NOTES TO THE INTERIM FINANCIAL STATEMENTS
June 30, 2017
(Unaudited)
1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Black Stallion Oil and Gas, Inc. (the “Company”) is a Delaware corporation. The Company's business plan involves exploration and development of oil and gas properties.
On September 10, 2013, the Company changed its name to Black Stallion Oil and Gas, Inc (formerly Secure IT Corp) and changed its business plan to that of exploration and development of oil and gas properties.
The accompanying unaudited interim consolidated financial statements of Black Stallion Oil and Gas Inc. (“BLKG” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2016 on Form 10-K filed on May 8, 2017.
In the opinion of management, 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. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2016 have been omitted.
Use of Estimates
The preparation of the accompanying financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of unproved oil and gas properties, deferred tax assets, asset retirement obligations and legal contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, and energy markets have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Oil and natural gas properties
The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.
All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.
The Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other information.
Currently, the Company has no economically recoverable reserves and no amortization base. As of June 30, 2017, the Company’s unproved oil and gas properties consist of capitalized exploration costs of caring value of $850,000.
Limitation on Capitalized Costs
Under the full-cost method of accounting, we are required, at the end of each fiscal quarter, to perform a test to determine the limit on the book value of our oil and natural gas properties (the "Ceiling Test"). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the "Ceiling", this excess or impairment is charged to expense and reflected as additional accumulated depreciation, depletion and amortization or as a credit to oil and natural gas properties. The expense may not be reversed in future periods, even though higher oil and natural gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10 percent, and assuming continuation of existing economic conditions, of 1) estimated future gross revenues from proved reserves, which is computed using oil and natural gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period (with consideration of price changes only to the extent provided by contractual arrangements including hedging arrangements pursuant to SAB 103), less 2) estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves; plus (b) the cost of properties not being amortized (pursuant to Reg. S-X Rule 4-10 (c)(3)(ii)); plus (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; net of (d) the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties.
Cash and Cash Equivalents
Cash and equivalents include investments with initial maturities of six months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000.
Accounts Receivable and Uncollectible Receivables
Accounts Receivable are recorded at the invoiced amount to the customer and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates associated risks by actively pursuing past due accounts. Receivables that are over 180 days past due are deemed uncollectible and are written off to the statement of operations.
Property, Plant and Equipment
The Company does not own any property, plant and equipment.
Intellectual Properties
The Company has adopted the provisions of ASC 350-50, Website Development Costs. All costs incurred during the planning phase of a website are expensed as research and development.
Costs incurred in the development stage, including the purchase of a domain name, are capitalized and reviewed annually for impairment.
Expenses subsequent to the launch will be expensed as research and development expenses. The Company will expense upgrades and revisions to its website as incurred.
Once the website is available for use, the asset will be amortized over its useful life on a straight-line basis, estimated to be 3 years, and is tested for impairment annually.
Oil and Gas Properties and Impairment
The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.
All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.
Impairment of Long Lived Assets
The Company reviews and evaluates long-term assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35 Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Term Assets.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.
Earnings per share
Our company computes loss per share in accordance with "ASC-260," "Earnings per Share" which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. In periods of losses, basic and diluted loss per share are the same, as the effect of stock warrants and convertible debt on loss per share is anti-dilutive.
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive potential shares consist of dilutive shares issuable upon the exercise of outstanding stock warrants using the treasury-stock method and convertible debt computed using as-if converted method. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
Long Lived Assets Including Goodwill and Other Acquired Intangible Assets
The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company typically amortizes its acquired intangible assets with definite useful lives over periods from three to seven years.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3- inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
Financial assets and liabilities measured at fair value on a recurring basis:
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Fair Value
|
|
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June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Input
|
|
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Carrying Estimated
|
|
|
Carrying Estimated
|
|
|
|
Level
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
Derivative Liability
|
|
|
3
|
|
|
$
|
1,636,725
|
|
|
$
|
1,636,725
|
|
|
$
|
405,929
|
|
|
$
|
405,929
|
|
Total Financial Liabilities
|
|
|
|
|
|
$
|
1,636,725
|
|
|
$
|
1,636,725
|
|
|
$
|
405,929
|
|
|
$
|
405,929
|
|
In managements opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
Income Taxes
The Company records deferred taxes in accordance with FASB ASC No. 740,
Income Taxes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Recent Accounting Pronouncements
The Company has reviewed recently issued accounting pronouncements and noted no new pronouncements that would have a material impact on its results of operations or financial position.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year presentation.
2. GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of June 30, 2017, the Company has insufficient working capital, has accumulated losses from operations of $4,246,894 and has earned no revenues since inception. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements.
To carry out further planned operations, the Company must raise additional funds through additional equity and/or debt issuances. There can be no assurance that this capital will be available, and if it is not, the Company may be forced to curtail or cease exploration and development activities. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
3. WORKING INTEREST IN OIL AND GAS LEASES
On February 23, 2014, the Company entered into a Lease Assignment Agreement with West Bakken Energy Holdings Ltd to acquire from an unaffiliated oil and gas company, an undivided 100% interests (a 50% working interest) in certain oil and gas properties, comprising approximately 12,233.93 acres of land located in Montana, United States.
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-
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As consideration, the Company has agreed to issue 1,100,000 shares of common stock to West Bakken Energy Holdings Ltd at a purchase price of $0.50 per share of common stock, a total of $550,000. The shares were issued to West Bakken Energy Holdings Ltd on August 19, 2015.
|
On October 2, 2015, the Company entered into a Lease Assignment Agreement with Hillcrest Exploration Ltd to acquire from an unaffiliated oil and gas company, the remaining 50% working interest in certain oil and gas properties, comprising approximately 12,233.93 acres of land located in Montana, United States.
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-
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As consideration, the Company agreed to issue 500,000 shares of common stock to Hillcrest Exploration Ltd at a purchase price of $1 per share and $50,000 cash for total proceeds of $550,000.
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|
|
|
|
-
|
Of the total consideration, $50,000 cash and 250,000 common shares were paid on the date of closing which occurred on October 27, 2015. The remaining 250,000 common shares are contingent and are to be paid on the date that Black Stallion spuds its first oil well on the property. Due to the uncertain nature of oil drilling, management is unable to state that this event is more likely that not to occur. Therefore, the total cost capitalized and payable is excluding this amount and will be reassessed at a future date.
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4. INTANGIBLE ASSETS
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|
June 30, 2017
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|
|
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|
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|
|
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|
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Weighted
|
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|
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Gross
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|
|
|
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|
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Average
|
|
|
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Carrying
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|
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Accumulated
|
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Net Carrying
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|
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Useful Life
|
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|
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Amount
|
|
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Amortization
|
|
|
Amount
|
|
|
(in Years)
|
|
Intellectual property - website
|
|
$
|
6,950
|
|
|
$
|
(6,950
|
)
|
|
$
|
0
|
|
|
|
3
|
|
Total finite-lived intangible assets
|
|
$
|
6,950
|
|
|
$
|
(6,950
|
)
|
|
$
|
0
|
|
|
|
|
|
Intangible assets consist of capitalized website development costs. The website entered its operating stage during July 2014. Amortization expenses of $1,158 have been recorded for the six months ended June 30, 2017.
5. CONVERTIBLE NOTES PAYABLE
As of June 30, 2017, and December 31, 2016, notes payable comprised as the following:
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June 30,
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|
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December 31,
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2017
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|
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2016
|
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Promissory Note #6
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$
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-
|
|
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$
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46,000
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Promissory Note #7
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|
|
-
|
|
|
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44,250
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Promissory Note #8
|
|
|
-
|
|
|
|
44,250
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Promissory Note #11
|
|
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20,044
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|
|
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50,000
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Promissory Note #13
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|
|
-
|
|
|
|
25,000
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Promissory Note #14
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|
|
-
|
|
|
|
20,000
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|
Promissory Note #15
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|
|
-
|
|
|
|
59,500
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|
Promissory Note #16
|
|
|
50,000
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|
|
|
-
|
|
Promissory Note #17
|
|
|
100,000
|
|
|
|
-
|
|
Promissory Note #18
|
|
|
100,000
|
|
|
|
-
|
|
Promissory Note #19
|
|
|
52,500
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|
|
|
-
|
|
Promissory Note #20
|
|
|
-
|
|
|
|
-
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|
Promissory Note #21
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|
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70,000
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|
|
|
-
|
|
Promissory Note #22
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|
|
-
|
|
|
|
-
|
|
Promissory Note #23
|
|
|
-
|
|
|
|
-
|
|
Promissory Note #24
|
|
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25,000
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|
|
|
-
|
|
Promissory Note #25
|
|
|
25,000
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|
|
|
-
|
|
Promissory Note #26
|
|
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50,000
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|
|
|
-
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|
Promissory Note #27
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|
|
50,000
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|
|
|
-
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Promissory Note #28
|
|
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40,000
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|
|
|
-
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Promissory Note #29
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|
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20,000
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|
|
|
-
|
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Promissory Note #30
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|
|
-
|
|
|
|
-
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Promissory Note #31
|
|
|
100,000
|
|
|
|
-
|
|
Promissory Note #32
|
|
|
100,000
|
|
|
|
-
|
|
Promissory Note #33
|
|
|
38,000
|
|
|
|
-
|
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Promissory Note #34
|
|
|
40,000
|
|
|
|
-
|
|
Promissory Note #35
|
|
|
61,539
|
|
|
|
-
|
|
Promissory Note #36
|
|
|
25,652
|
|
|
|
-
|
|
Notes payable, principal
|
|
|
967,735
|
|
|
|
289,000
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|
Debt discount/premium
|
|
|
(613,034
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)
|
|
|
(173,523
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)
|
Notes payable, net of discount
|
|
|
354,701
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|
|
|
115,477
|
|
Accrued interest
|
|
|
25,185
|
|
|
|
6,680
|
|
Total notes payable
|
|
$
|
379,886
|
|
|
$
|
122,157
|
|
Promissory Note #6
On July 12, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $46,000. The note is unsecured, bears interest at 8% per annum, and matures on July 12, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days. During the six months ended June 30, 2017, and 2016, the Company accrued $202 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $98,234, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $1,761 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $18,992 and $0, respectively, was accreted to the statement of operations.
On January 6, 2017, the principal balance of $46,000 and accrued interest of $1,937 was paid in full by an unrelated party (see Promissory Note #17). Legal fees and a pre-payment penalty of $34,399 was recorded to the statement of operations, and the derivative liability amounting to $68,987 was re-classified to additional paid in capital.
Promissory Note #7
On August 12, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $44,250. The note is unsecured, bears interest at 8% per annum, and matures on August 12, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $466 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $101,457, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $3,931 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $23,511 and $0, respectively, was accreted to the statement of operations.
On February 16, 2017, the company redeemed the note for $68,150, which included the principal balance of $44,250, accrued interest of $1,775 and pre-payment penalties and legal fees of $22,125. The derivative liability amounting to $50,618 was re-classified to additional paid in capital.
Promissory Note #8
On August 12, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $44,250. The note is unsecured, bears interest at 8% per annum, and matures on August 12, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $316 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $101,457, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $10,867 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $23,511 and $0, respectively, was accreted to the statement of operations.
On February 23, 2017, the company redeemed the note for $83,250, which included the principal balance of $44,250, accrued interest of $1,625 and pre-payment penalties and legal fees of $37,375. The derivative liability amounting to $43,682 was re-classified to additional paid in capital.
Promissory Note #11
On September 22, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $100,000. The note is unsecured, bears interest at 8% per annum, and matures on February 5, 2017. In the event of default, the outstanding principal due under this note shall increase by 50% and interest shall accrue at a default interest rate of 24% per annum. During the six months ended June 30, 2017, and 2016, the Company recorded a default penalty of $7,000 and $0, and accrued $2,899 and $0, respectively, in interest expense.
This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $173,881, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $65,904 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $76,157 and $0, respectively, was accreted to the statement of operations.
During the six months ended June 30, 2017, the Company issued an aggregate of 184,928,027 common shares upon the conversion of principal amount of $86,956 and interest of $7,035. The derivative liability amounting to $192,552 was re-classified to additional paid in capital.
As of June 30, 2017, principal balance of $20,044 accrued interest of $0, debt discount of $9,349 and a derivative liability of $33,364 was recorded.
Promissory Note #13
On October 31, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The note is unsecured, bears interest at 8% per annum and matures on October 31, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017 and 2016, the Company accrued $760 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $36,113, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $14,736 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $20,822 and $0, respectively, was accreted to the statement of operations.
During the six months ended June 30, 2017, the Company issued an aggregate of 52,020,872 common shares upon the conversion of principal amount of $25,000 and interest of $1,094. The derivative liability amounting to $51,272 was re-classified to additional paid in capital.
Promissory Note #14
On November 8, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $20,000. The note is unsecured, bears interest at 8% per annum, and matures on November 8, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $570 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $32,730, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $768 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $17,096 and $0, respectively, was accreted to the statement of operations.
On May 11, 2017, a Debt Purchase Agreement was executed, whereby the principal balance of $20,000 and accrued interest of $802 was purchased by and transferred to GS Capital Partners, LLC (see Promissory Note #29). The derivative liability amounting to $32,274 was re-classified to additional paid in capital.
Promissory Note #15
On November 10, 2016, the Company executed a convertible promissory note in the amount of $59,500. The note is unsecured, bears interest at 8% per annum, and matures on November 10, 2017. The Company received a premium amount of $19,878, which will be amortized over the life of the note. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $524 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $83,877, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $28,263 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $51,186 and $0 and note premium of $17,101 and $0, respectively, was accreted to the statement of operations.
During the six months ended June 30, 2017, the Company issued an aggregate of 75,259,726 common shares upon the conversion of principal amount of $59,500 and interest of $1,189. The derivative liability amounting to $115,218 was re-classified to additional paid in capital.
Promissory Note #16
On January 3, 2017, the Company entered into to a convertible promissory note in the amount of $50,000 for contractual consulting services. The note is unsecured, bears interest at 12% per annum, and matures on January 3, 2018. This note is convertible into the Company’s common stock equal to the lesser of $0.002 per share or the variable conversion price of 50% of the average of the five lowest closing bid price of the Company’s common stock for the five trading days prior trading days to a Notice of Conversion being received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $2,926 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $85,695, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $4,658 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $30,489 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $50,000, accrued interest of $2,926, debt discount of $19,511 and a derivative liability of $90,353, was recorded.
Promissory Note #17
On January 6, 2017, the Company entered into to a convertible promissory note in the amount of $100,000. The note is unsecured, bears interest at 8% per annum, and matures on January 6, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $3,529 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $169,331, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $15,872 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $59,925 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $100,000, accrued interest of $3,529, debt discount of $40,075 and a derivative liability of $185,203, was recorded.
Promissory Note #18
On January 7, 2017, the Company entered into to a convertible promissory note in the amount of $100,000 for contractual consulting services. The note is unsecured, bears interest at 12% per annum, and matures on January 7, 2018. This note is convertible into the Company’s common stock equal to the lesser of $0.002 per share or the variable conversion price of 50% of the average of the five lowest closing bid price of the Company’s common stock for the five trading days prior trading days to a Notice of Conversion being received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $5,721 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $190,173, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $9,466 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $59,571 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $100,000, accrued interest of $5,721, debt discount of $40,429 and a derivative liability of $180,707, was recorded.
Promissory Note #19
On January 20, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $35,000. The note is unsecured, bears interest at 8% per annum, and matures on January 20, 2018. In the event of default, the outstanding principal due under this note shall increase by 50% and interest shall accrue at a default interest rate of 22% per annum. During the six months ended June 30, 2017, and 2016, the Company recorded a default penalty of $17,500 and $0, and accrued $2,554 and $0, respectively, in interest expense.
This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the twenty prior trading days upon which a Notice of Conversion is received by the Company
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $52,490, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $34,892 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $19,190 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $52,500, accrued interest of $2,554, debt discount of $15,810 and a derivative liability of $87,382, was recorded.
Promissory Note #20
On February 16, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $60,000. The note is unsecured, bears interest at 8% per annum, and matures on February 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $1,539 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $83,848, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $65,700 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $60,000 and $0, respectively, was accreted to the statement of operations.
On June 16, 2017, a Debt Purchase Agreement was executed, whereby the principal balance of $60,000 and accrued interest of $1,539 was purchased by and transferred to Adar Bays, LLC (see Promissory Note #33). The derivative liability amounting to $149,548 was re-classified to additional paid in capital.
Promissory Note #21
On February 16, 2017, the Company entered into to a convertible promissory note in the amount of $70,000. The note is unsecured, bears interest at 8% per annum, and matures on February 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $2,056 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $97,823, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $31,819 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $30,918 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $70,000, accrued interest of $2,056, debt discount of $39,082 and a derivative liability of $129,642, was recorded.
Promissory Note #22
On February 16, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $40,000. The note is unsecured, bears interest at 8% per annum, and matures on February 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $815 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $55,899, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $13,983 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $40,000 and $0, respectively, was accreted to the statement of operations.
On May 10, 2017, a Debt Purchase Agreement was executed, whereby the principal balance of $40,000 and accrued interest of $815 was purchased by and transferred to GS Capital Partners, LLC (see Promissory Note #28). The derivative liability amounting to $69,882 was re-classified to additional paid in capital.
Promissory Note #23
On February 16, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The note is unsecured, bears interest at 8% per annum, and matures on February 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $652 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $34,937, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $27,375 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $25,000 and $0, respectively, was accreted to the statement of operations.
On June 16, 2017, a Debt Purchase Agreement was executed, whereby the principal balance of $25,000 and accrued interest of $652 was purchased by and transferred to Adar Bays, LLC (see Promissory Note #33). The derivative liability amounting to $62,312 was re-classified to additional paid in capital.
Promissory Note #24
On February 21, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The note is unsecured, bears interest at 8% per annum, and matures on February 21, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $707 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $34,918, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $11,383 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $10,519 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $25,000, accrued interest of $707, debt discount of $14,481 and a derivative liability of $43,301, was recorded.
Promissory Note #25
On February 21, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The note is unsecured, bears interest at 8% per annum, and matures on February 21, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017 and 2016, the Company accrued $707 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $34,918, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $11,383 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $10,519 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $25,000, accrued interest of $707, debt discount of $14,481 and a derivative liability of $46,301, was recorded.
Promissory Note #26
On March 16, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $50,000. The note is unsecured, bears interest at 8% per annum, and matures on March 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $1,162 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $77,717, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $5,504 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $15,979 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $50,000, accrued interest of $1,162, debt discount of $34,021 and a derivative liability of $83,221, was recorded.
Promissory Note #27
On May 10, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $50,000. The note is unsecured, bears interest at 8% per annum, and matures on May 10, 2018. The note is convertible at a 60% discount of the lowest VWAP of the Company’s common stock for the 20 prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $559 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $41,872, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $4,709 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $5,851 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $50,000, accrued interest of $559, debt discount of $36,021 and a derivative liability of $37,163, was recorded.
Promissory Note #28
On May 10, 2017, pursuant to a Debt Purchase Agreement, the Company entered into to a convertible promissory note in the amount of $40,000 in principal and $815 in interest. The note is unsecured, bears interest at 8% per annum, and matures on February 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $447 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $69,882, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $4,199 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $7,234 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $40,000, accrued interest of $1,262, debt discount of $32,766 and a derivative liability of $74,081, was recorded.
Promissory Note #29
On May 11, 2017, pursuant to a Debt Purchase Agreement, the Company entered into to a convertible promissory note in the amount of $20,000 in principal and $802 in interest. The note is unsecured, bears interest at 8% per annum, and matures on November 8, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $219 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $32,275, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $4,766 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $5,525 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $20,000, accrued interest of $1,021, debt discount of $14,475 and a derivative liability of $37,041, was recorded.
Promissory Note #30
On May 25, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The note is unsecured, bears interest at 8% per annum, and matures on October 31, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $80 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $36,152, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $39,044 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $25,000 and $0, respectively, was accreted to the statement of operations.
During the six months ended June 30, 2017, the Company issued an aggregate of 56,999,796 common shares upon the conversion of principal amount of $25,000 and interest of $80. The derivative liability amounting to $75,196 was re-classified to additional paid in capital.
Promissory Note #31
On May 25, 2017, the Company entered into to a convertible promissory note in the amount of $100,000 for contractual consulting services. The note is unsecured, bears interest at 12% per annum, and matures on May 24, 2018. This note is convertible into the Company’s common stock equal to the lesser of $0.002 per share or the variable conversion price of 50% of the average of lowest five trading prices from the date of the note until the latest complete trading day prior to the conversion date. During the six months ended June 30, 2017, and 2016, the Company accrued $1,184 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $136,649, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $48,554 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017 and 2016, the debt discount of $9,890 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $100,000, accrued interest of $1,184, debt discount of $90,110 and a derivative liability of $185,203, was recorded.
Promissory Note #32
On May 25, 2017, the Company entered into to a convertible promissory note in the amount of $100,000 for contractual consulting services. The note is unsecured, bears interest at 12% per annum, and matures on May 24, 2018. This note is convertible into the Company’s common stock equal to the lesser of $0.002 per share or the variable conversion price of 50% of the average of lowest five trading prices from the date of the note until the latest complete trading day prior to the conversion date. During the six months ended June 30, 2017, and 2016, the Company accrued $1,184 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $136,649, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $48,554 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $9,890 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $100,000, accrued interest of $1,184, debt discount of $90,110 and a derivative liability of $185,203, was recorded.
Promissory Note #33
On June 12, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $38,000. The note is unsecured, bears interest at 12% per annum, and matures on June 12, 2018. During the six months ended June 30, 2017, and 2016, the Company accrued $225 and $0, respectively, in interest expense.
After 180 days from issuance, the note may be converted at the option of the holder into common stock of the Company. The note is convertible into the Company’s common stock at a variable conversion price equal to 58% of the average of one lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company.
During the six months ended June 30, 2017, and 2016, the Company recorded a loss of $12,410 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $2,603 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $38,000 and accrued interest of $225 was recorded.
Promissory Note #34
On June 16, 2017, the Company received funding pursuant to a convertible promissory note in the amount of $40,000. The note is unsecured, bears interest at 8% per annum, and matures on June 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017 and 2016, the Company accrued $123 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $99,699, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $25,618 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $1,534 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $40,000, accrued interest of $123, debt discount of $38,466 and a derivative liability of $74,081, was recorded.
Promissory Note #35
On June 16, 2017, pursuant to a Debt Purchase Agreement, the Company entered into to a convertible promissory note whereby the principal amount of $60,000 and accrued interest of $1,539 was purchased for a total amount of $61,539. The note is unsecured, bears interest at 8% per annum, and matures on June 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $189 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $153,383, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $39,412 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $2,360 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $61,539, accrued interest of $189, debt discount of $59,179 and a derivative liability of $113,971, was recorded.
Promissory Note #36
On June 16, 2017, pursuant to a Debt Purchase Agreement, the Company entered into to a convertible promissory note whereby the principal amount of $25,000 and accrued interest of $652 was purchased for a total amount of $25,652. The note is unsecured, bears interest at 8% per annum, and matures on June 16, 2018. This note is convertible into the Company’s common stock at a variable conversion price equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days, including the day upon which a Notice of Conversion is received by the Company. During the six months ended June 30, 2017, and 2016, the Company accrued $79 and $0, respectively, in interest expense.
Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $63,937, being the fair value of the conversion feature, which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
During the six months ended June 30, 2017, and 2016, the Company recorded a gain of $16,429 and $0, respectively, due to the change in value of the derivative liability during the period. During the six months ended June 30, 2017, and 2016, the debt discount of $984 and $0, respectively, was accreted to the statement of operations.
As of June 30, 2017, principal balance of $25,652, accrued interest of $79, debt discount of $24,668 and a derivative liability of $47,508, was recorded.
6. DERIVATIVE LIABILITIES
The Company issued financial instruments in the form of convertible notes with embedded conversion features and uses the Black-Scholes model for valuation of the derivative instrument. Some of the convertible notes payable have conversion rates, which are indexed to the market value of the Company’s stock price. During the six ended June 30, 2017 and 2016, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of face value $1,501,889 and $0, respectively. During the six months ended June 30, 2017, and 2016, $205,854 and $0, respectively, of convertible notes payable principal and accrued interest was converted into common stock of the Company. For the six months ended June 30, 2017, and 2016, the Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes of and the carrying amount of the derivative liability related to the conversion feature of $911,541 and $0, respectively, was re-classed to additional paid in capital on the date of conversion in the statement of shareholders’ equity. During the six months ended June 30, 2017, and 2016, the Company recognized a loss of $270,042 and $0, respectively, based on the change in fair value (mark-to market adjustment) of the derivative liability associated with the embedded conversion features in the accompanying statement of operations.
These derivative liabilities have been measured in accordance with fair value measurements, as defined by ASC 820. The valuation assumptions are classified within Level 3 inputs.
The fair value of these derivatives was valued on the date of the issuances of the convertible notes using the Black-Scholes option pricing model with the following assumptions: (1) risk free interest rate 1.05% - 1.18%, (2) term of 0.50 – 1 year, (3) expected stock volatility of 304% - 326%, (4) expected dividend rate of 0%, and (5) common stock price of $0.0007 - $0.0015.
The fair value of these derivatives was valued on June 30, 2017 using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 1.21%, (2) term of 0.5 -1 year, (3) expected stock volatility of 320%, (4) expected dividend rate of 0%, and (4) common stock price of $0.001.
The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above for the periods ending June 30, 2017, and December 31, 2016:
|
|
June 30,
|
|
|
December 30,
|
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
405,929
|
|
|
$
|
-
|
|
Initial recognition of derivative liability
|
|
|
1,775,187
|
|
|
|
1,383,706
|
|
Conversion of derivative instruments to Common Stock
|
|
|
(911,541
|
)
|
|
|
(779,671
|
)
|
Mark-to-Market adjustment to fair value
|
|
|
367,150
|
|
|
|
(198,106
|
)
|
Balance at end of period
|
|
$
|
1,636,725
|
|
|
$
|
405,929
|
|
These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized in earnings until such time as the instruments are exercised, converted or expire.
7. RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. A related party transaction is considered to be a transfer of resources or obligations between related parties, regardless of whether or not a price is charged.
The following entities have been identified as related parties:
Ira Morris
|
|
- President, secretary, treasurer and director
|
George Drazenovic
|
|
- Greater than 10% stockholder
|
Rancho Capital Management Inc.
|
|
- Greater than 10% stockholder
|
The following balances exist with related parties:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Loan to related party
|
|
$
|
163,471
|
|
|
$
|
41,654
|
|
During the year ended December 31, 2015, the amount of $26,168 was advanced to the former President of the Company.
During the six months ended June 30, 2017, the Company advanced Rancho Capital Management Inc. $125,817. A payment of $4,000 was made to the Company, for a total balance owed of $137,303.
Accrued expenses
|
|
$
|
53,225
|
|
|
$
|
63,900
|
|
On February 12, 2016, the Company entered into a Contractor Agreement with the President of the Company for management services for the period of one year. Pursuant to the agreement the President would receive a signing bonus of $50,000 and $5,000 per month beginning February 2016, to be paid in cash and stock, for services rendered plus reimbursement of the Company's expenses. As of June 30, 2017, the Company accrued fees totaling $110,000, of which $110,000 has been paid in cash and stock.
On February 1, 2017, the Company entered into a Contractor Agreement with the President of the Company for management services for the period of one year. Pursuant to the agreement the President would receive a signing bonus of $50,000 and $5,000 per month beginning February 2017, to be paid in cash and stock, for services rendered plus reimbursement of the Company's expenses. As of June 30, 2017, the Company accrued fees totaling $75,000, of which $21,775 has been paid in cash and stock.
Prepaid expenses
|
|
$
|
4,931
|
|
|
$
|
202,876
|
|
During the year ended December 31, 2016, the Company entered into 3 contracts with Rancho Capital for consulting services for total payment of $420,000. As of June 30, 2017, $415,069 has been amortized to the statement of operations to consulting fees.
The following transactions were carried out with related parties:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Contractors
|
|
$
|
208,998
|
|
|
$
|
133,763
|
|
During the six months ended June 30, 2017, and 2016, the Company recorded $111,398 and $97,124, respectively, in contractor fees to Rancho Capital pursuant to the 3 contracts executed in 2016.
During the six months ended June 30, 2017, and 2016, the company accrued fees of $97,600 and $36,638, respectively, pursuant to the contracts executed in 2016 and 2017, to Mr. Ira Morris for management services.
8. PREPAID EXPENSES
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Prepaid expenses
|
|
$
|
269,722
|
|
|
$
|
118,787
|
|
Prepaid contracting expenses represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations over the life of the contract using the straight-line method.
On July 15, 2016, the Company entered into a 5-year contracting arrangement with a related party for contracting services related to expertise and experience in raising finance. As compensation for contractor services the Company will pay the contractor fees of $120,000 annually in advance. During the six months ended June 30, 2017, $115,068 has been amortized to the statement of operations to contractor fees, leaving a prepaid fee balance of $4,931.
On January 3, 2017, the Company entered into a consulting agreement for total amount of $50,000. During the six months ended June 30, 2017, $25,000 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $25,000.
On January 7, 2017, the Company entered into a consulting agreement for total amount of $100,000. During the six months ended June 30, 2017, $50,000 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $50,000.
On May 10, 2017, the Company entered auditing fees of $8,000 for 2017. During the six months ended June 30, 2017, $4,000 has been amortized to the statement of information as auditor fees, leaving a prepaid balance of $4,000.
On May 25, 2017, the Company entered into a consulting agreement for total amount of $100,000. As of June 30, 2017, $8,333 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $91,667.
On May 25, 2017, the Company entered into a consulting agreement for total amount of $100,000. As of June 30, 2017, $8,333 has been amortized to the statement of operations to consulting fees, leaving a prepaid fee balance of $91,667.
9. STOCKHOLDER’S EQUITY
Common Stock
On September 30, 2011, the Company issued 132,000,000 shares of common stock to the directors of the Company at a price of $0.00017 per share, for $22,000.
On September 10, 2012, the Company issued 19,872,000 free trading shares of common stock at $0.0025 per share to a total of 46 stockholders for consideration of $49,680.
On September 9, 2013, the Director then approved a sixty new, for one old share in a forward split of the Company's outstanding shares of common stock. All share and per share data in the accompanying financial statements and footnotes has been adjusted retrospectively for the effects of the stock split.
On September 9, 2013, the Company entered into a share cancellation/return to treasury agreement with Mr. George Drazenovic, the Company's president; wherein Mr. Drazenovic agreed to the cancellation and return to treasury of 108,000,000 shares of common stock of our company for $1.
On September 27, 2014, the Company initiated a private placement for the sale of 300,000 units at $0.5 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1 per share and expire on January 1, 2017.
On July 22, 2015, the Company initiated a private placement for the sale of 50,000 units at $1 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.
On August 13, 2015, the Company initiated a private placement for the sale of 27,027 units at $1.85 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $2.00 per share and expire on January 1, 2017.
On September 1, 2015, the Company initiated a private placement for the sale of 39,063 units at $1.28 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.
On October 1, 2015, the Company initiated a private placement for the sale of 103,000 units at $1.03 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.
On October 15, 2015, the Company initiated a private placement for the sale of 250,000 units at $1 per unit. Each unit comprised of 1 share of common stock with no warrants attached.
On August 1, 2016, the Company entered into a debt settlement agreement with Rancho Capital Management Inc. Pursuant to this agreement, the Company issued an aggregate of 50,000,000 common shares at a price of $0.001 to settle $50,000 owed on the Contractor agreement dated April 15, 2016.
During the year ended December 31, 2016, the holders of convertible notes converted a total of $254,837 of principal and interest into 49,525,831 shares of our common stock.
On May 9, 2017, the Company issued 24,000,000 shares of common shares at a price of $0.0008 to Ira Morris to satisfy unpaid contractor fees accrued in the amount of $19,200.
On June 12, 2017, the Company issued 34,133,333 shares of common shares at a price of $0.00075 to Ira Morris to satisfy unpaid contractor fees accrued in the amount of $25,600.
During the six months ended June 30, 2017, the holders of convertible notes converted a total of $205,854 of principal and interest into 369,208,421 shares of our common stock.
As of June 30, 2017, 6,000,000,000 common shares, par value $0.0001, were authorized (6,000,000,000 shares as of June 30, 2016), of which 572,505,675 shares were issued and outstanding (145,163,921 shares as of December 31, 2016).
Treasury Stock
Retirement of Treasury Stock
On September 9, 2013, the Company retired 108,000,000 shares of common stock. These retired shares are now included in the Company’s pool of authorized but unissued shares.
Warrants
The Company has reserved 519,090 shares of common stock as of December 31, 2016, for the exercise of warrants to non-employees, of which 519,090 are exercisable. These warrants could potentially dilute basic earnings per share in future years. The warrants exercise prices and expiration dates are as follows:
Exercise
|
|
|
Number
|
|
|
|
|
Price
|
|
|
of
|
|
|
Expiration
|
|
$
|
|
|
Shares
|
|
|
Date
|
|
|
1.50
|
|
|
|
103,000
|
|
|
January 1, 2017
|
|
|
1.00
|
|
|
|
300,000
|
|
|
January 1, 2017
|
|
|
1.50
|
|
|
|
39,063
|
|
|
January 1, 2017
|
|
|
2.00
|
|
|
|
27,027
|
|
|
January 1, 2017
|
|
|
1.50
|
|
|
|
50,000
|
|
|
January 1, 2017
|
|
|
|
|
|
|
519,090
|
|
|
|
|
As of June 30, 2017, the Company has no exercisable stock warrants.
10. INCOME TAXES
A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:
|
|
For the six months ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Operating loss
|
|
$
|
(2,283,489
|
)
|
|
$
|
(260,209
|
)
|
Average statutory tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Expected income tax provisions
|
|
$
|
(776,386
|
)
|
|
$
|
(88,471
|
)
|
Unrecognized tax losses
|
|
|
(776,386
|
)
|
|
|
(88,471
|
)
|
Income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company has net operating losses carried forward of approximately $3,000,537 for tax purposes which will expire in 2027 if not utilized beforehand.
11. COMMITMENTS
On January 3, 2017, the Company entered into a Consulting Agreement with Makmo Trading Corp. (“Makmo”), to provide marketing services. The term of the Agreement is from January 3, 2017 to January 3, 2018 and Makmo will be compensated $4,167 per month for a total annual amount of $50,000. Makmo agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)
On January 7, 2017, the Company entered into a Consulting Agreement with Blue Comet, LLC (“Blue Comet”), to provide consulting services related to business development and mergers and acquisitions. The term of the Agreement is from January 1, 2017 to December 31, 2017 and Blue Comet will be compensated $8,333 per month for a total annual amount of $100,000. Blue Comet agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)
On February 1, 2017, the Company entered into a twelve-month contracting arrangement with Ira Morris. As compensation for services, the Company will pay the contractor fees of $5,000 a month, payable $3,400 in cash and $1,600 with common stock of the company valued at 50% of market at the date of conversion. The contractor was entitled to cash compensation of $50,000 upon signing.
On February 9, 2017, the Company terminated all contractor agreements with Rancho Capital Management Inc, and therefore, the contracted annual fees of $420,000 were not prepaid to the contractor.
On May 25, 2017, the Company entered into a Consulting Agreement with N&M Brands, LLC (“N&M), to provide internet application services. The term of the Agreement is from May 25, 2017 to May 24, 2018 and N&M will be compensated $8,333 per month for a total annual amount of $100,000. N&M agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)
On May 25, 2017, the Company entered into a Consulting Agreement with VSP Holdings, LLC (“VSP”), to provide internet application services. The term of the Agreement is from May 25, 2017 to May 24, 2018 and VSP will be compensated $8,333 per month for a total annual amount of $100,000. VSP agreed to the acceptance of a convertible promissory note for the entire annual fee. (See Note 5)
12. SUBSEQUENT EVENTS
On July 27, 2017, the Company announced that it has executed a letter of intent (“LOI”) with Active Lab International, Inc. (“Active Lab”). The Company will be finalizing a licensing agreement for the rights to all of Active Lab intellectual property. Active Lab is a company dedicated to the nutraceutical and alternative medicine market with its diverse health and wellness product line.
On July 11, 2017, the holder of a convertible note converted a total of $4,700 of principal and $216 of interest into 12,290,825 shares of our common stock.
On July 13, 2017, the holder of a convertible note converted a total of $7,700 of principal and $1,000 of interest into 29,000,073 shares of our common stock.
On July 18, 2017, the holder of a convertible note converted a total of $6,600 of principal and $883 of interest into 24,944,000 shares of our common stock.
On July 19, 2017, the holder of a convertible note converted a total of $5,300 of principal and $294 of interest into 18,646,333 shares of our common stock.
On July 20, 2017, the holder of a convertible note converted a total of $5,744 of principal and $776 of interest into 21,735,690 shares of our common stock.
On July 24, 2017, the holder of a convertible note converted a total of $9,000 of principal and $398 of interest into 31,326,667 shares of our common stock.
On July 26, 2017, the holder of a convertible note converted a total of $9,000 of principal and $402 of interest into 31,340,000 shares of our common stock.
On July 26, 2017, the holder of a convertible note converted a total of $5,000 of principal and $285 of interest into 17,616,433 shares of our common stock.
On July 31, 2017, the holder of a convertible note converted a total of $8,008 of principal and $500 in filing fees into 35,451,000 shares of our common stock.
On July 31, 2017, the holder of a convertible note converted a total of $8,500 of principal and $389 of interest into 35,556,440 shares of our common stock.