Quarterly Report (10-q)

Date : 05/15/2019 @ 6:01PM
Source : Edgar (US Regulatory)
Stock : Lingerie Fighting Championships, Inc. (PN) (BOTY)
Quote : 0.0001  0.0 (0.00%) @ 12:21PM

Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 000-55498

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

(Exact name of Registrant as specified in its charter)

 

Nevada

 

20-8009362

(State or other jurisdiction

of incorporation of organization)

 

(I.R.S. Employer

Identification No.)

 

6955 North Durango Drive

Suite 1115-129

Las Vegas, NV 89149

(Address of principal executive offices)

 

(702) 527-2942

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

x

Smaller reporting company

x

 

Emerging growth company

¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

None

None

 

As of May 10, 2019, there were 1,188,114,339 shares of common stock issued and outstanding.

 

 
 
 
 

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

FORM 10-Q

March 31, 2019

 

TABLE OF CONTENTS

 

Page No.

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements

3

 

Balance Sheets as of March 31, 2019 and December 31, 2018 (Unaudited)

3

 

Unaudited Statements of Operations for the Three Months Ended March 31, 2019 and 2018

4

 

Unaudited Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018

6

 

Notes to Unaudited Financial Statements.

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

21

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

25

 

Item 4.

Controls and Procedures.

25

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

 

Item 1A.

Risk Factors

26

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

 

Item 3.

Defaults upon Senior Securities

26

 

Item 4.

Mine Safety Disclosures

26

 

Item 5.

Other Information

26

 

Item 6.

Exhibits.

27

 

 
2
 
 

 

PART I. - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 102,099

 

 

$ 3,439

 

Prepaid expenses

 

 

-

 

 

 

1,134

 

Total Current Assets

 

 

102,099

 

 

 

4,573

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 15,574

 

 

$ 7,450

 

Accounts payable - related party

 

 

241,768

 

 

 

214,118

 

Accrued interest payable

 

 

213,326

 

 

 

182,962

 

Stock payable

 

 

30,000

 

 

 

30,000

 

Convertible notes, net of $136,246 and $43,339 debt discount, respectively

 

 

590,219

 

 

 

656,557

 

Derivative liability

 

 

1,353,040

 

 

 

1,241,550

 

Total Current Liabilities

 

 

2,443,927

 

 

 

2,332,637

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, 51 and 51 shares issued and outstanding, respectively

 

 

-

 

 

 

-

 

Common stock, par value $0.001 per share, 5,000,000,000 shares authorized, 1,080,300,539 and 770,401,939 shares issued and outstanding, respectively

 

 

1,080,301

 

 

 

770,402

 

Additional paid-in capital

 

 

166,756

 

 

 

391,555

 

Accumulated deficit

 

 

(3,588,885 )

 

 

(3,490,021 )

Total stockholders’ deficit

 

 

(2,341,828 )

 

 

(2,328,064 )

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$ 102,099

 

 

$ 4,573

 

 

See notes to unaudited financial statements

 

 
3
 
Table of Contents

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Revenue

 

$ 1,235

 

 

$ 1,718

 

Cost of Services

 

 

-

 

 

 

20,300

 

GROSS PROFIT (LOSS)

 

 

1,235

 

 

 

(18,582 )

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

55,483

 

 

 

77,776

 

Total Operating Expenses

 

 

55,483

 

 

 

77,776

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

 

(54,248 )

 

 

(96,358 )

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Interest expense

 

 

(70,610 )

 

 

(64,242 )

Loss on derivative liabilities

 

 

(74,006 )

 

 

(1,270,284 )

Convertible note written off

 

 

100,000

 

 

 

-

 

Total other income (expense)

 

$ (44,616 )

 

$ (1,334,526 )

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (98,864 )

 

$ (1,430,884 )

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Common Share

 

$ (0.00 )

 

$ (0.00 )

Basic and Diluted Weighted Average Shares of Common Stock Outstanding

 

 

916,182,097

 

 

 

590,885,046

 

 

See notes to unaudited financial statements

 

 
4
 
Table of Contents

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(UNAUDITED)

 

 

 

Common Stock

 

 

Preferred Shares

 

 

Additional

 

 

 

 

Total

 

 

 

Number of Shares

 

 

Amount

 

 

Number of Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Stockholders’

Deficit

 

Balance - December 31, 2018

 

 

770,401,939

 

 

$ 770,402

 

 

 

51

 

 

$ -

 

 

$ 391,555

 

 

$ (3,490,021 )

 

$ (2,328,064 )

Shares of common stock issued for conversion of debt

 

 

309,898,600

 

 

 

309,899

 

 

 

-

 

 

 

-

 

 

 

(303,314 )

 

 

-

 

 

 

6,585

 

Derivative reclass to APIC due to conversion

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

78,516

 

 

 

-

 

 

 

78,516

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(98,864 )

 

 

(98,864 )

Balance - March 31, 2019

 

 

1,080,300,539

 

 

$ 1,080,301

 

 

 

51

 

 

$ -

 

 

$ 166,757

 

 

$ (3,588,885 )

 

$ (2,341,828 )

 

 

 

Common Stock

 

 

Preferred Shares

 

 

Additional

 

 

 

 

Total

 

 

 

Number of Shares

 

 

Amount

 

 

Number of Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Stockholders’

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2017

 

 

576,193,639

 

 

$ 576,194

 

 

 

51

 

 

$ -

 

 

$ 525,366

 

 

$ (3,556,784 )

 

$ (2,455,224 )

Shares of common stock issued for conversion of debt

 

 

89,132,000

 

 

 

89,132

 

 

 

-

 

 

 

-

 

 

 

(59,818 )

 

 

-

 

 

 

29,314

 

Derivative reclass to APIC due to conversion

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,338

 

 

 

-

 

 

 

1,338

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,430,884 )

 

 

(1,430,884 )

Balance - March 31, 2018

 

 

665,325,639

 

 

$ 665,326

 

 

 

51

 

 

$ -

 

 

$ 466,886

 

 

$ (4,987,668 )

 

$ (3,855,456 )

 

See notes to unaudited financial statements

 

 
5
 
Table of Contents

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$ (98,864 )

 

$ (1,430,884 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock - based compensation

 

 

-

 

 

 

-

 

Loss on derivative liability

 

 

74,006

 

 

 

1,270,284

 

Amortization of debt discount

 

 

39,093

 

 

 

40,326

 

Convertible note written off

 

 

(100,000 )

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

1,134

 

 

 

-

 

Accounts payable - related party

 

 

27,650

 

 

 

22,500

 

Accounts payable and accrued liabilities

 

 

8,124

 

 

 

29,765

 

Accrued interest payable

 

 

31,517

 

 

 

-

 

Net cash used in operating activities

 

 

(17,340 )

 

 

(68,009 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Advancement from related party

 

 

-

 

 

 

-

 

Proceeds from convertible debt

 

 

116,000

 

 

 

50,000

 

Net cash provided by financing activities

 

 

116,000

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

98,660

 

 

 

(18,009 )

Cash and cash equivalents - beginning of period

 

 

3,439

 

 

 

28,438

 

Cash and cash equivalents - end of period

 

$ 102,099

 

 

$ 10,429

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Disclosures

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Debt discount from derivative liability

 

$ 132,000

 

 

$ 60,000

 

Derivative reclass to APIC due to conversion

 

$ 78,516

 

 

$ 1,338

 

Shares of common stock issued for conversion of debt and accrued interest

 

$ 6,585

 

 

$ 29,314

 

 

See notes to unaudited financial statements

 

 
6
 
Table of Contents

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

NOTES TO UAUDITED FINANCIAL STATEMENTS

MARCH 31, 2019

 

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 consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2018 have been omitted. These interim financial statements are condensed and should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 16, 2019.

 

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 $102,099 and $3,439 in cash and cash equivalents as at March 31, 2019 and December 31, 2018, 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

 

 
7
 
Table of Contents

 

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:

 

 

a.

the customer simultaneously receives and consumes the benefits as the entity performs;

 

b.

the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

 

c.

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.

 

The Company’s revenue derives from the development, promotion and distribution of our live events and televised entertainment programming. For the three months ended March 31, 2019 and March 31, 2018, the Company recognized revenue of $1,235 and $1,718 and cost of sales of $0 and $20,300, resulting in gross profit of $1,235 and gross loss of $18,582, respectively.

 

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 shares of common stock 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.

 

For the three months ended March 31, 2019 and March 31, 2018, convertible notes and warrants were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive.

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(Shares)

 

 

(Shares)

 

Convertible notes payable

 

 

13,776,000,333

 

 

 

10,682,117,872

 

Warrants

 

 

469,833,333

 

 

 

-

 

 

 

 

14,245,833,666

 

 

 

10,682,117,872

 

 

The following is a reconciliation of the numerator and denominator used for the computation of basic and diluted loss per shares of common stock:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

NET LOSS

 

$ (98,864 )

 

$ (1,430,884 )

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Common Share

 

$ (0.00 )

 

$ (0.00 )

Basic and Diluted Weighted Average Shares of Common Stock Outstanding

 

 

916,182,097

 

 

 

590,885,046

 

 

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.

 

 
8
 
Table of Contents

 

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.

 

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 –

quoted prices in active markets for identical assets or liabilities

Level 2 –

quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 –

inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

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.

 

 
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The change in the level 3 financial instrument is as follows:

 

Balance - December 31, 2018

 

$ 1,241,550

 

Addition of new derivative liabilities upon issuance of convertible notes as debt discount

 

 

83,584

 

Reduction of derivative liabilities from conversion of convertible notes to shares of common stock

 

 

(78,516 )

Reduction of derivative liabilities from written off of convertible note

 

 

(347,826 )

Addition of new derivative liabilities upon issuance of warrants as debt discount

 

 

32,416

 

Addition of new derivatives liabilities recognized as day one loss

 

 

279,421

 

Loss (Gain) on change in fair value of the derivative

 

 

142,411

 

Balance - March 31, 2019

 

$ 1,353,040

 

 

 

The following table summarizes fair value measurement by level at March 31, 2019 and December 31, 2018, measured at fair value on a recurring basis:

 

March 31, 2019

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

-

 

 

 

-

 

 

 

1,353,040

 

 

 

1,353,040

 

 

December 31, 2018

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

-

 

 

 

-

 

 

 

1,241,550

 

 

 

1,241,550

 

 

New Accounting Pronouncements

 

In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update addresses several aspects of the accounting for nonemployee share-based payment transactions and expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The main provisions of the update change the way nonemployee awards are measured in the financial statements. Under the simplified standards, nonemployee options will be valued once at the date of grant, as compared to at each reporting period end under ASC 505-50. At adoption, all awards without established measurement dates will be revalued one final time, and a cumulative effect adjustment to retained earnings will be recorded as the difference between the pre-adoption value and new value. Companies will be permitted to make elections to establish the expected term and either recognize forfeitures as they occur or apply a forfeiture rate. Compensation expense recognition using a graded vesting schedule will no longer be permitted. This pending content is the result of the FASB’s Simplification Initiative, to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. Because the Company does not currently have any outstanding awards to non-employees for which a measurement date has not been established the adoption of ASU 2018-07 does not have a material impact to the Company’s financial statements and related disclosures upon adoption. The adoption of this standard will change the way that the Company accounts for non-employee compensation in the future.

 

In January 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which amends ASC Topic 842. Among other things, the new standard requires us to recognize a right of use asset and a lease liability on our balance sheet for leases. It also changes the presentation and timing of lease-related expenses. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the effect this guidance may have on its financial position, results of operations, comprehensive income, cash flows and disclosures.

 

 
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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 March 31, 2019 and December 31, 2018.

 

Common Stock

 

The Company has authorized 5,000,000,000 shares with a par value $0.001 per share.

 

During the three months ended March 31, 2019, the Company issued 309,898,600 shares of common stock for conversion of convertible note principal amount of $5,432 and accrued interest of $1,153.

 

During the year ended December 31, 2018, the Company issued 193,608,300 shares of common stock for conversion of convertible note principal amount of $905 and accrued interest of $2,494.

 

As of March 31, 2019 and December 31, 2018, the shares of common stock issued and outstanding was 1,080,300,539 and 770,401,939, respectively.

 

Shares of common stock issued for compensation

 

During the year ended December 31, 2016, the Company issued 2,250,000 shares of common stock with a fair value of $174,000 for services rendered. The shares were valued at market price when the shares were issued.

 

As of March 31, 2019, the Company recorded stock payable for 300,000 outstanding shares of common stock of $30,000 not yet issued to the consultant for service performed.

 

NOTE 5 – WARRANTS

 

During the three months ended March 31, 2019 and the year ended December 31, 2018, in conjunction with the issuance of convertible notes, the Company issued warrants to purchase 324,833,333 and 145,000,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share, respectively.

 

 
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The below table summarizes the activity of warrants exercisable for shares of common stock during the three months ended March 31, 2019 and the year ended December 31, 2018:

 

 

 

Number of

Shares

 

 

Weighted-

Average

Exercise

Price

 

Balances as of December 31, 2017

 

 

-

 

 

$ -

 

Granted

 

 

145,000,000

 

 

 

0.0003

 

Exercised

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

Balances as of December 31, 2018

 

 

145,000,000

 

 

$ 0.0003

 

Granted

 

 

324,833,333

 

 

 

0.0003

 

Exercised

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

Balances as of March 31, 2019

 

 

469,833,333

 

 

$ 0.0003

 

 

The fair value of each warrant on the date of grant is estimated using the Black-Scholes option valuation model. The following weighted-average assumptions were used for options granted during the three months ended March 31, 2019:

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2019

 

Exercise price

 

$ 0.0003

 

Expected term

 

5 years

 

Expected average volatility

 

288% - 310%

 

Expected dividend yield

 

 

-

 

Risk-free interest rate

 

2.23% - 2.24%

 

 

 

 

 

 

 

The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2019:

 

Warrants Outstanding

 

 

Warrants Exercisable

 

 

 

 

Weighted Average

 

 

 

 

 

 

 

 

 

 

Number

 

 

Remaining Contractual

 

 

Weighted Average

 

 

Number

 

 

Weighted Average

 

of Shares

 

 

life (in years)

 

 

Exercise Price

 

 

of Shares

 

 

Exercise Price

 

 

469,833,333

 

 

 

4.78

 

 

$ 0.0003

 

 

 

-

 

 

 

-

 

 

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at March 31, 2019 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). As of March 31, 2019, the aggregate intrinsic value of warrants outstanding was approximately $0 based on the closing market price of $0.0001 on March 31, 2019.

 

The Company determined that the warrants qualify for derivative accounting as a result of the related issuance of the convertible note during the three months ended March 31, 2019. As of March 31, 2019 and December 31, 2018, the Company valued the fair value on the 469,833,333 units and 145,000,000 units of share purchase warrants granted at $46,901 and $14,468 based on Black-Scholes option valuation model, respectively. <see Note 7>

 

 
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NOTE 6 – NOTES PAYABLE

 

The Company had the following unsecured notes payable as at March 31, 2019 and December 31, 2018:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

 

 

 

 

 

 

 

Convertible Promissory Notes to Auctus Fund

 

$ 307,730

 

 

$ 292,360

 

Convertible Promissory Notes to EMA Financial

 

 

227,073

 

 

 

208,781

 

Convertible Promissory Notes to Black Bridge Capital

 

 

-

 

 

 

100,000

 

Convertible Promissory Notes to Tangiers

 

 

23,801

 

 

 

23,801

 

Convertible Promissory Notes to Denali

 

 

31,615

 

 

 

31,615

 

Total Convertible Debt

 

$ 590,219

 

 

$ 656,557

 

 

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 year ended December 31, 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 into111,460,000 shares of common stock.

 

During the year ended December 31, 2018, accrued interest of $2,494 were converted into 133,258,300 shares of common stock.

 

During the three months ended March 31, 2019, principal of $2,606 and accrued interest of $1,153 were converted into 125,298,600 shares of common stock.

 

As of March 31, 2019, the note is presented net of a debt discount of $42,647.

 

This 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 year ended December 31, 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 principal increased to $76,750. The Company received $20,000 cash proceeds from the note amendment on the same date.

 

As of March 31, 2019, the notes are presented net of a debt discount of $76,750.

 

This note is currently in default.

 

 
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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 year ended December 31, 2018 and the year ended December 31, 2017.

 

During the year ended December 31, 2017, principal of $6,700 was converted into 30,455,486 shares of common stock.

 

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 year ended December 31, 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 year ended December 31, 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 March 31, 2019, the note is presented net of a debt discount of $50,745.

 

This 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 $41,546 and $11,454 of the discount was recorded as interest expense for the year ended December 31, 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 to settle the total outstanding principal and accrued penalty amount at $11,272.08 of the $40,000 convertible note. As a result, the principal amount of the $53,000 convertible note increased to $58,636.04.

 

As of March 31, 2019, the note is presented net of a debt discount of $58,636.

 

This note is currently in default.

 

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 $30,000 of interest expense for the year ended December 31, 2018.

 

 
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As of March 31, 2019, the note is presented net of a debt discount of $30,000.

 

This note is currently in default.

 

Auctus #6

 

On July 9, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $43,500 with a $5,000 original issue discount. On July 25, 2018, the convertible promissory note was further amended with principal increased to $48,500. 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 $48,500 is being amortized over the life of the note using the effective interest method resulting in $1,593 and $30,976 of interest expense for the three months ended March 31, 2019 and the year ended December 31, 2018, respectively. 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.

 

As of March 31, 2019, the note is presented net of a debt discount of $46,907.

 

Auctus #7

 

On March 22, 2019, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $62,500 with a $9,000 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 $62,500 is being amortized over the life of the note using the effective interest method resulting in $2,045 of interest expense for the three months ended March 31, 2019. In conjunction with the convertible note, the Company issued warrants to purchase 209,000,000 shares of common stock, exercisable for five years from issuance at $0.0003 per share.

 

As of March 31, 2019, the note is presented net of a debt discount of $2,045.

 

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 year ended December 31, 2018 and the year ended December 31, 2017, respectively.

 

During the year ended December 31, 2017, principal of $7,538 were converted into 123,242,000 shares of common stock.

 

During the year ended December 31, 2018, principal of $905 were converted into 60,350,000 shares of common stock.

 

As of March 31, 2019, the note is presented net of a debt discount of $47,521.

 

This note is currently in default.

 

 
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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 year months ended December 31, 2018 and the year ended December 31, 2017, respectively.

 

During the year ended December 31, 2017, principal of $10,810 were converted into 65,000,000 shares of common stock.

 

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 March 31, 2019, the notes are presented net of a debt discount of $49,190.

 

This 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 $44,142 and $8,858 of the discount was recorded as interest expense for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

 

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 to settle the total outstanding principal and accrued penalty amount at $11,272.08 of the $40,000 convertible note. As a result, the principal amount of the $53,000 convertible note increased to $58,636.04.

 

As of March 31, 2019, the note is presented net of a debt discount of $58,636.

 

This note is currently in default.

 

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 $5,260 and $24,740 of interest expense for the three months ended March 31, 2019 and year ended December 31, 2018, respectively.

 

During the three months ended March 31, 2019, principal of $2,826 were converted into 184,600,000 shares of common stock.

 

As of March 31, 2019, the note is presented net of a debt discount of $27,174.

 

This note is currently in default.

 

 
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EMA#5

 

On August 9, 2018, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $43,500 with a $5,653 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 $43,500 is being amortized over the life of the note using the effective interest method resulting in$14,341 and $22,945 of interest expense for the three months ended March 31, 2019 and the year ended December 31, 2018, respectively. 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.

 

As of March 31, 2019, the note is presented net of a debt discount of $43,036.

 

EMA#6

 

On March 25, 2019, the Company entered into an agreement to issue a convertible promissory note to an unrelated party for an amount of $69,500 with a $7,000 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 $69,500 is being amortized over the life of the note using the effective interest method resulting in$1,516 of interest expense for the three months ended March 31, 2019. In conjunction with the convertible note, the Company issued warrants to purchase 115,833,333 shares of common stock, exercisable for five years from issuance at $0.0003 per share.

 

As of March 31, 2019, the note is presented net of a debt discount of $1,516.

 

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 principal 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.

 

On February 8, 2019, an agreement was reached between the Company and Blackbridge Capital Growth Fund, LLC for the termination of a securities purchase agreement between the two companies dated November 3, 2016 granting Blackbridge the rights to purchase up to $2million of the Company’s common stock and cancellation of an 8% convertible promissory note in the original amount of $100,000 issued by the Company to Blackbridge pursuant to the securities purchase agreement as a commitment fee.

 

During the three months ended March 31, 2019, the note principal amount of $100,000 was written off, resulting in other income of convertible note written off of $100,000.

 

 
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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 $0.001 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 principal 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.

 

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 shares of common stock.

 

As of March 31, 2019, the note is presented net of a debt discount of $23,801.

 

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 shares of common stock.

 

As of March 31, 2019, the note principal balance was $31,615.

 

The note is currently in default.

 

 
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Accrued interest on convertible notes

 

During the three months ended March 31, 2019 and March 31, 2018, interest expense of $31,517 and $23,916 was incurred on convertible notes, respectively. As of March 31, 2019 and December 31, 2018, accrued interest payable on convertible notes was $213,326 and $182,962, respectively.

 

Summary of Conversions

 

During the three months ended March 31, 2019, the Company issued 309,898,600 shares of common stock for conversion of convertible note principal amount of $5,432 and accrued interest of $1,153.

 

During the year ended December 31, 2018, the Company issued 193,608,300 shares of common stock for conversion of convertible note principal amount of $905 and accrued interest of $2,494.

 

NOTE 7 – 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 March 31, 2019:

 

Balance - December 31, 2018

 

$ 1,241,550

 

Addition of new derivative liabilities upon issuance of convertible notes as debt discount

 

 

83,584

 

Reduction of derivative liabilities from conversion of convertible notes to shares of common stock

 

 

(78,516 )

Reduction of derivative liabilities from written off of convertible note

 

 

(347,826 )

Addition of new derivative liabilities upon issuance of warrants as debt discount

 

 

32,416

 

Addition of new derivatives liabilities recognized as day one loss

 

 

279,421

 

Loss (Gain) on change in fair value of the derivative

 

 

142,411

 

Balance - March 31, 2019

 

$ 1,353,040

 

 

The following table summarizes the loss on derivative liability included in the income statement for the three months ended March 31, 2019 and March 31, 2018, respectively.

 

 

 

Three months ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

Day one loss due to derivative liabilities on convertible notes

 

$ (279,421 )

 

$ (311,773 )

Gain (Loss) on change in fair value of derivative liabilities on convertible notes and warrants

 

 

205,415

 

 

 

(958,511 )

Loss on change in fair value of derivative liabilities

 

$ (74,006 )

 

$ (1,270,284 )

 

 
19
 
Table of Contents

 

The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date:

 

 

 

Three months ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

Expected term

 

0.02 - 0.74 years

 

 

0.34 - 0.93 years

 

Expected average volatility

 

288% - 1099

%  

 

272% - 333

%

Expected dividend yield

 

 

-

 

 

 

-

 

Risk-free interest rate

 

2.43% - 2.47

 

1.39% - 2.09

%

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2019, the Company accrued $30,000 of salary payable to the Director of the Company, and paid $2,350 owing to him for the accrued salaries.

 

During the year ended December 31, 2018, the Company accrued $120,000 of salary payable to the Director of the Company, and paid $25,520 owing to him for the accrued salaries.

 

As of March 31, 2019 and December 31, 2018, amount due to related parties was 241,768 and $214,118, respectively.

 

NOTE 9 – SUBSEQUENT EVENTS

 

Subsequent to March 31, 2019 and through the date that these financials were made available, the Company had the following subsequent events:

 

Principal of $4,312 from convertible notes were converted for 107,813,800 shares of common stock.

 

 
20
 
Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This quarterly report on Form 10-Q and other reports filed by Lingerie Fighting Championships, Inc. (“Lingerie”, “we” or the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Overview

 

LFC is a media company focused on the development, production, promotion and distribution of original entertainment which we plan to make commercially available predominantly through live entertainment events, as well as through digital home video, broadcast television networks, video-on-demand and digital media channels. As a result, we have ceased to be a shell company. Effective as of April 1, 2015, we changed our name to “Lingerie Fighting Championships, Inc.,” (by virtue of the short form merger with our new LFC subsidiary) to reflect our new business focus.

 

 
21
 
Table of Contents

 

Results of Operations

 

Three months ended March 31, 2019 as compared to the three months ended March 31, 2018

 

Our operating results for the year ended December 31, 2018 and December 31, 2017, and the changes between those periods for the respective items are summarized as follows:

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

Statement of Operations Data:

 

2019

 

 

2018

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ 1,235

 

 

$ 1,718

 

 

$ (483 )

Cost of Services

 

 

-

 

 

 

(20,300 )

 

 

20,300

 

Total operating expenses

 

 

(55,483 )

 

 

(77,776 )

 

 

22,293

 

Other income

 

 

(44,616 )

 

 

(1,334,526 )

 

 

1,289,910

 

Net Income (loss)

 

$ (98,864 )

 

$ (1,430,884 )

 

$ 1,332,020

 

 

Revenues

 

We generated revenues of 1,235 and $1,718 for the three months ended March 31, 2019 and 2018, respectively. The Company’s revenue derives from the development, promotion and distribution of our live events and televised entertainment programming.

 

Cost of Services

 

We incurred total cost of services of $0 and $20,300 for the three months ended March 31, 2019 and 2018, respectively. The cost of services incurred consist of labor, material, equipment and subcontractor expenses.

 

Operating Expenses

 

We incurred total operating expenses of $55,483 and $77,776 for the three months ended March 31, 2019 and 2018, respectively. The decrease in operating expenses was primarily due to the decrease in professional fees and advertising expense.

 

Other Expense

 

We incurred other expense of $44,616 and $1,334,526 for the three months ended March 31, 2019 and 2018, respectively. The decrease in other expense was mainly attributed to other income from the written off of a convertible note of $100,000 during the three months ended March 31, 2019 and the decrease in loss on of derivative liabilities from the convertible notes of $74,006 during the three months ended March 31, 2019 from the comparative three months ended March 31, 2018 of $1,270,284.

 

Net Income (Loss)

 

We incurred net loss of $98,864 and $1,430,884 during the three months ended March 31, 2019 and 2018, respectively. The decrease in our net loss was mainly attributed to the decrease in gross loss, decrease in operating expenses and decrease in other expense.

 

 
22
 
Table of Contents

 

Liquidity and Capital Resources

 

 

 

March 31,

 

 

December 31,

 

Balance Sheet Data:

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 102,099

 

 

$ 3,439

 

Working capital deficiency

 

$ (2,341,828 )

 

$ (2,328,064 )

Total assets

 

$ 102,099

 

 

$ 4,573

 

Total liabilities

 

$ 2,443,927

 

 

$ 2,332,637

 

Total stockholders’ deficit

 

$ (2,341,828 )

 

$ (2,328,064 )

 

At March 31, 2019, we had a working capital deficiency of $2,341,828 and an accumulated deficit of $3,588,885. The Company intends to fund future operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2019.

 

The ability of the Company to realize its business plan is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The following table sets forth certain information about our cash flow during the three months ended March 31, 2019 and March 31, 2018:

 

 

 

Three Months Ended

 

 

 

March 31,

 

Cash Flow Data:

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Cash Flows used in Operating Activities

 

$ (17,340 )

 

$ (68,009 )

Cash Flows used in Investing Activities

 

 

-

 

 

 

-

 

Cash Flows provided by Financing Activities

 

 

116,000

 

 

 

50,000

 

Net increase (decrease) in cash during period

 

$ 98,660

 

 

$ (18,009 )

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities.

 

During the three months ended March 31, 2019, net cash flows used in operating activities was $17,340, consisting of a net loss of $98,864, increased by convertible note written of $100,000, and was reduced by loss on derivative liability of $74,006, amortization of debt discount of $39,093, a decrease in prepaid expenses of $1,134, an increase in accounts payable to related party of $27,650, an increase in accounts payable and accrued liabilities of $8,124 and an increase in accrued interest payable of $31,517.

 

For the three months ended March 31, 2018, net cash flows used in operating activities was $68,009, consisting of a net loss of $1,430,884 and was reduced by loss on derivative liability of $1,270,284, amortization of debt discount of $40,326, an increase in accounts payable to related party of $22,500 and an increase in accounts payable and accrued liabilities of $29,765.

 

 
23
 
Table of Contents

 

Cash Flows from Investing Activities

 

There was no investing activities during the three months ended March 31, 2019 and March 31, 2018.

 

Cash Flows from Financing Activities

 

During the three months ended March 31, 2019 and 2018, net cash provided by financing activities was $116,000 and $50,000 for proceeds from the issuance of convertible notes, respectively.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2019, we had no off-balance sheet arrangements.

 

Inflation

 

We do not believe that inflation has had a material effect on our results of operations.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 or revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Stock-Based Compensation

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Share-based payments”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505, “Equity Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

 

 
24
 
Table of Contents

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information under this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019.

 

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allo w timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

 

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based on that evaluation, we concluded that our disclosure controls and procedures were not effective as of September 30, 2018.

 

During our assessment of the effectiveness of internal control over financial reporting as of March 31, 2019, management identified material weaknesses related to (i) the lack of any accounting personnel (ii) the lack of internal audit functions, (iii) the lack of segregation of duties, and (iv) the lack of proper internal control procedures and documentation. As of March 31, 2019, we had one executive, our chief executive and financial officer. As a result there was no segregation of duties.

 

Notwithstanding the assessment that our disclosure controls and procedures and our internal controls over financial reporting were not effective and that there are material weaknesses as identified herein, we believe that our condensed consolidated financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.

 

 
25
 
Table of Contents

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Other than described below, we are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

On August 24, 2018, Mr. Jeffrey Stone, a former consultant of the Company, filed suit against the Company and our CEO, Mr. Shaun Donnelly, in New York County Civil Court alleging that the Company failed to provide some of the promised shares of common stock as compensation for services rendered pursuant to an agreement whereby Mr. Stone was to provide investor relations services to the Company. This suit was settled on April 12, 2019 for $5,000.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended March 31, 2019, the Company issued 309,898,600 shares of common stock for conversion of convertible note principal amount of $5,432 and accrued interest of $1,153.

 

Item 3. Defaults upon Senior Securities

 

As of March 31, 2019, total note payable amount of $[●] in default as follows:

 

 

 

Issuance date

 

Expire date

 

Amount at default

 

Auctus #1

 

5/20/2016

 

2/20/2017

 

$ 42,647

 

Auctus #2

 

9/20/2016

 

6/20/2017

 

$ 76,750

 

Auctus#3

 

11/27/2017

 

3/20/2018

 

$ 50,745

 

Auctus#4

 

11/2/2017

 

8/2/2018

 

$ 58,636

 

Auctus#5

 

3/7/2018

 

12/7/2018

 

$ 30,000

 

EMA#1

 

9/6/2016

 

9/7/2017

 

$ 47,521

 

EMA#2

 

9/27/2017

 

11/3/2017

 

$ 49,190

 

EMA#3

 

10/31/2017

 

10/31/2018

 

$ 58,636

 

EMA#4

 

3/5/2018

 

3/5/2019

 

$ 27,174

 

Tangiers #1

 

4/4/2016

 

11/4/2016

 

$ 23,801

 

Denali

 

1/10/2017

 

11/4/2016

 

$ 31,615

 

 

 

 

 

 

 

$ 496,714

 

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other information

 

Not applicable.

 

 
26
 
Table of Contents

 

Item 6. Exhibits

 

31.1*

 

Certification of the Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

 

Certification of the Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

 

Certification of the Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

 

Certification of the Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

 

XBRL Instance Document

101.SCH*

 

XBRL Taxonomy Extension Schema Document

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

_________

* Filed herewith

** Furnished herewith

 

 
27
 
Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

LINGERIE FIGHTING CHAMPIONSHIPS, INC.

 

May 15, 2019

By:

/s/ Shaun Donnelly

 

Shaun Donnelly,

Chief Executive Officer, Chief Financial Officer,

(Principal Executive Officer and

Principal Financial Officer)

 

 

28

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