NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
Elite Group Inc. (the Company) is a corporation, registered in the State of Nevada on May 21, 2013. We are a company at its start up stage. Our business intention was to sell books utilizing the internet, and grow customer base by selling unique editions of books. Currently, we plan to acquire water properties for the oilfield service sector. Management specializes in the acquisition of assets relating to the management of oilfield water used in upstream oil and gas operations. Management's objective is to acquire and consolidate water processing assets in prolific oil and gas exploration areas. Management believes it will accomplish its goal to maximize shareholder value through strategic acquisitions, effective business model design and economies of scale to a fragmented industry. The Company will control the entire process from wellhead to the final destination and use the most environmental friendly practices in all aspects of our operations to protect and conserve the environment for future generations.
As a result of a private transaction, on January 26, 2016, the control block of stock of this company, represented by 2,000,000 shares of common stock, were cancelled by Vesna Pesic, and 2,020,000 shares of common stock were issued to Terrence Tecco, and a change of control of the Company occurred.
On February 6, 2017, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the Amended and Restated Articles) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Companys board of directors.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (GAAP accounting). The Company has adopted a calendar year end.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Companys promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk.
We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.
F-6
When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue will be recognized when it is realized or realizable and earned. Specifically, revenue will be recognized when all of the following criteria are met: (1) Persuasive evidence of an arrangement exists; (2) Service has occurred, customer acceptance has been achieved; (3) Our selling price to the buyer is fixed and determinable; and (4) Collection is reasonably assured. The Company recognizes revenue when services have been provided and collection is reasonably assured.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Companys net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Companys net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common share equivalents outstanding as of March 31, 2017.
Comprehensive Income
The Company has established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Shareholders Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.
F-7
Recent Accounting Pronouncements
In February 2016, FASB issued ASU-2016-02, "Leases (Topic 842)." The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for the Company beginning January 1, 2019, including interim periods within that fiscal year. We are currently evaluating the impact of adopting the new guidance of the consolidated financial statements.
In January 2016, the Financial Accounting Standards Board ("FASB"), issued Accounting Standards Update ("ASU") 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and are to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this standard.
In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The adoption of this standard will not have any impact on the Company's financial position, results of operations and disclosures.
NOTE 3 GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company currently has limited working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of managements efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
F-8
NOTE 4 CONVERTIBLE PROMISSORY NOTES PAYABLE
Convertible promissory notes, including accrued interest, at March 31, 2017 and 2016 are as follows:
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March 31, 2017
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March 31, 2016
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TCA Global Fund, Inc., including accrued interest of $170,758 and $23,833 as of March 31, 2017 and 2016, respectively
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$
570,758
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$
523,833
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LG Capital Funding, LLC, accrued interest of $363, as of March 31, 2017
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363
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-
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Mammoth Corporation, net of debt discount of $134,090 and original issue discount interest of $22,588 as of March 31, 2017
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114,551
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-
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Auctus Fund, LLC, including accrued interest of $1,239 and net of debt discount of $47,312 and original issue discount interest of $7,360 as of March 31, 2017
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11,567
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-
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Crown Bridge Capital, including accrued interest of $23 and net of debt discount of $28,841 and original issue discount interest of $5,965 as of March 31, 2017
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217
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-
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Convertible promissory note payable, net
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$
697,456
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$
523,833
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TCA Global Master Credit Fund, L.P.
On January 26, 2016, the Company issued the Convertible Note in favor of TCA Global Master Credit Fund, L.P. ("TCA"). The maturity date of the Convertible Note was June 18, 2016, and the Convertible Note bears interest at a rate of sixteen and one-half percent (16.5%) per annum. The Convertible Note is convertible, at TCA's option upon an event of default, into shares of the Companys common stock, par value $0.001 per share (the "Common Stock") at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note may be prepaid in whole or in part at the Companys option without penalty.
Furthermore, the Company shall pay $2,000 on the first day of each third month during the term. The fee shall increase by $500 for each subsequent line of credit increase with a cap of $2,500.
At any time and from time to time while this Convertible Note is outstanding, the principal and accrued interest may be, at the sole option of TCA upon an Event of Default, convertible into shares of the Company's common stock. The note is convertible into shares of common stock at a price equal to a variable conversion price of eighty-five percent (85%) of the volume-weighted averages the five (5) days preceding the date of conversion.
On March 31, 2017, the Company accepted and agreed to a debt purchase agreement, whereby Mammoth Corporation acquired $100,000 convertible note payable in exchange for $115,000 (see Mammoth Corporation below).
The balance as of March 31, 2017 and 2016 amount to $507,758 and $523,833 comprised of principal balance amounted to $400,000 and $500,000 and accrued interest of $170,758 and $23,833, respectively.
As of March 31, 2017, the six-month term of the agreement has expired and the obligations continues to be outstanding The Company has accrued default interest at a rate of 18% as of December 31, 2016.
F-9
LG Capital Funding, LLC.
On April 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $5,700 of original issuance discount and financing costs and and bears interest at a 8% per annum interest rate. The note matures on April 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest and financing costs in the amount of $14,468 and $5,700 during the period ending March 31, 2017, respectively. On October 28, 2016, the Company accepted and agreed to a debt purchase agreement, whereby Mammoth Corporation acquired the $40,700 convertible note payable and accrued interest in exchange for $68,743 (see Mammoth Corporate below).
On June 19, 2016, the Company entered into a convertible note payable with LG Capital Funding, LLC. The $40,700 note payable includes $5,700 of original issuance discount and financing costs and bears interest at an 8% per annum interest rate. The note matures on June 19, 2017 and may only be repaid within 180 days of issuance date with prepayment penalties ranging from 18% to 48% of principal. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the twenty (20) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $27,133 and $5,700 during the year ending March 31, 2017, respectively.
In the year ended March 31, 2017, the lender converted the $40,700 of principal and $1,849 into 22,358,211 shares of common stock at a fair market value of $97,601 and recorded an extinguishment of debt expense of $55,053.
The balance as of March 31, 2017 amount to $363 comprised of accrued interest of $363.
Mammoth Corporation
On November 18, 2015, the Company entered into a convertible note payable with Mammoth Corporation. The $17,300 note payable note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. The note is due on demand and the default rate is 18% per annum interest. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount in the amount of $17,300 during the year ended March 31, 2017, respectively. In the year ended March 31, 2017, the lender converted the $7,313 of principal in exchange for 4,500,000 shares common stock payable at a fair market value of $11,250 and recorded an extinguishment of debt expense of $3,937. The principal balance as of March 31, 2017 amounted to $9,987.
On July 29, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $27,500 note payable includes $6,000 of original issuance discount. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the five (5) lowest closing price averages the fifteen (15) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $13,760 and $4,699 during the year ended March 31, 2017, respectively. The balance as of March 31, 2017 amount to $18,459 comprised of principal balance amounted to $27,500 net of remaining debt discount of $6,740 and original issue discount of $2,301, respectively.
F-10
On September 28, 2016, the Company entered into a convertible note payable with Mammoth Corporation. The $50,000 note payable includes $13,190 of original issuance discount. The note payable includes advances to the Company of $7,500 on September 28, 2016, additional advances of $8,040 in October 2016 and $2,300 on January 17, 2017. The note is due upon the Company closing a debt or equity transaction in excess of $100,000 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the issuance of 300,000 shares of the Company common stock. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the lowest market price one year preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $14,329 and $6,316 during the year ended March 31, 2017, respectively. The balance as of March 31, 2017 amount to $28,751 comprised of principal balance amounted to $50,000 net of remaining debt discount of $14,575 and original issue discount of $6,674, respectively.
On October 28, 2016, the Company entered into a $68,743 convertible note payable with Mammoth Corporation. The note payable is a balance of $62,493 of principal and accrued interest assigned from the April 29, 2016 LG Capital Funding, LLC note payable and includes $6,250 of original issuance discount. The note is due one year upon issuance October 28, 2017 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of market price six months preceding the date of the conversion notice. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $5,675 and $2,637 during the year ended March 31, 2017, respectively. The balance as of March 31, 2017 amount to $57,356 comprised of principal balance amounted to $68,743 net of remaining debt discount of $7,775 and original issue discount of $3,613, respectively.
On March 31, 2017, the Company entered into a $115,000 convertible note payable with Mammoth Corporation. The note payable is a balance of $100,000 of principal assigned from the November 18, 2016 TCA note payable and includes $10,000 of original issuance discount and $5,000 in financing costs. The note is due one year upon issuance March 31, 2018 and no further interest shall accrue as long as the note is not in default. Default rate is 18% per annum interest. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of market price. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The balance as of March 31, 2017 amount to $0 comprised of principal balance amounted to $115,000 net of remaining debt discount of $105,000 and original issue discount of $10,000, respectively.
Auctus Fund, LLC.
On January 31, 2017, the Company entered into a convertible note payable with Auctus Fund, LLC. The $65,000 note payable includes $8,750 of original issuance discount. The note is due one year upon issuance November 1, 2017 and bears interest at a 12% rate per annum. The note is collateralized by the reservation of shares of the Company common stock equivalent to 700% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the volume-weighted averages the twenty-five (25) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $8,938 and $1,390 during the year ended March 31, 2017, respectively. The balance as of March 31, 2017 amount to $11,567 comprised of principal balance amounted to $65,000 and accrued interest of $1,239 and net of remaining debt discount of $47,312 and original issue discount of $7,360, respectively.
F-11
Crown Bridge Partners
On March 29, 2017, the Company entered into a convertible note payable with Crown Bridge Partners, LLC up to $105,000 in principal. On March 31, 2017, a $35,000 tranche includes $6,000 of original issuance discount and $2,000 of financing costs. The note is due one year upon issuance of each tranche and bears interest at a 12% rate per annum. The note is collateralized by the reservation of shares of the Company common stock equivalent to 100% of convertible shares. The note is convertible into shares of common stock at a price equal to a variable conversion price of fifty percent (50%) of the volume-weighted averages the twenty-five (25) days preceding the date of conversion. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded amortization of debt discount and original discount interest in the amount of $159 and $33 during the year ended March 31, 2017, respectively. The balance as of March 31, 2017 amount to $192 comprised of principal balance amounted to $35,000 and accrued interest of $23 and net of remaining debt discount of $28,841 and original issue discount of $5,967, respectively.
NOTE 5 RELATED PARTIES
Advances
From time to time, the Company has received advances from certain of its officers and shareholders to meet short-term working capital needs. For the years ended March 31, 2017 and 2016, a total of $41,917 and $4,894 advances from related parties is outstanding, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.
Officer Agreements
On January 28, 2016, the Company entered into an employment agreement, effective February 15, 2016, with the Company's Chief Executive Office whereby the Company provides for compensation of $10,000 per month. A total salary of $120,000 and $15,000 expensed during the year ended March 31, 2017 and 2016, respectively. The total balance due to the Chief Executive Officer for accrued salaries at March 31, 2017 and 2016, was $15,000 and $0, respectively. Furthermore, the Company agreed to issued the Chief Executive Officer 20 million shares of common stock valued at $15,200,000 recorded as common stock payable and subsequently issued the shares on August 2, 2016.
NOTE 6 EQUITY
Common shares
The Company had authorized 999,000,000 and 75,000,000 common shares as of March 31, 2017 and 2016 and the Company had 89,960,093 and 2,799,999 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of our company for a vote.
On February 6, 2017, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the Amended and Restated Articles) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 999,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Companys board of directors.
F-12
On July 22, 2016, the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation (the Amended and Restated Articles) that had the effect of changing the name of the corporation to Elite Group, Inc. and designating 74,000,000 shares of the authorized capital stock of the Company as common stock, par value $0.001 and 1,000,000 shares of the authorized capital stock of the Company as preferred stock, par value $0.001, with the powers, preferences and rights, and the qualifications, limitations and restrictions designated by the Companys board of directors.
The Company issued the following equity instruments during the year ended March 31, 2017:
On July 14, 2016, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Rockwell Capital Partners, Inc. (Rockwell), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $56,000 (the Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company. The Company issued 4,359,333 Settlement shares to Rockwell to reduce the $56,000 outstanding liability (See Note 7).
In conjunction with the settlement agreement, the Company issued 75,000 shares of common stock at a fair market value of $22,500 to Rockwell for fees related to the Settlement Agreement.
On July 27, 2016, the Company issued 100,000 shares of common stock at a fair market value of $25,000 to Mammoth Corporation in conjunction with the financing.
On November 11, 2016, the Company entered into a Settlement Agreement and Stipulation with Rockwell pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $49,500 (the November 2016 Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
Rockwell purchased the obligations and accounts payable from certain vendors of the Company. In the year ended March 31, 2017, the Company issued 16,461,500 Settlement shares to Rockwell to reduce the $49,500 outstanding liability (See Note 7).
In conjunction with the settlement agreement, the Company issued 250,000 shares of common stock at a fair market value of $3,500 to Rockwell for fees related to the Settlement Agreement.
On January 31, 2017, the Company entered into a Settlement Agreement and Stipulation with Rockwell, pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $39,500 (the January 2017 Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company. The Company issued 23,341,300 Settlement shares to Rockwell to reduce certain outstanding liabilities through March 31, 2017 (See Note 7).
On August 2, 2016, the Company issued 20,000,000 shares of common stock to the Company's CEO in accordance with the employment agreement dated January 28, 2016. The Company previously accrued the share issuance as a common stock payable at March 31, 2016.
In the year ended March 31, 2017, the Company issued 22,358,211 shares in exchange for the conversion of $40,700 and $1,848 accrued interest of convertible notes to LG Capital Funding, LLC., a third party, at a fair market value of $97,601 and recorded an extinguishment of debt expense of $55,053.
On March 29, 2017, the Company agreed to exchange $7,313 of convertible notes to Mammoth Capital, a third party, at a fair market value of $11,250 and recorded an extinguishment of debt expense of $3,937 during the year ended March 31, 2017. The issuances was recorded as a common stock payable as of March 31, 2017 and 4,500,000 shares were issued on April 10, 2017.
F-13
The Company issued the following equity instruments during the year ended March 31, 2016:
On December 18, 2015, as a result of a private transaction, whereby 2,000,000 shares of the Company's common stock, has been cancelled by the former Chief Executive Officer and 2,020,000 shares of common stock have been issued to the current Chief Executive Officer. The transaction effectuated a change of control and the proceeds from a convertible debenture in the amount of $390,500 which has been recorded an offsetting discount of common stock to equity.
On December 18, 2015, the Company issued 139,750 shares of common stock in accordance with the TCA Advisory agreement (See note 7).
On February 16, 2016, the Company issued 75,000 at a fair market value of $93,750 for professional services.
NOTE 7 FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosures about fair value of financial instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2016, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
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●
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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●
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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●
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2017:
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Total
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(Level 1)
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(Level 2)
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(Level 3)
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Liabilities
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Derivative and warrant liability
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-
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-
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-
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1,351,129
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Total liabilities measured at fair value
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$
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-
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$
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-
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$
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-
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$
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1,351,129
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F-14
The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
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Beginning balance as of March 31, 2016
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$
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-
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Fair value of derivative liabilities issued
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1,125,145
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Reduction for conversions
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(343,823)
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Loss on change in derivative liability
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569,807
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Ending balance as of March 31, 2017
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$
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1,351,129
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Convertible Debentures
The derivative liabilities related to the embedded conversion feature were valued using the Black-Scholes option valuation model and the following assumptions on the following dates:
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March 31, 2017
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Embedded Conversion Feature
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Risk free interest rate
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|
|
|
|
|
0.37% to 1.24%
|
|
|
|
Expected volatility (peer group)
|
|
|
|
|
|
|
89.96% to 376.95%
|
|
|
|
Expected life (in years)
|
|
|
|
|
|
|
0.5 to 1.00
|
|
|
|
Expected dividend yield
|
|
|
|
|
|
|
-
|
|
|
|
Number outstanding
|
|
|
|
|
|
|
203,503,416
|
|
|
|
NOTE 8 COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. An office space has been leased on a month by month basis.
The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
Consulting Agreements
On December 18, 2015, the Company entered into an advisory services agreement with TCA Global Master Fund (Consultants) for investment banking services. In consideration, the Company shall issue the Consultant $250,000 in the form of restricted shares of the Company common stock. The issuance of shares are subject to an anti-dilution share issuances to the extent the cash proceeds from the share issuances are inadequate to satisfy the $250,000 fee. The Company issued 139,750 shares of common stock at closing valued at a price equal to eighty-five percent (85%) of the average of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately prior to the agreement date. As of March 31, 2017, an additional issuance of 30,724,478 shares with a fair market value of $248,868 are required to satisfied the advisory agreement whereby an additional financing costs has been recorded to common stock payable. The Company recorded $105,055 and $393,813 of advisory services stock-based financing costs for the year ended March 31, 2017 and 2016, respectively.
F-15
Settlement Agreement with Rockwell Capital Partners
On July 14, 2016, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Rockwell Capital Partners, Inc. (Rockwell), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $56,000 (the Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On July 14, 2016, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the Manatee Court), entered an order (the Rockwell Order) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the Securities Act), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Rockwell. The Company issued 4,359,333 Settlement shares to Rockwell to reduce certain outstanding liabilities through March 31, 2017 resulting in a loss on debt extinguishment of $68,814.
Settlement Agreement with Rockwell Capital Partners
On November 11, 2016, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Rockwell Capital Partners, Inc. (Rockwell), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $49,500 (the November 2016 Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On November 12, 2016, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the Manatee Court), entered an order (the Rockwell Order) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the Securities Act), in accordance with a stipulation of settlement, pursuant to the November 2016 Settlement Agreement between the Company and Rockwell. The Company issued 16,461,500 Settlement shares to Rockwell to reduce certain outstanding liabilities through March 31, 2017 resulting in a loss on debt extinguishment of $79,286
Settlement Agreement with Rockwell Capital Partners
On January 31, 2017, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Rockwell Capital Partners, Inc. (Rockwell), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $39,500 (the January 2017 Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company. The Company issued 23,341,300 Settlement shares to Rockwell to reduce certain outstanding liabilities through March 31, 2017 resulting in a loss on debt extinguishment of $49,803.
F-16
NOTE 9 INCOME TAXES
As of March 31, 2017, and 2016, the Company had net operating loss carry forwards of approximately $18,225,077 and $451,743, respectively, that may be available to reduce future years taxable income in varying amounts through 2035. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
|
|
$
801,000
|
|
|
$
5,370,000
|
Less: valuation allowance
|
|
|
(801,000)
|
|
|
(5,370,000)
|
Net provision for Federal income taxes
|
|
|
$
-
|
|
|
$
-
|
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
|
$
6,123,000
|
|
|
$
153,000
|
Stock based compensation
|
|
|
88,000
|
|
|
5,217,000
|
Less: valuation allowance
|
|
|
(6,211,000)
|
|
|
(5,370,000)
|
Net deferred tax asset
|
|
|
$
-
|
|
|
$
-
|
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
NOTE 10 SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to March 31, 2017 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than those specified below.
TCA Convertible Debenture Agreement
As of March 31, 2017, the six-month term of the agreement has expired and the obligations continues to be outstanding which is a nonpayment of the obligation of the Senior Secured Revolving Credit Facility dated December 18, 2015 (see Note 3).
Mammoth Capital convertible notes payable
In May and June 2017, the Mammoth Capital converted $32,888 of principal balance of convertible notes payable into 29,400,000 shares of common stock.
F-17
Settlement Agreement with Rockwell Capital Partners
On April 26, 2017, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Rockwell Capital Partners, Inc. (Rockwell), pursuant to which the Company agreed to issue common stock to Rockwell in exchange for the settlement of $46,000 (the Settlement Amount) of past-due obligations and accounts payable of the Company. Rockwell purchased the obligations and accounts payable from certain vendors of the Company.
On April 26, 2017, the Circuit Court of the Twelfth Judicial Circuit for Manatee County, Florida (the Manatee Court), entered an order (the Rockwell Order) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the Securities Act), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and Rockwell. The Company issued 30,436,500 Settlement shares to Rockwell to reduce certain outstanding liabilities through May 11, 2017.
Convertible Debenture Agreement Adar Bay
On April 25, 2017, the Company entered into a convertible note payable with Adar Bays, LLC. The $50,000 note payable bears interest at a 12% per annum interest rate. The note matures on December 25, 2017.
Convertible Debenture Agreement GS Capital Partner, LLC
On May 12, 2017, the Company entered into a convertible note payable with GS Capital Partners, LLC. The $51,700 note payable bears interest at a 8% per annum interest rate. The note matures on May 12, 2018. The note is convertible into shares of common stock at a price equal to a variable conversion price of sixty percent (60%) of the volume-weighted averages the fifteen (15) days preceding the date of conversion.
Convertible Debenture Agreement Crown
On May 19, 2017, the Company entered into additional draw of the Crown Bridge Partners, LLC convertible debenture agreement in the amount of $44,500 (see Note 4). The note is due one year upon issuance of each tranche and bears interest at a 12% rate per annum.
F-18