Notes to Financial Statements
June 30, 2017
(Unaudited)
NOTE 1 - ORGANIZATION
JPX Global, Inc. (the “Company”
or “JPX”) was incorporated under the laws of the state of Nevada on December 18, 2008, with 75,000,000 authorized common
shares with a par value of $0.001. On January 3, 2013, the Company approved the action to amend and restate the Articles of Incorporation
of the Company and increase the authorized common shares to 500,000,000 and create and authorize 40,000,000 shares of Preferred
Stock which was approved by written consent of the holders representing approximately 67% of the outstanding voting securities
of the Company. Series A Preferred Stock was created and designated with super-voting rights of 100,000 votes per share of Series
A Preferred Stock held, but no conversion, dividend and liquidation rights.
On February 5, 2014, the Company entered
into an agreement to acquire all the operating assets of Scorpex, Inc. (“Scorpex”) (an entity related by common
control) in exchange for 105,000,000 shares of common stock and 10,000,000 shares of Series B Preferred Stock of the Company.
Scorpex was majority owned and controlled by JPX Global, Inc.’s then controlling shareholder, Joseph Caywood. Each
share of Series B preferred stock is convertible into 10 shares of common stock and is entitled to vote ratably together with
our common stockholders on all matters upon which common stockholders may vote. With the acquisition of these assets, which
consist primarily of a license agreement, the Company modified its business plan to include the development of waste
management services including the storage, recycling, and disposal of waste. The Company does not presently have any
waste management operations.
The acquired assets consist primarily of
a license agreement between Scorpex and Tratamientos Ambientales Scorpion, S.A. de C.V. (a corporation formed under the laws
of Mexico) (“TAS”). This license agreement with TAS was assigned to JPX. TAS was a wholly owned subsidiary of
Scorpex, and was, therefore, a common control entity. ASC 805-50-30-5 provides guidance on measuring assets and liabilities
transferred between entities under common control. As these entities were under common control and the license agreement had
no basis on Scorpex’s books, the transaction was recorded at a value of $-0-.
The license agreement was dated July 30, 2011
and provided Scorpex with an exclusive worldwide license for the permits, property, and any and all of TAS’s other assets
necessary for the business of storing, recycling, disposing, and treating waste in Mexico for a term of 10 years. The agreement
also provided for Scorpex’s annual payment to TAS of 20% of its Net Revenues (gross cash receipts less cost of processing
and other expenses excluding general, administrative, interest, and taxes) from the license. Pursuant to the Assignment Consent
dated February 3, 2014, TAS agreed to extend the term of the agreement every 10 years if operations have commenced pursuant to
the license agreement.
NOTE 2 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited financial
statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The
information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments,
which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management
believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that
these interim financial statements be
JPX Global, Inc.
Notes to Financial Statements
June 30, 2017
(Unaudited)
read in conjunction with the Company’s
audited financial statements and notes thereto included in its Form 10-K for the year ended December 31, 2016. Operating results
for the six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the year ending December
31, 2017.
NOTE 3 - GOING CONCERN
The accompanying financial statements have
been prepared assuming that the company will continue as a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. At June 30, 2017, the Company had $319 cash, negative working capital
of $750,848 (including past due debt), and no business operations. These conditions raise substantial doubt about our ability to
meet our future financial operations as they become due within one year after the date that the financial statements are issued.
Continuation of the company as a going concern
is dependent upon obtaining additional working capital and the management of the company plans to accomplish this objective through
short term loans from related parties and additional equity investments, which will enable the company to continue operations for
the coming year. However, no financing arrangements have yet been implemented. Therefore, these plans do not alleviate the conditions
that raise substantial doubt about our ability to continue as a going concern for one year after the date that the financial statements
are issued.
The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities
that might result from the outcome of this uncertainty.
NOTE 4 – NET INCOME (LOSS) PER COMMON
SHARE
The Company follows ASC Topic 260 to account
for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income
(loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share
calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share
equivalents outstanding.
For the periods presented, the common shares
underlying the following dilutive securities were excluded from the calculation of diluted shares outstanding as the effect of
their inclusion would be anti-dilutive:
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Common Shares Issuable
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|
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Three Months
Ended
June 30,
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Six Months
Ended
June, 30
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|
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2017
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|
2016
|
|
2016
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Convertible note payable
|
|
|
133,920,697
|
|
|
|
—
|
|
|
|
—
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Convertible loan payable – related party
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1,500,000
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|
|
|
1,500,000
|
|
|
|
1,500,000
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Series B Preferred Stock
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|
|
100,000,000
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|
|
|
100,000,000
|
|
|
|
100,000,000
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Total common shares issuable
|
|
|
235,420,697
|
|
|
|
101,500,000
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|
|
|
101,500,000
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JPX Global, Inc.
Notes to Financial Statements
June 30, 2017
(Unaudited)
NOTE 5 – ADVANCES FROM RELATED PARTIES
The advances from related parties liability
at June 30, 2017 ($21,594) and December 31, 2016 ($14,594) are due to Joseph Caywood, former chief executive officer and significant
stockholder of the Company and John D. Thomas PC, legal counsel of the Company. The liabilities are non-interest bearing and there
are no terms of repayment.
On July 1, 2016, the Company issued a $254,364
Promissory Note to Joseph Caywood in satisfaction of the then advances from related party liability of $254,364. See Note 6.
NOTE 6 – NOTES PAYABLE TO RELATED PARTIES
The notes payable to related parties at June
30, 2017 and December 31, 2016 consisted of the following:
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June 30,
2017
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December 31, 2016
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Promissory note dated May 20, 2015, interest at 8% per annum, interest and principal due November 20, 2015 (A)
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$
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8,000
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|
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$
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8,000
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Promissory note dated June 24, 2015, interest at 8% per annum, interest and principal due December 24, 2015 (A)
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8,000
|
|
|
|
8,000
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Promissory note dated November 15, 2015, interest at 8% per annum, interest and principal due May 15, 2016 (A)
|
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2,000
|
|
|
|
2,000
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Promissory note dated April 15, 2016, interest at 8% per annum, interest and principal due October 12, 2016 (A)
|
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3,000
|
|
|
|
3,000
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Promissory note dated May 21, 2016, interest at 8% per annum, interest and principal due November 17, 2016 (A)
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2,000
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|
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2,000
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Promissory note dated July 1, 2016, interest at 8% per annum, interest and principal due on demand (B)
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148,864
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|
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148,864
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Total
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$
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171,864
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$
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171,864
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(A)
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These notes are payable to Mitchell Dean Hovendick, owner of 1,000
shares of Series A Preferred Stock, 10,000,000 shares of Series B Preferred Stock, and 75,250,000 shares of common stock.
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(B)
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This note is payable to Joseph Caywood, former owner of 500 shares
of Series A Preferred Stock, 5,000,000 shares of Series B Preferred Stock, and 37,625,000 shares of common stock. The original
note was in the amount of $254,364 and arose from the Company’s satisfaction of the then advances from related party liability
of $254,364 (See Note 5). From July 1, 2016 to March 31, 2017, the Company repaid $105,500 of the note.
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JPX Global, Inc.
Notes to Financial Statements
June 30, 2017
(Unaudited)
NOTE 7 – NOTES PAYABLE
The notes payable at June 30, 2017 consisted
of the following:
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June 30,
2017
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December 31, 2016
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Convertible note payable dated July 22, 2016, interest at 10% due on April 22,2017 – net of discount of $-0- and $67,854, respectively (A)
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$
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154,328
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$
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98,146
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Promissory note dated July 1, 2016, interest at 8% per annum, interest and principal due on demand (B)
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50,000
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|
|
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50,000
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Total
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$
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204,328
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|
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$
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148,146
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(A) On July 22, 2016, the Company issued a
$166,000 Convertible Promissory Note to Auctus Fund, LLC (“Auctus”) for net loan proceeds of $150,000. The note bears
interest at a rate of 10% per annum (24% per annum default rate), is due April 22, 2017, and is convertible at the option of Auctus
into shares of the Company common stock at a Conversion Price equal to the lesser of (a) 55% of the lowest Trading Price during
the 25 Trading Day period prior to July 22, 2016 or (b) 55% of the lowest Trading Price during the 25 Trading Day period prior
to the Conversion Date. See Note 9 – Derivative Liability.
(B) This note is payable to the Company’s
law firm for legal services rendered.
NOTE 8 - CONVERTIBLE LOAN PAYABLE - RELATED
PARTY
On December 18, 2008, the company entered
into a Promissory Note agreement with the former CEO of the Company. The note is for a sum of $1,500, is non interest
bearing, and was due and payable on December 31, 2010. The note provides that if the note was not paid on December 31, 2010,
the note can be converted to shares of common stock of the Company for $.001 per share. On January 3, 2013, this note was
assigned to Joseph Caywood, the then controlling shareholder of JPX. The Company and Joseph Caywood have verbally agreed that
the Company will pay the loan off as it is able to without penalty, and Joseph Caywood will not convert the debt into shares
of common stock. As of June 30, 2017 and December 31, 2016, the balance of the loan is $1,500.
NOTE 9 – DERIVATIVE LIABILITY
The derivative liability at June 30, 2017 and
December 31, 2016 consisted of the following:
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June 30, 2017
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Face Value
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Derivative Liability
|
Convertible note payable issued July 22, 2016, due April 22, 2017
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$
|
154,328
|
|
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$
|
280,596
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Totals
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$
|
154,328
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|
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$
|
280,596
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JPX Global, Inc.
Notes to Financial Statements
June 30, 2017
(Unaudited)
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December 31, 2016
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Face Value
|
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Derivative Liability
|
Convertible note payable issued July 22, 2016, due April 22, 2017
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$
|
166,000
|
|
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$
|
724,364
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Totals
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$
|
166,000
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|
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$
|
724,364
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The above convertible note contains a variable
conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of commons stock
issuable upon conversion of the note is indeterminate. Accordingly, we have recorded the $730,400 fair value of the embedded conversion
feature as a derivative liability at the July 22,2016 issuance date and charged $166,000 to debt discounts and the remaining $564,400
to expense from derivative liability. The $449,804 decrease in the fair value of the derivative liability from $730,400 at July
22, 2016 to $280,596 at June 30, 2017 was credited to income from derivative liability ($6,036 in the year ended December 31, 2016
and $443,768 in the six months ended June 30, 2017). The fair value of the derivative liability is measured at the respective issuance
date and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculation of the derivative
liability of the note at June 30, 2017 include (1) stock price of $0.0034 per share, (2) exercise price of $0.0012 per share, (3)
term of 0 days, (4) expected volatility of 467% and (5) risk free interest rate of 0.84%.
NOTE 10 - CAPITAL STOCK
On January 6, 2014, the Company issued 1,000
shares of Series A preferred stock as security for outstanding debts of the Company owed to Joseph Caywood. Although the preferred
stock carries no dividend, distribution, liquidation or conversion rights, each share of Series A preferred stock carries one hundred
thousand (100,000) votes, and holders of our Series A preferred stock are able to vote together with our common stockholders on
all matters upon which common stockholders may vote.
On February 5, 2014 (see Note 1 above), the
Company entered into an agreement to acquire all the operating assets of Scorpex, Inc. (“Scorpex”) (an entity related
by common control) in exchange for 105,000,000 shares of common stock and 10,000,000 shares of Series B preferred stock of the
Company. Scorpex was majority owned and controlled by JPX Global, Inc.’s former significant shareholder, Joseph Caywood.
Each share of Series B preferred stock is convertible into 10 shares of common stock and is entitled to vote ratably together with
our common stockholders on all matters upon which common stockholders may vote.
On February 17, 2015, pursuant to a Consulting
Agreement with Joseph Caywood dated January 1, 2015 (term ended March 31, 2015), the Company issued a total of 2,050,000 shares
of common stock to 18 individuals/entities for services rendered to the Company. The stock was valued at $2,050,000 and was expensed
as consulting fees in the three months ended March 31, 2015.
JPX Global, Inc.
Notes to Financial Statements
June 30, 2017
(Unaudited)
On July 1, 2016, pursuant to a Consulting Services
Agreement with an individual consultant dated June 1, 2016 (term ending November 30, 2016), the Company issued 2,000,000 shares
of common stock to such individual for certain marketing consulting services to be rendered to the Company. The stock was valued
at $400,000 and was expensed as consulting fees in the three months ended June 30, 2016.
On June 17, 2016, pursuant to a Consulting
and Representation Agreement with an entity consultant dated June 14, 2016 (extended term ending June 14, 2017), the Company issued
1,000,000 shares of common stock to such entity for certain investor relations services to be rendered to the Company. The stock
was valued at $200,000 and was expensed as consulting fees in the three months ended June 30, 2016.
During the three months ended March 31, 2017,
the Company issued a total of 42,254,454 shares of common stock for the satisfaction of notes payable and accrued interest totaling
$28,094.
NOTE 11 – SUBSEQUENT EVENT
On August 8, 2017, the Company entered into
a Settlement Agreement and Mutual General Release with Auctus Fund, LLC (“Auctus”) (see Note 7). The agreement provides
for a $54,000 increase of the outstanding principal balance of the Note (from $154,328 to $208,328). The agreement also provides
for the Company’s issuance of an irrevocable letter of instruction to its transfer agent to reserve initially 933,333,334
shares of common stock for conversion of the Amended Note.