with a new logo in the shape of a woman with words written inside of the woman describing
“
what is a beautiful woman.
”
We call this woman
“
BEAUTY
”
.
Competition
Most of our competitors are well-established networks that have substantially greater financial resources than we do. However, these large companies are Bio Pharmaceutical companies such as, Palatin Technologies and AMAG Pharmaceutical, partnering on a female sexual dysfunction product that has completed phase 3 trials. These two companies expect to go through the FDA approval
7
process in order to bring their product to market as an FDA approved drug, and will begin the that process in the middle to late 2018. It customarily takes about 2 years to get through the FDA approval process, without certainty of getting final approval. MJTV will be bringing VOLUPTAS to the market as an over-the-counter product and will not be making any specific medical claims. Additionally, their delivery method is an auto-inject EPI Pen into the woman
’
s stomach. Our delivery method is a non-invasive application. A provisional patent has been filed protecting multiple delivery methods making entry by a third party very difficult. We feel strongly that we will be to market before Palatin and AMAG, and that our delivery method will be widely accepted and viewed more favorable than an injection into the stomach. Other competitors include sex dust (tree bark powder) that has been considered not effective with side effects including upset stomach and vomiting. ADI is also on the market as an FDA approved female sexual dysfunction drug, but is also not considered very effective which has led to very limited sales. There are several vaginal gels on the market that claim to help excite a women providing tingling or warming sensations. There is also an established market for essential oils making the entry of LUNA, and other soon to be developed essential oil mixtures, difficult for MJTV to penetrate and gain market share in this essential oil segment. There are no assurances that we will ever effectively compete in our target market.
Acquisition of RP Capital In Place Of The Proposed Acquisition of Michael James Enterprises, Inc. [Nevada]
On August 4, 2016, the company
’
s Board of Directors approved an asset purchase agreement with RP Capital Group, Ltd. to acquire all rights and title to the studies and intellectual property to a dranabinol based treatment for sleep apnea. This acquisition substituted the contemplated acquisition of Michael James Enterprises, Inc., a Nevada corporation. The Michael James Enterprises, Inc acquisition did not move forward as the acne based product it was bringing to marked has experienced several significant set backs and the Board of Directors has determined that the proposed agreement was not in the best interest of the Company and its shareholders.
Our History
We were organized under the laws of the State of Delaware on December 30, 2010 under the name Spicy Gourmet International, Inc. as part of the implementation of the Chapter 11 plan of reorganization of Spicy Gourmet Organics, Inc. ("SGO"), a California corporation. SGO was incorporated in the State of California in 2006 and was formed to import specialty, organic spices from South Asia and sell them in the United States. SGO was undercapitalized and sales of its spice products were slow to develop, possibly due to the recession in the 2007-2008 time period. As a result SGO lacked sufficient cash flow to meet its current obligations and on October 1, 2010 SGO filed a voluntary petition for bankruptcy under Chapter 11 in the U.S. Bankruptcy Court for the Central District of California. SGO's plan of reorganization was confirmed by the Court on November 19, 2010.
The plan of reorganization provided for the acquisition by SGO of a new, unrelated, retail business and the spin-off of all of the various elements of SGO's spice business to four different entities. The plan of reorganization called for the spin-off of SGO's manufacturing business to our company, the incorporation of our company, and the distribution of shares of our common stock to the bankruptcy creditors. The plan required us to issue 1,180,000 shares of our common stock and distribute these to SGO's general unsecured creditors, to its administrative creditors, and to its shareholders. The shares were distributed pursuant to Section 1145 of the U.S. Bankruptcy Code.
8
The Court also ordered the distribution of warrants to all administrative creditors of SGO, with these creditors to receive five warrants exercisable into shares of our common stock for each $0.05 of SGO's administrative debt which they held. These creditors received an aggregate of 5,000,000 warrants consisting of:
·
1,000,000 "A Warrants" each convertible into one share of common stock at an exercise price of $3.00;
·
1,000,000 "B Warrants" each convertible into one share of common stock at an exercise price of $4.00;
·
1,000,000 "C Warrants" each convertible into one share of common stock at an exercise price of $5.00;
·
1,000,000 "D Warrants" each convertible into one share of common stock at an exercise price of $6.00; and
·
1,000,000 "E Warrants" each convertible into one share of common stock at an exercise price of $7.00.
All warrants are exercisable at any time prior to November 19, 2017 as a result of a two-year extension. This warrants distribution also took place on December 30, 2010. During October 2012, we agreed to reduce the exercise price of the outstanding warrants to $0.25 per share.
We were a
“
shell company
”
as that term is defined in the Securities Act of 1933 from our date of incorporation until October 2012.
On October 20, 2012, we acquired from James M. Palladino, then an unrelated third party, the URL domain name and websites of bullsnbears.com for $150,000. Following this asset purchase we were no longer considered a
“
shell company.
”
On October 23, 2012, our former officers and directors resigned and certain of the then officers and directors were appointed, with the balance of our directors being newly appointed in December 2012.
In November 2012 we changed our name to BullsnBears.com, Inc. Effective December 11, 2015, we changed our name to Michael James Enterprises, Inc., and entered into an Agreement for Plan of Merger and Reorganization between the Company and Michael James Enterprises, Inc., a Nevada corporation. On August 4, 2016, the Company changed its direction and decided to acquire RP Capital Group, Ltd. and all of its intellectual property associated with a Dronabinol based treatment for sleep apnea. Additionally, the Company decided to develop and bring to market a female sexual arousal enhancer
–
VOLUPTAS. Trademark and patent aplications were filed and the Company is currently in the process of securing $2,500,000 of funding to manufacture and bring to market this product. There is no guarantee these funds will be raised.
On December 31, 2015, the Company formed a new wholly-owned company, BullsnBears Holdings, LLC., for the purpose of holding the Company
’
s intellectual property assets. As contractually agreed to, the Company's wholly-owned subsidiary, BullsnBears, Holdings LLC. was spun off in its entirety including all of the assets and liabilities of the subsidiary including certain liabilities of the parent company that were incurred by the previous management including BullsnBears Holdings, LLC. Intellectual Property assets, including its websites, URL
’
s, and proprietary software, were
9
tranfrred through a share dividend to MJTV shareholders of record as of the close of business on December 28, 2016, with one share of BullsnBears Holdings, LLC. Common Stock distributed for each one share of MJTV Common Stock owned as of the record date. Distribution of the shares took place on December 28, 2016.
Prior to that, effective December 11, 2015, the Company filed an Amendment to the Company
’
s Articles of Incorporation changing the Company
’
s name to
“
Michael James Enterprises Inc.
”
and filed with FINRA for a new stock ticker symbol
“
MJTV
”
. Since August of 2016 the Company created the alchemy of essential oils called LUNA to help a person relax and hopefully achieve better sleep. Additionally, the Company
’
s CEO, James M. Farinella, designed a creative non invasive delivery system for an active ingredient which was assigned to the company by the CEO in exchange for
2,35
0,000 Preferred B shares. This product VOLUPTAS, now patent pending with a filing for a trademark on the Name VOLUPTAS. On April 12, 2017, the Company changes its name to MJ Biotech, Inc. to better represent the new direction of the Company.
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 March 31, 2017, the Company has generated minimal revenues and has an accumulated deficit of ($19,216,165). 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.
10
Principles of Consolidation
The accompanying financial statements reflect the the individual financial statements of Michael James Enterprises, Inc. taking into account the spin off of BullsnBears Holdings, LLC. 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 March 31, 2017 and 2016, so the diluted EPS excluded all dilutive potential shares in the diluted EPS because their effect is anti-dilutive. As of March 31, 2017 and March 31, 2016 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 March 31, 2017 and 2016, respectively. However, these notes were included in the spin off of BullsnBears Holdings, LLC, on December 28, 2016.
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.
11
New Accounting Pronouncements
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.
12
NOTE 2 - RELATED PARTY TRANSACTIONS
Notes and Convertible Notes Payable
Consulting Expense
As of March 31, 2017 the company owes Michael James Enterprises, Inc. (Nevada) $15,
434
in expenses paid for the Company. The Company
’
s CEO is the controlling shareholder of Michael James Enterprises, Inc. (Nevada).
As of March 31, 2017 the company owes Integrated Capital Partners, Inc. (Nevada) $70,596.16 in expenses paid for the Company. The Company
’
s CEO is the controlling shareholder of Integrated Capital Partners, Inc. (Nevada).
As of March 31, 2017 the Company owes James M. Farinella $3,036.12 in expenses paid for the Company.
As of March 31, 2017 the Company had paid to Raj Pamnani $3,322.16 in consulting fees for the quarter ended March 31, 2017.
In February 2017 the Company
’
s CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and re-filed increasing the protection covering more than 10 delivery methods. Mr. Farinella surrendered 120,000 Preferred B shares to pay of loans owed to three trust accounts and those trust accounts were issued 40,000 preferred C shares each. James Farinella now owns 2,890,000 preferred B shares of the Company. James Farinella also retired 8,425,000 common shares and now owns no common shares of the Company.
In February 2017 the Company
’
s Chief Operating Officer, Gina Morreale, was issued 240,000 preferred B shares. The Company agreed to issue these shares to Ms. Morreale in 2016 for her joining the Company as an Officer and Director.
On August 4, 2016 the company issued 660,000 shares of preferred B shares to RP Capital Group. Ltd. for research and development services. Each preferred B share is convertible into 100 shares of the company
’
s common stock,
NOTE 3 - CONVERTIBLE PROMISSORY NOTES PAYABLE
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
13
election to convert. See Note 4 for discussion of the derivative liability. In connection with the note payable the Company is obligated to issue 200,000 shares of common stock that was 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.
On December 5, 2016, the Company entered into a $79,000 10% Convertible Promissory Note with GHS Investments, LLC, a non-affiliate. The term is for eight months, with an original issuance discount of $2,000 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 the lower of $.09 or 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 December 16, 2016, the Company entered into a $63,250 12% Convertible Promissory Note with Auctus Fund, LLC, a non-affiliate. The term is for nine months, with an original issuance discount of $2,750 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 the lower of $.09 or 50% of the lowest trading price of the Company
’
s Common Stock during the 25 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability..
On January 5, 2017, the Company entered into a $53,000 8% Convertible Promissory Note with Power Up Lending Group, LTD, a non-affiliate. The term of the Note is for 9 months, with an original issuance discount of $3,000 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 average of the three lowest trading prices of the Company
’
s Common Stock during the 10 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On March 13, 2017 the Company entered into a $43,000 8% Convertible Promissory Note with PowerUp Lending Group, LTD, a non-affiliate. The term of the Note is for 9 months, with an original issuance discount of $3,000 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 average of the three lowest trading prices of the Company
’
s Common Stock during the 10 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On March 7, 2017, the Company entered into a $25,000 12% Convertible Promissory Note with Vista Capital Investments, LLC, a non-affiliate. The term of the Note is for two years, with an original issuance discount of $5,000 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 50% of the lowest trading price of the Company
’
s Common Stock during the 25 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On March 7, 2017, the Company entered into a $5,000,000 equity line with Tangier Investment Group, LLC which will require a registration statement to be filed. The Company no longer intends to move forward on the equity line. As part of the Equity line the Company entered into a
14
commitment note for $29,000 with no interest. 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 50% of the lowest trading price of the Company
’
s Common Stock during the 25 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On January 17, 2017 Vista Capital Investments, LLC converted $10,000 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01925 for 519,481 shares.
On January 24, 2017 Tangiers Investment Group, LLC converted $19,943.00 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0175 for 1,139,600 shares.
On January 30, 2017 Vista Capital converted $14,500 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01375 for 1,054,545 shares.
On February 15, 2017 the Company
’
s CEO, James M. Farinella Retired 8,425,000 common shares.
On March 1, 2017 the Company entered into a six month agreement with Smallcapvoice.com, Inc. for investor relations services in exchange for 10,000 preferred C shares of the Company at the time when the common shares were trading at $0.017. The preferred C shares carry no voting rights, restrict the holder of converting and owning no more than 9.9% of the common outstanding at any point in time and are unaffected by reverse splits.
On February 22, 2017 Tangiers Investment Group, LLC converted $10,119.00 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0061 for 1,658,852 shares.
On March 3, 2017 Vista Capital Investments, LLC converted $5,637.50 of its $60,500 note dated March 23, 2016 at a conversion price of $0.00451 for 1,250,000 shares.
On March 9, 2017 GHS Investments, LLC converted $4,100.00 of its $66,500 note it acquired from Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0.0041 for 1,000,000 shares.
On March 17, 2017 Vista Capital Investments, LLC converted $7,995.00 of its $75,000 note it acquired from Tangiers Investment Group, LLC dated February 4, 2016 at a conversion price of $0.00410 for 1,950,000 shares.
Accrued interest on all outstanding non-related-party Notes was $26,427 at March 31, 2017 and $16,266 as for December 31, 2016.
|
|
|
|
Debt Discount
|
|
Balance as of December 31, 2015
|
$
-
|
Initial recognition of debt discount for derivative liability and share issuance 2016
|
242,000
|
Amortization of Debt Discount 2016
|
(70,387)
|
Debt Discount Balance as of December 31, 2016
|
171,613
|
Initial recognition of debt discount for derivative liability and share issuance 2017
|
121,000
|
Amortization of Debt Discount 2017
|
(105,628)
|
Debt discount Balance as of March 31, 2017
|
$
186,985
|
|
|
Balance of December 31, 2016
|
$
345,210
|
Notes Payable recorded in 2017
|
135,062
|
Notes converted in 2017
|
(72,295)
|
Total Notes payable at March 31, 2016
|
407,977
|
Debt discount
|
(186,985)
|
Notes Payable, net
|
220,992
|
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 March 31, 2017, the company issued three convertible promissory notes totaling $135,062.
The following table represents the Company
’
s derivative liability and debt discount activity for the embedded conversion features discussed above:
|
|
Derivative Liability
|
|
Balance as of December 31, 2016
|
$467,492
|
Initial recognition of additional derivative liability
|
137,080
|
Change in the fair value
|
(112,733)
|
Balance as of March 31, 2017
|
$
491,839
|
During the three months ended March 31, 2017 and 2016, the aggregate gain on the derivative liability was $96,653 and a loss of $502,047 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 March 31, 2017: