NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
(a) Organization
Lingerie Fighting Championships, Inc. (the “Company”) is a Nevada corporation incorporated on November 29, 2006 under the name Sparking Events, Inc. The Company’s corporate name was changed to Xodtec Group USA, Inc. in June 2009, Xodtec LED, Inc. in May 2010, Cala Energy Corp. in September 2013 and Lingerie Fighting Championships, Inc. on April 1, 2015.
NOTE 2 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and notes required by GAAP for complete financial statements. These interim financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected any other interim period or for the year ending December 31, 2018. At June 30, 2018 and December 31, 2017, the Company had no subsidiaries.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company continually evaluates its estimates and judgments. The Company bases its estimates and judgments on historical experience and other factors that it believes to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $892 and $28,438 in cash and cash equivalents as at June 30, 2018 and December 31, 2017, respectively.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”
Revenue Recognition
” following the five steps procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A performance obligation is satisfied over time if one of the following criteria are met:
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a.
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the customer simultaneously receives and consumes the benefits as the entity performs;
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b.
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the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
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c.
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the entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.
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Earnings (Loss) per Share
The Company computes basic and diluted net loss per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share reflects the potential dilution that could occur if convertible notes to issue common stock were converted resulting in the issuance of common stock that could share in the loss of the Company.
Six months and Three months ended June 30, 2018
For the six months and three months ended June 30, 2018, 5,341,058,936 shares of common stock from the convertible notes were included in the calculation of diluted earnings per shares.
The following is a reconciliation of the numerator and denominator used for the computation of basic and diluted earnings per common shares:
Basic earnings per common share
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Three months
ended
|
|
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Six months
ended
|
|
|
|
June 30
2018
|
|
|
June 30
2018
|
|
Net Income
|
|
$
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1,480,271
|
|
|
$
|
49,387
|
|
|
|
|
|
|
|
|
|
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Basic Weighted Average Common Shares Outstanding
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|
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665,925,639
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|
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628,705,342
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|
|
|
|
|
|
|
|
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Basic Earnings per Common Share
|
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$
|
0.00
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|
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$
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0.00
|
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Diluted earnings per common share
|
|
Three months
ended
|
|
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Six months
ended
|
|
|
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June 30
2017
|
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June 30
2017
|
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Net Income
|
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$
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1,480,271
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|
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$
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49,387
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|
|
|
|
|
|
|
|
|
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Diluted Weighted Average Common Shares Outstanding
|
|
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6,006,984,575
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|
|
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5,969,764,279
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|
|
|
|
|
|
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Diluted Earnings per Common Share
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$
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0.00
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$
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0.00
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Six months and Three months ended June 30, 2017
For the six months and three months ended June 30, 2017, convertible notes were included in the calculation of diluted loss per share under if-converted method as gain on dilutive liabilities exceeds the interest expense from the convertible notes.
The following is a reconciliation of the numerator and denominator used for the computation of basic and diluted loss per common share for the six months and three months ended June 30, 2017:
Basic loss per common share
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Three months
ended
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Six months
ended
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June 30
2017
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June 30
2017
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Net Loss
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$
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(48,345
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)
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$
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(111,584
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)
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|
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Basic Weighted Average Common Shares Outstanding
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305,541,153
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239,461,074
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Basic Loss per Common Share
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$
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(0.00
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)
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$
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(0.00
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)
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Diluted loss per common share
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Three months
ended
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Six months
ended
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June 30
2017
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June 30
2017
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Net Loss
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$
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(48,345
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)
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$
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(111,584
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)
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add: Interest Expense
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90,373
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202,968
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less: Gain on derivative liabilities
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(97,191
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)
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(264,214
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)
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Adjusted Net Loss
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$
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(55,163
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)
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$
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(172,830
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)
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|
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Diluted Weighted Average Common Shares Outstanding
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593,144,576
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527,064,496
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|
|
|
|
|
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Diluted Loss per Common Share
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$
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(0.00
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)
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$
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(0.00
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)
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Related Party Balances and Transactions
The Company follows FASB ASC 850, “
Related Party Disclosures
,” for the identification of related parties and disclosure of related party transaction.
Beneficial Conversion Feature of Convertible Debt
The Company accounts for convertible debt in accordance with the guidelines established by FASB ASC 470-20, “
Debt with Conversion and Other Options
”. The Beneficial Conversion Feature (“BCF”) of convertible debt is normally characterized as the convertible portion or feature of certain debt that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of convertible debt when issued, and also records the estimated fair value. Beneficial Conversion Features that are contingent upon the occurrence of a future event are recorded when the event is resolved.
Convertible Instruments and Derivatives
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities.”
Share-Based Compensation
The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Employee awards are accounted for under ASC 718 - where the awards are valued at grant date. Awards given to nonemployees are accounted for under ASC 505 where the awards are valued at earlier of commitment date or completion of services. Compensation cost for employee awards is recognized over the vesting or requisite service period. The Black-Scholes option-pricing model is used to estimate the fair value of options or warrants granted.
For the six months ended June 30, 2018 and June 30, 2017, the stock based compensation was $0 and $30,000, respectively.
Fair Value Measurement
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 –
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quoted prices in active markets for identical assets or liabilities
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Level 2 –
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quoted prices for similar assets and liabilities in active markets or inputs that are observable
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Level 3 –
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inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
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The derivative liability in connection with the conversion feature of the convertible debt, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.
The change in the level 3 financial instrument is as follows:
Balance - December 31, 2017
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$
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1,831,630
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Reduction of derivative liabilities from conversion of convertible note to common shares
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(29,314
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)
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Addition of new derivative liabilities upon issuance of convertible notes as debt discount
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50,000
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Addition of new derivatives liabilities recognized as day one loss
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311,773
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Gain on change in fair value of the derivative
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(654,138
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)
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Balance - June 30, 2018
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$
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1,509,951
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The following table summarizes fair value measurement by level at June 30, 2018 and December 31, 2017, measured at fair value on a recurring basis:
June 30, 2018
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Level 1
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Level 2
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Level 3
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Total
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Assets
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None
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-
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-
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-
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-
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Liabilities
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Derivative liabilities
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-
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-
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1,509,951
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1,509,951
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December 31, 2017
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Level 1
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Level 2
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Level 3
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Total
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Assets
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|
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None
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
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Liabilities
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|
|
|
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|
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|
|
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Derivative liabilities
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-
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|
|
|
-
|
|
|
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1,831,630
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|
|
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1,831,630
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NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has generated nominal revenues since inception, has sustained losses since its organization and requires funding to generate revenue. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company can give no assurances that it can or will become financially viable and continue as a going concern.
NOTE 4 – STOCKHOLDERS DEFICIT
Preferred Stock
The authorized preferred stock consists of 10,000,000 shares with a par value $0.001 per share. The board of directors has broad discretion in setting the rights, preferences and privileges of one or more series of preferred stock.
On September 3, 2016, the Company issued 51 Series A preferred shares to the chief Executive Officer. The Series A preferred shares have voting rights, resulting in the Series A stockholder holding in aggregate approximately 51% of the total voting power of all issued and outstanding voting capital of the Company. The valuation of the preferred shares was completed by the Company based on the change in voting percentage rights before and after the Series A shares were issued. The value of the Series A shares is $42,669 and was expensed.
There were 51 and 51 preferred shares issued and outstanding as at June 30, 2018 and December 31, 2017.
Common Stock
The Company has authorized 5,000,000,000 shares with a par value $0.001 per share.
During the six months ended June 30, 2018, the Company issued 89,132,000 common shares for conversion of debt and accrued interest in the amount of $1,337.
During the years ended December 31, 2017, the Company issued 488,517,204 common shares for conversion of debt and accrued interest in the amount of $119,392.
As of June 30, 2018 and December 31, 2017, the common shares issued and outstanding was 665,925,639 and 576,193,639, respectively.
Common shares issued for compensation
During the year ended December 31, 2016, the Company issued 2,250,000 common shares with a fair value of $174,000 for services rendered. The shares were valued at market price when the shares were issued.
As of June 30, 2018, the Company recorded stock payable for 300,000 outstanding common shares of $30,000 not yet issued to the consultant for service performed.
NOTE 5 – NOTES PAYABLE
The Company had the following unsecured notes payable as at June 30, 2018 and December 31, 2017:
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June 30,
2018
|
|
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December 31,
2017
|
|
|
|
|
|
|
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Convertible Promissory Note to Crown Bridge
|
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$
|
-
|
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$
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2,404
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Convertible Promissory Notes to Auctus Fund
|
|
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237,522
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|
|
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179,172
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Convertible Promissory Notes to EMA Financial
|
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130,316
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|
|
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89,686
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Convertible Promissory Notes to Black Bridge Capital
|
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100,000
|
|
|
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100,000
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Convertible Promissory Notes to Tangiers
|
|
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23,801
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|
|
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23,801
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Convertible Promissory Notes to Denali
|
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31,615
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31,615
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Total Convertible Debt
|
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$
|
523,253
|
|
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$
|
426,678
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Promissory Note Payable to Crown Bridge Partners
On February 23, 2018, EMA Financial LLC and Auctus Fund, LLC each made repayment to Crown Bridge Partners, LLC on behalf of the Company at $5,636.04, totaling $11,272.08 to settle the total outstanding principal and accrued penalty amount at $11,272.08 of the $40,000 convertible note originally issued to Crown Bridge Partners, LLC on April 1, 2016.
Promissory Notes Payable to Auctus Fund
Auctus #1
On May 20, 2016, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $67,750 with a $7,750 original issue discount. The convertible promissory note bears interest at 10% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $60,000 is being amortized over the life of the note using the effective interest method resulting in $0 and $14,542 of interest expense for the six months ended June 30, 2018 and December 31, 2017, respectively.
During the year ended December 31, 2017, principal of $15,278 and accrued interest of $5,975 were converted for 111,460,000 common shares.
During the six months ended June 30, 2018, accrued interest of $432 were converted for 28,782,000 common shares.
As of June 30, 2018, the note is presented net of a debt discount of $0.
The note is currently in default.
Auctus #2
On September 20, 2016, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $56,750 with a $6,750 original issue discount. The convertible promissory note bears interest at 10% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $50,000 is being amortized over the life of the note using the effective interest method resulting in $0 and $35,607 of interest expense for the six months ended June 30, 2018 and year ended December 31, 2017, respectively.
On July 7, 2017, note amendment was executed with $20,000 increase in principal of the note and the note principle increased to $76,750. The Company received $20,000 cash proceeds from the note amendment on the same date.
As of June 30, 2018, the notes are presented net of a debt discount of $0.
The note is currently in default.
Auctus #3
On January 13, 2017, the Company entered into an agreement with Power Up Lending Group to issue a convertible promissory note of $45,000 with a $2,500 original issue discount to the unrelated party, which bears interest at 8% of the principal amount. The promissory note matures on January 13, 2018. The conversion price shall be equal to 57.5% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $45,000 is being amortized over the life of the note using the effective interest method. Total of $0 and $40,843 of the discount was recorded as interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017.
During the year ended December 31, 2017, principal of $6,700 was converted for 30,455,486 common shares.
On June 14, 2017, the Company entered into an agreement with Power Up Lending Group to issue a convertible promissory note of $7,500 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matured on March 20, 2018. The conversion price shall be equal to 50% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $7,500 is being amortized over the life of the note using the effective interest method. Total of $0 and $4,462 of the discount was recorded as interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017.
On November 27, 2017, Auctus Fund, LLC entered into an agreement with Power Up Lending Group Ltd. to buy out the total outstanding principal amount and accrued interest of the two convertible promissory notes at $50,774.54. The note bears interest at 12% of the principal amount and matured on March 20, 2018. The conversion price shall be equal 57.5% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. During the six months ended June 30, 2018 and the year ended December 31, 2017, interest expense of $5,030 and $2,165 was recorded over the remaining note discount transferred the two convertible notes of $7,195.
As of June 30, 2018, the note is presented net of a debt discount of $0.
The note is currently in default.
Auctus #4
On November 2, 2017, the Company entered into an agreement to issue a convertible promissory note of $53,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on August 2, 2018. The conversion price shall be equal to 50% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $53,000 is being amortized over the life of the note using the effective interest method. Total of $35,139 and $11,454 of the discount was recorded as interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017.
On February 23, 2018, EMA Financial LLC and Auctus Fund, LLC each made repayment to Crown Bridge Partners, LLC on behalf of the Company at $5,636.04, totaling $11,272.08 to settle the total outstanding principal and accrued penalty amount at $11,272.08 of the $40,000 convertible note originally issued to Crown Bridge Partners, LLC on April 1, 2016.
As of June 30, 2018, the note principal was amended to 58,636.04.
As of June 30, 2018, the note is presented net of a debt discount of $6,407.
Auctus #5
On March 7, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $30,000 with a $5,000 original issue discount. The convertible promissory note bears interest at 12% per annum and matures nine months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $30,000 is being amortized over the life of the note using the effective interest method resulting in $12,545 of interest expense for the six months ended June 30, 2018.
As of June 30, 2018, the note is presented net of a debt discount of $17,455.
Promissory Note Payable to EMA Financial, LLC
EMA#1
On September 7, 2016, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $35,000 with a $5,250 original issue discount. The convertible promissory note bears interest at 10% per annum and matures twelve months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $29,750 is being amortized over the life of the note using the effective interest method resulting in $0 and $21,774 of interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.
During the year ended December 31, 2017, principal of $7,538 were converted for 123,242,000 common shares.
During the six months ended June 30, 2018, principal of $905 were converted for 60,350,000 common shares.
As of June 30, 2018, the note is presented net of a debt discount of $0.
The note is currently in default.
EMA#2
On November 3, 2016, the Company entered into an agreement with Blackbridge Capital Growth Funds, LLC to issue a convertible promissory note to an unrelated party for an amount of $60,000. The convertible promissory note bears interest at 8% per annum and matures on November 3, 2017. The conversion price is 50% of the lowest trading price 20 days prior to conversion. The note was discounted for a derivative and the discount of $60,000 is being amortized over the life of the note using the effective interest method resulting in $0 and $50,465 of interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.
During the year ended December 31, 2017, principal of $10,810 were converted for 65,000,000 common shares.
On September 27 2017, EMA Financial, LLC entered into an agreement with Blackbridge Capital Growth Funds, LLC to buy out the outstanding principal amount and accrued interest of the convertible promissory note at $53,367.22. The note bears interest at 8% of the principal amount and matures on November 3, 2017. The conversion price shall be equal to 57.5% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note.
As of June 30, 2018, the notes are presented net of a debt discount of $0.
The note is currently in default.
EMA#3
On October 31, 2017, the Company entered into an agreement to issue a convertible promissory note of $53,000 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on October 31, 2018. The conversion price shall be equal to 50% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note. The note was discounted for a derivative and the discount of $53,000 is being amortized over the life of the note using the effective interest method. Total of $26,282 and $8,858 of the discount was recorded as interest expense for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.
As of June 30, 2018, the note is presented net of a debt discount of $17,860.
EMA#4
On March 5, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $30,000 with a $5,000 original issue discount. The convertible promissory note bears interest at 12% per annum and matures twelve months from issue date. The conversion price is 50% of the lowest trading price 25 days prior to conversion. The note was discounted for a derivative and the discount of $30,000 is being amortized over the life of the note using the effective interest method resulting in $9,616 of interest expense for the six months ended June 30, 2018.
As of June 30, 2018, the note is presented net of a debt discount of $20,384.
Promissory Note Payable to Blackbridge Capital Growth Fund, LLC
Commitment Note
On November 3, 2016, the Company entered into an investment agreement with Blackridge Capital Growth Fund, LLC. Per the investment agreement, the investor will invest up to $2,000,000 to purchase the Company’s common stock, par value of $.001 per share.
The Company issued a convertible promissory note for $100,000, as a commitment fee, which bears interest at 8% of the principle amount and matures on November 3, 2017. The commitment fee expense of $100,000 was recognized on November 3, 2016. The conversion price is equal to 57.5% of the lowest trading price during the 20 days prior to the conversion.
On November 3, 2016, a derivative debt discount of $100,000 was recorded. For the year ended December 31, 2017, an amount of $100,000 was amortized into interest expense in relation to the debt discount.
As of June 30, 21018, the notes are presented net of a debt discount of $0.
The note is currently in default.
Commitment Note Payable to Tangiers
On April 4, 2016, the Company entered into an investment agreement with an unrelated party. Per the investment agreement, the investor will invest up to $5,000,000 to purchase the Company’s common stock, par value of $.001 per share. In connection with the investment agreement, the Company entered into a registration rights agreement with the unrelated party which has been filed with the SEC. The maximum investment amount is equal to one hundred percent of the average of the daily trading volume of the common stock for the ten days prior to the put notice entered into by the unrelated party. The total purchase price to be paid in connection with the put notice, is calculated at eighteen percent discount of the lowest trading price of the common stock during the five consecutive trading days immediately succeeding the put notice date.
The Company issued a promissory note to the unrelated party for $100,000, as a commitment fee, which bears interest at 10% of the principle amount and matures seven months from April 4, 2016 with a possible extension to ten months based on whether the Company executes the related investment agreement within 180 days from April 4, 2016. If the registration statement is declared effective within 90 days of the execution of the investment agreement, the Company and the unrelated party agree the principal balance of the note will be immediately reduced by $40,000. The note payable will be available to be converted upon default. Per the agreement, default could occur based on: failure of payment on any outstanding amounts longer than five days after the due date, failure to issue shares after request, or failure to comply with all of the other material provisions included in the agreement. The conversion price is equal to the lower of: (a) 90% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the date on which the unrelated party elects to convert all or part of the note, or (b) 90% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to the effective date of April 4, 2016. At the election of the unrelated party, at each closing date (as defined in the investment agreement) after the date which is six months after April 4, 2016, the unrelated party shall retain (or the Company shall pay to the unrelated party) an amount equal to ten percent of each Put Amount (as defined in the agreement), and the amounts shall be applied by the unrelated party as follows: first against the amount of any unpaid interest or other fees, and second against any unpaid principal amounts, until all interest, fees, and principal have been paid.
On April 28, 2016, the Company filed a registration statement with the Securities and Exchange Commission to register 3,500,000 shares of common stock pursuant to the Investment Agreement and the Registration Rights Agreement. On May 24, 2016, the Company received a comment letter from the Securities and Exchange Commission regarding the registration statement. On March 3, 2017, the Company voluntarily withdrew the registration statement.
The Company expensed the $100,000 as commitment fee during the year ended December 31, 2016.
The note was discounted for a derivative and the discount of $65,238 is fully amortized into interest expense for the year ended December 31, 2016. As of March 31, 2018, the note is presented net of a debt discount of $0.
On January 10, 2017, the Company entered into an Assignment Agreement that Denali acquired $50,000 of the $100,000 note held by Tangiers. As at January 10, 2017, $50,000 of principal remained with Tangiers.
During the year ended December 31, 2017, principal of $26,199 was converted for 49,905,893 common shares.
The note is currently in default.
Notes Payable to Denali
On January 10, 2017, the Company entered into an Assignment Agreement that Denali acquired $50,000 of the $100,000 note held by Tangiers.
During the year ended December 31, 2017, principal of $18,385 was converted for 9,884,409 common shares.
As of June 30, 2018, the note principal balance was $31,615.
The note is currently in default.
Accrued interest on convertible notes
During the six months ended June 30, 2018 and June 30, 2017, interest expense of $50,331 and $22,942 was incurred on convertible notes, respectively. As of June 30, 2018 and December 31, 2017, accrued interest payable on convertible notes was $120,380 and $70,049, respectively.
Summary of Conversions
During the six months ended June 30, 2018, $905 principal amount of the convertible note and $432 accrued interest was converted for 89,132,000 common shares.
During the year ended December 31, 2017, $111,542 principal amount of the convertible note and $7,850 accrued interest was converted for 488,517,204 common shares.
NOTE 6 – DERIVATIVE LIABILITY
The Company analyzed the conversion options for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability when the conversion option becomes effective
The following table summarizes the derivative liabilities included in the balance sheet at June 30, 2018:
Balance - December 31, 2017
|
|
$
|
1,831,630
|
|
Reduction of derivative liabilities from conversion of convertible note to common shares
|
|
|
(29,314
|
)
|
Addition of new derivative liabilities upon issuance of convertible notes as debt discount
|
|
|
50,000
|
|
Addition of new derivatives liabilities recognized as day one loss
|
|
|
311,773
|
|
Gain on change in fair value of the derivative
|
|
|
(654,138
|
)
|
Balance - June 30, 2018
|
|
$
|
1,509,951
|
|
The following table summarizes the loss on derivative liability included in the income statement for the six months ended June 30, 2018 and 2017, respectively.
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Day one loss due to derivative liabilities on convertible notes
|
|
$
|
(320,641
|
)
|
|
$
|
(45,283
|
)
|
Gain on change in fair value of derivative liabilities
|
|
|
654,136
|
|
|
|
309,497
|
|
Gain on change in fair value of derivative liabilities
|
|
$
|
333,495
|
|
|
$
|
264,214
|
|
The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date:
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Expected term
|
|
0.34 - 0.68 years
|
|
|
0.19 - 0.54 years
|
|
Expected average volatility
|
|
272% - 440
|
%
|
|
266% - 312
|
%
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Risk-free interest rate
|
|
1.39% - 2.33
|
%
|
|
0.94% - 1.14
|
%
|
NOTE 7 – RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2018, the Company accrued $60,000 of salary payable to the Director of the Company, and paid $9,520 owing to him for the accrued salaries.
During the year ended December 31, 2017, the Company accrued $120,000 of salary payable to the Director of the Company, and paid $24,600 owing to him for the accrued salaries.
During the year ended December 31, 2017, the Director of the Company advanced $780 to the Company. The amount is unsecured and non-interest bearing with no set terms of repayment. During the six months ended June 30, 2018, the Company repaid $780 to the Director.
As of June 30, 2018 and December 31, 2017, amount due to related parties was $169,380 and $119,680, respectively.
NOTE 8 – SUBSEQUENT EVENTS
Subsequent to June 30, 2018 and through the date that these financials were made available, the Company had the following subsequent events:
On July 2, 2018, the Company entered into an agreement with Auctus Fund, LLC to issue a convertible promissory note of $43,500 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on April 2, 2019. The conversion price shall be equal to the lesser of (i) 50% multiplied by the lowest Trading Price during the previous twenty-five Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Variable Conversion Price, that is 50% multiplied by the Market Price, being the lowest Trading Price for the Common Stock during the twenty-five Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. In conjunction with the convertible note, the Company issued warrants to purchase 72,500,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share.
On July 2, 2018, the Company entered into an agreement with EMA Financial, LLC to issue a convertible promissory note of $43,500 to the unrelated party, which bears interest at 12% of the principal amount. The promissory note matures on April 2, 2019. The conversion price shall be equal to the lesser of (i) 50% multiplied by the lowest Trading Price during the previous twenty-five Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Variable Conversion Price, that is 50% multiplied by the Market Price, being the lowest Trading Price for the Common Stock during the twenty-five Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. In conjunction with the convertible note, the Company issued warrants to purchase 72,500,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share.